Your Excellencies,
Distinguished Delegates,
Ladies and Gentlemen,

Introduction
The present workshop, that tries to address the concepts and issues related to Promoting Investment and Technology Transfer through South-South Cooperation, offers a timely occasion to reflect more broadly on industrial development, the challenges and threats that many developing countries have to face, and the role of UNIDO in supporting their efforts to address their needs and to pursue a sustainable growth.
In the last few decades, a number of developing countries, especially in East Asia, have provided the success stories and the inspiring examples that social and economic development is achievable if industrial development can be leveraged, and this gives us a reason for optimism.
Each country-specific industrial development might have been diverse because each country started with its own specific endowments and constraints, and had to adopt policy choices and policy instruments that suited its own particular conditions; nonetheless, whatever the options, there were common pre-requisites and decisive factors for success, which, still today, are regarded as inescapable.
a) A key factor is the contribution of foreign technological inputs channeled trough linkages of different kind with foreign partners, for example: technology acquisition through licensing or through foreign direct investment (FDI) with its spill over effects and beneficial linkages with local suppliers; or through joint ventures, with the consequent upgrading of local partners; or through original equipment manufacturing arrangements (OEM) and the learning process that came with them; or through participation in global supply chains and production networks and the inherent opportunities to upgrade capabilities and internationalize;
b) Another factor is the own technological effort of local firms.  In order to take full advantage of the linkages with foreign partners, local firms have to undertake a conscious, purposeful and consistent technological effort to learn, innovate and move up the technology ladder from basic assembly operations to own design and own branding towards the internationalization and eventually market leadership;
c) A third factor is: government policies and support.  The role of government is critical for the development process, both at macro level and at enterprise level. On the one hand, foreign investors and partners would only be willing to operate in a country or establish cooperative arrangements with local enterprises if governments are able to create the legal, institutional and infrastructural conditions that inspire confidence. On the other hand, many local enterprises would not be able to succeed in their own technological efforts without government policies and institutions aimed at supporting their learning and internationalization efforts.

The new industrial environment
Having looked into the roots of the spectacular development witnessed in some developing countries, allow me to take a view over the new industrial environment and the present development scenario, characterized by fierce competition among global players – the Multinational Enterprises (MNEs) – and a new organization of industries and services that create opportunities for developing countries, but also challenges and threats, that call for further partnerships and synergies especially along a South-South Cooperation approach.
The operational strategies of Multinational Enterprises, are influenced and shaped by several interrelated elements. First, the intense competition for consumers’ preference and market position, which means continuing innovation, differentiation, product quality, and also low prices; secondly, the liberalization of trade and FDI regimes, which result in decreasing transaction costs and give MNEs substantial flexibility in the spatial location of their operations and in the dynamic distribution and re-distribution of manufacturing and services according to convenience; thirdly, the mobility of capital and the propensity of MNEs to shift from more “closed” and vertically integrated operations to more “open” initiatives where the outsourcing and offshoring of fragmented manufacturing activities is becoming the prevailing rule; fourthly, the advances in information and communication technologies, which give MNEs the tools and skills to process data and the ability to effectively coordinate and manage complex networks of suppliers and customers worldwide, thus responding quickly and flexibly to changes in demand and playing to their advantage with location differences in costs, infrastructure, manufacturing capabilities, and trade and investment regimes.
The dynamic and integrated, but geo-spatially distributed activities of international production can be referred to as the “global factory”, a concept and a reality that encapsulates conceptualizations such as global supply chains; global value chains; off-shoring and outsourcing; spatially distributed production networks; production sharing; vertically intra-industry trade (VIIT), vertical specialization and their interlinkages in the form of internationally integrated sourcing, technology, production, marketing and servicing networks, as well as “third party” logistics, distribution and transportation services.
In the global factory each country’s imports and exports are increasingly significant links of value addition in the international supply chains. The global factory enables Multinational Enterprises, and different locations in Developing Countries, to specialize in specific parts of global value chains and therefore service different geographic markets. The crucial outcomes of the operations of the global factory are in terms of shares of vertical specializations in the world trade, which have been increasing.

