Characteristics of South-South Cooperation

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31 2008, thus representing a growth of US$6.7 billion (78%) in two years. The participation of SSC in global development cooperation has doubled in ten years, mainly due to large increases by China, Saudi Arabia and a doubling of Venezuela’s cooperation through its Petrocaribe oil loans arrangements. Nevertheless, almost all Southern providers increased flows, except the United Arab Emirates (UAE) (UN, 2010).

The largest Southern providers are China, Saudi Arabia and Venezuela (each one provides over US$2 billion a year), followed by Arab Agencies (over US$1 billion) and India (over US$ 750 million). In 2008, top 3 providers (Saudi Arabia, China and Venezuela) together accounted 75% of total Southern development cooperation, compared with 60% in 2006 (UN, 2010). On the other hand, Rosseel et al. (2009) did a SWOT analysis of the SSC and they state that this kind of cooperation may boost economic, cultural, environmental and social development, and they pinpoint that the SSC will continue increasing. However, there is an ineffective coordination, lack of resources and some political problems that developing countries can drag out this process, among others strength, opportunities, weaknesses and threats respectively.

2.2.2.1 Characteristics of South-South Cooperation Types of cooperation

In general, over 90% of SSC financed by governments and South-South multilateral organizations is “country programmed”, and around 75% of SSC goes in the form of project finance. Most of the largest providers (China, Arab governments and multilateral institutions, India, and Thailand) focus on this type of support due to their concentration on large infrastructure projects (UN, 2010).

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32 - Balance of payments and budget support has ascended from around 10% to over 15% in recent years – mostly due to an increase in Venezuelan oil financing. Arab multilateral funds and the governments of Saudi Arabia, Kuwait, and the United Arab Emirates have provided balance of payment support to finance oil imports. This is what Venezuela is doing in El Salvador through the ALBA Petroleos of El Salvador (see the section below).

- Technical cooperation (TC) is a key modality of SSC. The stand-alone Technical Assistance (TA) accounts for only around 10%, many smaller SSC contributors (for example Argentina, Chile, Cuba, Indonesia, Mexico, Nigeria, Singapore, etc.) and Brazil focus mainly on TC.

- Humanitarian assistance is also increasing radically, in response to natural disasters. In accordance with the United Nations Office for the Coordination of Humanitarian Affairs (UNOCHA), Southern donors contributed more than US$1 billion, compared with US$ 275 million in the period of 2006-07.

Target and distribution of SSC

Thus far, geographical proximity has been a main factor determining the direction of Southern bilateral cooperation, with many providers focusing their flows on countries in the neighboring region or sub-region. They often have better understanding of next-door countries, mutual interests and needs as well as language and cultural resemblances, for being resolved by joint solutions. Regional cooperation also could strengthen political ties, investment links and trade, and could be more inexpensive to administer than longer-distance cooperation programs.

Nevertheless, “regional cooperation” (table 2.2) is also becoming a common means for the funding of multi-country programs or projects, or regional organizations. SSC has shown much comparative advantage in this field (UN, 2010). Some Southern providers also bring cooperation outside their own regions, for common political, trade and investment interests. China provides

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33 45% of its cooperation to Africa, and 40% of commitments by Arab agencies and Kuwaiti and Saudi Funds have been made to Africa, focusing on communications and transportation, agriculture, energy and water sanitation. Promoting bilateral trade and investment has also been a powerful motive for SSC. Venezuela's aim under the Petrocaribe agreement has been the regional promotion of energy integration (UN, 2010).

Table 2.2: Examples of the regional cooperation initiatives in Africa, Asia and Latin America

Africa African Union (AU), Communauté Economique et Monétaire de l’Afrique Centrale (CEMAC), Common Market of Eastern and Southern Africa (COMESA), East African Community (EAC), East African Development Bank (EADB), New Economic Partnership for Africa (NEPAD), Southern African Development Community (SADC); West African Development Bank (WADB); West African Economic and Monetary Union (WAEMU).

Asia Association of Southeast Asian Nations (ASEAN+3), South Asian Association for Regional Cooperation (SAARC)

Latin America

Bolivarian Alternative for the Americas (ALBA), Andean Community (CAN), Andean Development Corporation (CAF), Caribbean Community (CARICOM), Central American Integration System (SICA), Central American Bank for Economic Integration (CABEI), Southern Common Market (MERCOSUR)

Source: Department of Economic and Social Affairs, “Development Cooperation for the MDGs:

Maximizing Results”, International Development Cooperation Report, United Nations, New York, 2010.

Priority Sectors and Projects

Basically, Southern contributors have focused on all sectors in national development plans;

however, they tend to provide grants and technical assistance focused primarily on capacity development and social sectors. Brazil, Cuba and Venezuela are all well-known providers of doctors and teachers to other developing countries.

