South-South Ideas Paper: The Role of Southern-Based Development Finance Institutions in South-South Cooperation and Mobilization of the Private Sector for Sustainable Development

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Addressing the United Nations Sustainable Development Goals requires thorough consideration by governments, public and private institutions, the private sector and other stakeholders. The variance in the level of development of countries from the global South, and the connections between them, calls for robust South-South cooperation modalities and instruments that can deal with innovative financial matters as a complement to traditional development assistance.

In this connection, Southern-led Development Finance Institutions (DFIs) need to play an active role to support emerging economies, developing and least developed countries, particularly by mobilizing the private sector, so that these countries can implement sustainable development agendas adapted to their domestic conditions. Given the heterogeneity of institutions, this paper does not seek to recommend institutional models or region-specific actions. Instead, it highlights issues and examples from which Southern-led financial institutions can draw lessons to strengthen cooperation strategies and initiatives.

The paper examines how selected Southern-led DFIs provide support, including mobilizing the private sector, with a focus on sustainable development. Further, it explores the contribution of South-South Cooperation to the emergence of a consolidated Southern Financial Governance Mechanism comprising national and regional development banks, export-import banks and other stakeholders. Its purpose is to jointly explore cooperation strategies and alternative funding sources to attain consensus on ways to address the SDGs in a manner that reflects the economic and social priorities of the global South. Given the global economic and financial crisis which has been accentuated since the outbreak of the COVID-19 pandemic, a huge challenge is to ensure appropriate political will on the part of Southern-led DFIs to commit to such enhanced cooperation.

The conclusion and recommendations of the paper leave the discussion open and call for further research on the role of Southern-led DFIs and on a potential consolidated Southern Financial Governance Mechanism. Such a mechanism is expected to contribute to the implementation of the SDGs as an initiative from the global South addressing the issues from a South-South perspective. It would also complement the research carried out by UNOSSC on the importance of South-South Cooperation in strengthening global South trade, investment and regional integration. To build an inclusive, resilient and sustainable post-COVID world it is vital to increase the pool of sustainable finance, particularly removing bottlenecks to blended finance and other innovative financing instruments.