Developing countries and trade: the South-South divide
Key production players of the South are becoming increasingly important in trading intermediate goods and South-South trade flows compared to South’s total trade have also been steadily growing.  The distribution of this growth over the South is skewed to the Developing Countries of Asia, which have a growing lead in manufactured exports and in exports of products of medium- and high-technology (MHT). In contrast, for Sub-Saharan Africa, there has been a decline in both transactional capacity (exporting) and transformational industrial capability (value adding in MHT products).
Also in terms of intra-regional manufactured export trade, East Asia dominates the South-South picture.  Over 1995 to 2003, while East Asia changed its share of resource-based and low technology trade by some 4%, it changed its MHT share by 22%.  In contrast, other regions of the South experienced either zero or negative changes in the export of MHT products. Besides, East Asia trades more with itself in its global factory of MHT vertical specialization than it does with other regions of the South while South Asia and Sub-Saharan Africa trade more with other South regions in resource-based and low technology than they do with themselves.
The above illustrations reflect a striking reality: while some developing countries that started at the level of simple assembling operations have grown to the point of becoming global players and sources of FDI through their own MNEs,  many other Developing Countries are still not developing at a sufficient pace. For lack of adequate technological capabilities, they have been unable to effectively participate in the global value chains and take advantage of the opportunities offered by the global factory and the correspondent vertical intra-industry trade (VIIT).

The case for South-South Cooperation
A wide spectrum of initiatives among Developing Countries and also from the international community is needed in pursuit of using trade and South-South Cooperation as engines of growth and responses to the challenge of industrial development in the South.
A division of labor that spurs South-South trade-induced economic and industrial complementarity would seem beneficial.  The implications for upgrading the nature of South-South trade lie in generating progressive abilities in the industrial structures of the South. As the suppliers bases in the South become more efficient and competitive, East Asian MNEs will increasingly be motivated to expand their offshore and outsourcing to locations in the South other than the Asian region; and, by the same token, become the agents of South-South technology exchange and capacity-building, through, for example, FDI, licensing agreements, production partnerships and international joint ventures.
Global and regional integration on the one hand and South-South Cooperation on the other are critical elements to enable Developing Countries to keep up with a participatory role in the new industrial environment. Building advanced domestic capabilities constitutes the key to embed learning, develop innovation and enhance competitiveness.  In this regard, FDI and the participation in global value chains are generally expected to bring in advanced skills, innovative know-how and updated technology.  But the extent to which FDI can produce the desired outcomes depends on the effectiveness of trade and competition regimes, the policies for attracting foreign firms, the corporate strategies of Multinational Enterprises, the responsiveness of local markets, and the national institutional framework towards development.  The participation in the global value chains requires substantial capacities already being in place, which for many developing countries’ enterprises is not the case.
They key challenge to developing countries is improving their global integration through enhanced domestic capacity building.  Certainly for many developing countries, such aim would remain out of reach without concerted international efforts, such as those derived from a consistent and purposeful South-South Cooperation, and the assistance of specialized organizations like UNIDO.

South-South Cooperation: perspectives and issues
Directly or indirectly, all major pronouncements of the international community on the plight of developing countries highlight the role of South-South Cooperation as an important instrument to achieve economic development and poverty reduction.
The origin of South-South Cooperation can be traced to the creation of the Group of 77 (G-77) in 1964 to promote economic and technical cooperation among developing countries. Concrete steps for action occurred in the 1970s, particularly in 1978 when the Buenos Aires Plan of Action by the Conference on Technical Cooperation among Developing Countries (TCDC) was adopted. Articulation of these and other plans was advanced through the adoption of the Caracas Programme of Action in 1981. As recently as in 2003, the United Nations General Assembly formally opted to use the term South-South (instead of ECDC/TCDC) in describing cooperation among developing countries. These international efforts, in concert, have brought together within Developing Countries measures for capacity building, increasing trade and promoting technical cooperation in industrialization for the advantage of economic development in order to achieve the Millennium Development Goals.
The South-South Cooperation can be seen as encompassing, among other things, four broad areas:
• industrial trade, investment and technology flows among developing countries;
• common positions to address discriminatory elements of global trade norms;
• a joint response to poverty reduction;
• a strategic exchange of experience and know-how.
Regional groupings among developing countries are endeavouring to achieve the above objectives within the framework of preferential trade agreements and in this connection there are already in Asia several examples of industrial complementation schemes, such as the ASEAN Framework Agreement on Services (FAS) and the ASEAN Investment Area (AIA).  But many questions still remain and here are just a few among the many that come to mind:
• How will the rise of a some developing countries as economic superpowers influence South-South trade, technology and investment flows?
• In which way the lead countries of the South play an effective role in addressing the unresolved elements of trade negotiations?
• How South-South Cooperation could be instrumental in generating income and employment opportunities for the rural and urban poor?
• What are the determinants of successful South-South cooperation in industrial development for poverty reduction?
• And so on…