Requirements and Procedures Political Requirements

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34 From a recipient countries’ perspective, a key advantage of SSC is that it carries little, if any, economic or governance requirements or policy conditionalities; and it is not aligned to policy arrangements with multilateral organizations. Contrariwise, bilateral Southern contributors highlight that development aid should not interfere in the internal affairs of others.

Southern multilateral organizations also do not usually impose any macroeconomic conditionalities - making faster the mobilization of aid - , and disbursements are only interrupted if a beneficiary falls into debts.

Procedural Conditionalities

SSC tends to come with fewer requirements, which must be met before a grant or loan agreement becomes effective, such as financial conditions, cross-financing clauses, counterpart funds, feasibility and the establishment of project implementation units. Most Southern providers require a legal opinion before allowing disbursements to commence. Some of the Southern bilateral providers also require receiver governments to provide counterpart funds. In general, the conditions made by Southern providers’ grant or loan disbursements are fairly few, hence the SSC is often disbursed much faster.

Expenditure Procedures

In general, beneficiary countries prefer easier cooperation disbursed and faster acquisition procedures which permit for competitive bidding, preferably including local suppliers. Due to the fact that SSC is mainly focused on project assistance, it tends to be disbursed directly to suppliers. While this may promote faster disbursement, recipient governments are not always informed that operations have occurred, hindering debt and cooperation data monitoring. Some contributors (i.e. India and Venezuela) pay out via cash advances to recipient governments and others via reimbursement claims. Overall disbursement procedures of Southern contributors are somewhat simple. Though this is sometimes counterbalanced by slowness of internal

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35 administrative practices, limited staff in the agencies which are delivering the cooperation, and scarcity of provider presence in the receiver country, major coordination reduces disbursement retardation.

Assessment, Monitoring and Evaluation (M&E)

While Southern providers are often able to carry out projects faster and at lower costs, there is some concern that this may be because of less respect for environmental or labor standards, particularly on infrastructural projects. Some examples include the impact of dam construction projects in Southeast Asia and Africa on the environment, communities and human health; as well as the hiring of local workers only for unskilled positions, paying them very low wages in infringement of national labor laws. There is scarce information available on the M&E procedures of Southern contributors. Recipient countries argue that SSC involves fewer missions to appraisal project development, as well as fewer reports during project implementation.

South-South cooperation in key sectors

Health, agriculture and infrastructure have historically been key sectors of SSC (UN, 2010).

Besides, Southern contributors have acquired a significant expertise in working on “neglected diseases”. An example of SSC is Venezuela - El Salvador relations, in which both are Southern countries (or developing). The specific issue to be addressed is the project financed partially by Petrocaribe¹⁶: ALBA¹⁷ Petroleos of El Salvador. In these relations, Venezuela is the Southern provider country, and El Salvador is the Southern recipient country.

16 Petrocaribe is an initiative of integration of Central American and Caribbean nations, which is expressed in concrete achievements through energy cooperation, based on a scheme favorable and equal exchange between countries. Petrocaribe promotes social and economic development of the region, based on the principles of unity, solidarity, cooperation, complementarity and the vision toward the South. Source: Alba Petroleos de El Salvador,

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36 2.2.2.2 Venezuela and El Salvador relations: ALBA Petroleos of El Salvador

ALBA Petroleos de El Salvador S.E.M. de C.V¹⁸ – a part of Petrocaribe - is a mixed owned company that was created to incorporate the country into the Petrocaribe agreement promoted by the President of Venezuela -officially called Bolivarian Republic of Venezuela - Hugo Chavez Frias. Given the resistance of El Salvador to be incorporated as a part of the agreement¹⁹, Energy Inter-municipal Association for El Salvador (ENEPASA)²⁰ was created to act as a counterparty, representing the interests of El Salvador in the agreement (ALBA Petroleos of El Salvador, 2014).

Moreover, Mayors of the municipalities’ members of ENEPASA are using Salvadoran public funds and turn them into investment securities to develop the project of ALBA Petroleos of El Salvador. This is expressed in the shareholding of ENEPASA by the Republic of El Salvador and PDV-Caribe SA subsidiary of PDVSA²¹ by Venezuela (ALBA Petroleos of El Salvador, 2014). According to the official website of Alba Petroleos of El Salvador, this Corporation of Shares Mixed Ownership and Variable Capital is composed by:

 Decentralized Public Entity

 ENEPASA, Republic of El Salvador

S.E.M. de C.V., http://www.albapetroleos.com.sv/index.php?option=com_content&view=article&id=56%3Aque-es-enepasa&Itemid=66

17 ALBA: Bolivarian Alliance for the Peoples of Our America’s Trade Treaty. Current country members: Antigua and Barbuda, Bolivia, Cuba, Dominica, Ecuador, Nicaragua, Saint Lucia, Saint Vincent and the Grenadines and Venezuela (founder country of the Alliance), http://www.alianzabolivariana.org/paises_alba_tcp.php

18 Alba Petroleos of El Salvador Corporation of Shares Mixed Economy and Variable Capital

19 However since June 2^nd 2014, El Salvador joint to Petrocaribe agreement.

20 According to the Article 1 of the Constitution Act of ENEPESA, this is an “Intermunicipal entity, decentralized, of public law, with own autonomy, non-profit and with legal personality”, and “will aim at the commercialization, distribution, transportation and research of fuels and energy sources...” (Art 4),

http://www.albapetroleos.com.sv/index.php?option=com_content&view=article&id=56%3Aque-es-enepasa&Itemid=66

21 Petroleum of Venezuela

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37

 Private Enterprise

 PDV Caribe S.A. subsidiary of PDVSA, Bolivarian Republic of Venezuela

Basically, the purpose of the corporation is the attainment of commercial and industrial activities in general. Hence, it is possible to obtain cheaper fuel through the partnership of energy cooperation with the Venezuelan government; that was signed between ENEPASA and PDV Caribe SA, which is a subsidiary of PDVSA. The transportation from the refinery to the port of discharge is carried by the Naviera Fleet of PDVSA. The distribution and marketing in El Salvador is through strategic alliances with the domestic transportation entrepreneurs, gas stations and other sectors of the national economy. Thus, through these partnerships, intermediation costs are eliminated, thus enabling to have lower prices.

Furthermore, in accordance with this corporation’s website, through the purchase of ALBA Petroleos products, the company is supporting the development of social projects in the country.

For every gallon of fuel sold, US$0.02 cents are allocated to the special fund used to carry out programs such as building bridges in inaccessible areas within the country, scholarships and distribution of computers at schools among others.

Opening of a bridge in Sensuntepeque (Department of Cabañas, El Salvador) (ALBA Petroleos, 2014)

On February 22^nd, 2014, it was the opening ceremony of a new bridge linking the town of Sensuntepeque with the municipality of San Isidro (Department of Cabañas). On a visit from the General Manager of ALBA Petroleos de El Salvador to the area, accompanied by the President of the Foundation "Cristóbal Hernández", on 4^th January this year, the commitment was consolidated for providing connectivity in the region, thus benefiting the citizens living near the river (Copinolapa) where the bridge was built.

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38 Two days after the visit to the community, the construction of the bridge started and was completed on February 13^th. Through this project, 18 direct jobs were generated as skilled workforce, and a contribution of 30 people of the community who worked on a rotating basis, in order to engage a large part of the inhabitants of the area. The project included the construction of a hydraulic stone box and channeled discharge head for the river, which includes a dam with water flowing through 6 pvc pipes of 60 inches, plus a running surface reinforced by concrete for pedestrian and vehicular traffic with a capacity of 12 tons. The total investment was approximately US$ 45 thousand. These works directly benefited 500 families in the communities of three municipalities of the department of Cabañas, near the Copinolapa River, as part of the expected benefits derived from the boosting of this new trade area.

In sum, no need to say which cooperation is better; however, each one has its own advantages and disadvantages which will depend on the needs of the recipient country. For example, since El Salvador needed to do a vast change in the infrastructure in the south of the country, and perhaps structural changes like the amendment and/or creation of laws to attire more investment; hence the country required a large funding and an accurate plan for a long term, which can be better achieved through NSC. At the same time, in El Salvador there are some other necessities that must be covered, in which perhaps there is no need of a big plan, and therefore they can be achieved in a shorter term through SSC.

Finally, for a deeper understanding of the relations between Taiwan-El Salvador and China- Costa Rica respectively, the author considers important to use both the NSC and SSC in order to achieve the last objective of this thesis, which is also expressed in the topic: a comparative study of the relations of the countries mentioned above. Additionally, these are the most suitable terms for a better interpretation of the found information and its structuration, which will lead this research to a reliable conclusion.

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39 Chapter 3: EL SALVADOR-REPUBLIC OF CHINA (TAIWAN) RELATIONS

3.1 Introduction

This chapter deals with El Salvador – Taiwan relations in terms of development cooperation, trade and investment. First, the author gives an economic and development overview of both countries, addressing also an introduction of Taiwan’s development, to conclude the chapter with the presentation of the current situation on bilateral investments and trade relations.

3.2 Economic Overview of Both Countries

3.2.1 Republic of China (Taiwan) (map 1 Appendix I)

Due to its industrialization, Taiwan is considered one of the so-called Asian Tigers²²; however, to become a newly industrialized country, the island underwent a process of development in which the US and multilateral organizations played an important role. For instance, Taiwan’s agricultural sector received important benefits from US aid. In accordance with some scholars, US covered around two-thirds of all expenses, and Taiwan the remaining third, in order to modernize this sector. This technical aid plan concurred with the expansion of the ROC’s official relations in Africa - from 8 countries in 1960 to 24 in 1969. The US finally ceased to fund ROC agricultural missions starting from 1975 (Atkinson, 2014).