The role of UNIDO
a) in general
UNIDO has consistently been looking for answers to the above questions and translating them into practical action, as a key player in the promotion of South-South Cooperation.
UNIDO has been at the forefront in that process with a vast array of tools, activities and programmes. It would not be feasible to enumerate all of them in the time allocated to my address to you today. So, I will confine myself to a few examples for illustration.
a) The UNIDO International Network of Technology Centers, set up over the years, and dealing with diverse technology fields with cross-sectoral impact, from new materials to advanced manufacturing technologies, play a catalytic role in translating technology into business opportunities and new industrial investments; and at the same time take the South-South Cooperation to the heart of their concerns.
b) The International Centre for Small Hydropower (SHP), established in Hangzhou, China in 1991, provides accomplished example of triangular South-South Cooperation.  It promotes global SHP development through triangular technical and economic co-operation among developing countries, developed countries and international organizations, hence to supply the rural areas in developing countries with environmentally sound, affordable and adequate energy.  Since its establishment, the Centre has trained hundreds of engineers from 43 countries and sent missions to 54 countries for programming and technical consultation resulted in the development and implementation of concrete capacity building projects in the energy area.  In addition, thousands of specialists and policy makers from the developing countries visited the Centre for learning best practices in use of locally available resources for energy production and use. 
c) The UNIDO Investment and Technology Promotion Offices (ITPOs) support the transfer of technology and foreign direct investment from the countries of establishment to other developing regions. For example, the China ITPO in Beijing and UNIDO Shanghai Investment Promotion Centre have been active at promoting business relationships between China and other developing countries, particularly in Africa.
In the same line of activities, I can refer to the Asia-Africa Investment and Technology Promotion Centre (AAITPC), which was established to foster the development of business alliances between Asian and African countries and consequently reinforce South-South cooperation;
d) The Investment and Technology Promotion programme of UNIDO is also, and especially, an important element to support South-South Cooperation. This is because South-South interaction is growing and to foster national industrial development of the concerned countries, it is indispensable the availability of national technical and investment-promotion institutions that ensure the necessary competence and availability of productive industrial capacity.

The role of UNIDO
a) The UNIDO Centres for South-South Industrial Cooperation
Last but not least, let me make a reference to a recent initiative of UNIDO: the Centres for South-South Industrial Cooperation.
Countries that have been most successful in raising incomes and reducing poverty – the case of China and the newly industrialized countries – can provide unique opportunities for a qualitative enhancement of South-South Cooperation. With this in mind, and also considering that recent years have witnessed a steady growth in South-South trade in commodities, UNIDO has embarked on a new initiative involving the creation of South-South Technical Cooperation Centres in several emerging economies.
Two of such centres are already established in China and India. Similar centres will subsequently be established in other of the more advanced countries like South Africa, Egypt and Brazil.
The UNIDO Centres for South-South Industrial Cooperation will:
• provide for exchange of expertise and experience, including the design of practical and innovative projects with social and economic development impact for LDCs;
• network institutions and enterprises, including linkages with the UNIDO International Technology Centres, the Investment and Technology Promotion Offices (ITPOs), the UNIDO field offices, and regional Investment Promotion Agencies Networks;
• provide a platform to encourage closer co-operation in policy formulation among developing countries;
• strengthen national and local innovation systems, leverage projects of governments and sharpen their South-South Cooperation component.
Furthermore, the Centres will help identify and mobilize resources required for concrete projects within the framework of South-South Cooperation; and they will play a catalytic role in mapping the potentials in more developed countries in the South to support other developing countries in mutually beneficial partnership arrangements.
Your Excellencies, Ladies and gentlemen,
The holding of this event, important and impressive as we are witnessing, has involved combined efforts and synergies of several organizations, governments, institutions and businesses. My compliments and thanks to all of them for their commitment to make a success out of it.
I have talked about the importance of South-South cooperation and highlighted some aspects of UNIDO’s traditional activities and recent initiatives to bring developing countries together for mutual benefit and for the cause of poverty alleviation in the world; but the advancement of South-South Cooperation requires much more than what UNIDO can do within the confines of its mandate and resources. It is a collective task that has to involve the synergistic interplay of governments, development organizations, financial institutions, and the international community in general. As I said at the opening ceremony, with so many authorities and representatives of organizations gathered here, we can reflect on the cooperation mechanisms already available for South-South Cooperation and on the ways of making them more effective.
Thank you very much for your attention.