Currently, the island is well-known for its dynamic economy and its exports, led by machinery, electronics, and petrochemicals, which have provided the initial stimulus for its economic development. However, this strong dependence on exports has exposed the economy to fluctuations in world demand. In 2009, Taiwan's GDP decreased 1.8%, due mainly to a fall on

22 The Asian Tigers comprised 4 newly industrialized economies: Hong Kong, Singapore, South Korea and Taiwan.

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40 its exports of about 13.1% for that year. In 2010, Taiwan’s GDP grew 10.7%, as exports returned to the level of previous years; but in 2011, its growth rate went down to 4.0%. In 2012, growth fell back again to 1.3%, due to a slowdown in global demand (CIA²³, 2014). In 2011, Taiwan was the world’s 16th largest exporter and 16^th largest importer, and it had the world’s 5^th highest foreign exchange reserves (Wang, 2011).

Taiwan's major long-term challenges are its diplomatic isolation, its rapidly aging population and a lowering birth rate (CIA, 2014). Except for the Economic Cooperation Framework Agreement (ECFA) signed with mainland China in June 2010, so far Taiwan has been excluded from the economic integration, mainly because of its diplomatic status. In 2006, China became Taiwan's second-largest source of imports after Japan, and the former is also the island's main destination for the export of capital on the form of direct investment. Bilateral trade on securities, banking and insurance took effect in January 2010, opening the island to greater investments from the China's financial firms and institutional investors, thus providing new opportunities for the ROC financial firms to operate in mainland China (CIA, 2014).

According to the CIA, in 2012, Taiwan’s GDP (purchasing power parity) was US$ 894.3 billion, positioning it on the 20^th place in the world, more than the double of Sweden’s rate:

US$393.8 billion in 2013 (35^th). The GDP - real growth rate was 1.3% (in 2010 it was 10.8%), higher than Germany’s rate: 0.9%. The GDP - per capita (PPP) was US$38,400, ranking 29th position, higher than France’s: US$ 35,800 (39^th). The population below poverty line in the same year was 1.5%, lower than Austria’s rate: 6.2%. The Human Development Index (HDI) during the same year was 0.890 (23^rd), considered as a very high level (CIA, 2012), which is similar to Finland’s rate: 0.892. It means that despite the moderate economic growth (contrary to 2010), the living conditions and welfare remain high; moreover, the low index of population living

23 Central Intelligence Agency

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41 below the poverty line, as well as the very high HDI, reflect the high quality of life that a person may have in this country. Each rate is being compared with different countries considered as developed countries from which ROC surpassed almost all rates. Regarding the population below poverty line Taiwan’s rate is much lower than Austria’s and the HDI is almost the same to Finland’s.

3.2.1.1 Commercial Environment

The ROC is a member of the World Trade Organization (WTO) since January 1^st 2002, hence in June 2006, it had its first trade policy review, in which the main features of its commercial environment were the following (SIECA²⁴, 2007):

 Since the ROC’s accession to the WTO, the value of its trade on commercial goods has experienced a growth of 66.9%, from US$ 248.5 billion in 2002, to US$ 414.8 billion in 2006. Taiwan’s exports rose from US$ 135.3 billion in 2002, to US$ 213.2 billion in 2006, and its imports also grew from US$113.2 billion in 2002, to US$201.6 billion in 2006.

 The dynamism and strength of the island's economy is reflected in studies by recognized

international organizations such as the Business Environment Risk Intelligence (BERI) which classifies its environment investment as the 5^th among 50 economies, and the 5^th in competitiveness among the 118 economies studied.

 Regarding Taiwan’s investments, in 2005 inward investment reached a volume of US

$4.228 million, thus increasing by 7% over the previous year. This increase responds to the expansion of manufacturing sectors and the continued growth of the service sector, which have improved the investment framework of the island. Meanwhile, outbound investments reached US$8.454 million, which were destined mainly to Asian countries,

24 Secretariat for Central American Economic Integration

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42 such as Cambodia, China, Indonesia, Malaysia, Thailand and Vietnam, as well as some countries from the American continent, such as Cayman Islands, United States, Panama, Mexico and Canada.

 With respect to Taiwan’s tariff policy, since its accession to the WTO it began to reduce import tariffs. Pursuant to its accession commitments in 2002, to modify the rates

 With respect to Taiwan’s tariff policy, since its accession to the WTO it began to reduce import tariffs. Pursuant to its accession commitments in 2002, to modify the rates

在文檔中 薩爾瓦多-台灣與哥斯大黎加-中國的關係模式之比較研究 2000-2012 - 政大學術集成 (頁 38-0)