A new phenomenon is emerging in the international economic arena, whereby the South is moving steadily from the periphery to the centre of world trade and economic relations, reflecting changes in the traditional patterns of the international division of labour.

This phenomenon is not yet entirely understood, but it seems clear that it holds great potential for future economic relations among developing countries and between them and developed countries.

During the deliberations at UNCTAD XI, and subsequently at the 51st session of the Trade and Development Board, particular attention was paid to the emergence of what is being described in the current debate as the "new geography of international economic relations".

That heading is most often applied to international trade as an expression of the extent to which trade among developing countries has grown in importance. However, we feel that the potential scope of the phenomenon is considerably wider, covering such areas as investment flows, technology, services, commodities and finance.

It involves not only relations among developing countries, but between developing and developed countries as well. In the mid-1960s, when both the G-77 and UNCTAD were created, North-South trade relations were understood essentially in terms of the South being a producer and exporter of commodities and raw materials to, and an importer of manufactured products from the North. For a majority of developing countries, this situation still holds.

Despite progress made in the diversification of many developing countries´ exports over the past two decades, many of them, including almost all LDCs and many small economies, continue to depend to a very large extent on a few primary commodities for their export revenue. Indeed, some 30 developing countries, most of them LDCs, currently rely on just one single commodity for over half of their export earnings.

However, the continuing dominance of commodities in developing countries´ exports should not overshadow the dramatic growth during the past two decades in the share of the South as a whole in global trade and investment flows. Three fundamental features of this development are worth noting.

First is the growing importance of the South as a producer, trader and consumer in global markets. As such, the South represents a potential engine of growth and dynamism for the global economy. Some figures in this connection are presented in the two background notes prepared by UNCTAD for the workshops on trade and investment.

In the mid-1980s, 20 per cent of global trade was accounted for by developing countries. Now, 20 years later, that figure is 30 per cent. In 2003, the US imported more from developing countries than from developed countries, and exports to developing countries increased to over 40 per cent of total US exports.

In the case of Japan, about half of its exports go to developing countries, and in the case of the EU - if one excludes intra-community trade - about one third of exports.

Second, trade among developing countries has grown dramatically. Over 40 Per cent of developing-country exports of goods, including basic commodities and manufactures, are destined for other developing countries, and this trade is increasing at an annual rate of 11 per cent - nearly twice the growth rate of total world exports.

Thus, an interesting trend that is part of the new internationalization is that developing countries are both increasing their importance as trading partners of developed countries and at the same time becoming significant trading partners for other developing countries.

Third, the composition of the trade from developing countries has changed. It is no longer the case that developing countries export raw materials and primary commodities, and import manufactures: developing countries are increasingly exporting manufactures.

The share of manufactures in developing-country exports has grown steadily, from 20 per cent of their exports in 1980 to nearly 70 per cent in 2000. The growing importance of the South in the global economy is not confined to trade relations alone.

Similar patterns are also emerging in international investment flows. Annual foreign direct investment (FDI) outflows from developing countries have grown faster over the past 15 years than those from developed countries.

Negligible until the early 1990s, their outward FDI accounted for over one tenth of world stock and some 6 per cent of world flows in 2003. More importantly, in the 1990s, many developing countries emerged as significant sources of FDI in other developing countries. The number of developing economies that are now large investors by global standards has increased.

In 2003, for instance, Hong Kong, China, had a larger outward FDI stock than Italy and Spain, while Singapore ranked ahead of Denmark and Norway. Increasing amounts of outward investment from developing countries are going to other developing countries, and the rate of South-South international investment is growing faster than that from developed to developing countries.

Today, the more successful developing countries are better able to leverage these changes and the resulting shifts in international division of labour. The off-shoring of manufacturing since the 1980s and, more recently, that of services, reflects this trend.

Many developing countries are able to participate in the international production system organized by TNCs, in which the value chain in the production process is sliced up into different activities to be located in different places and coordinated in integrated international production systems.

Such a system may not have been thought viable some 40 or 50 years ago, but developments in the past 20 years have made it possible. Diverse factors have contributed to the impressive performance of the South.

They include strategic policies and actions (including a careful balance in the role of the State and the market) by the successful developing countries and their firms; changes in TNC strategies and the internationalisation of the production systems; increasing liberalization, which made mobility of factors of production and business relatively easier; changes in demand patterns and market access conditions; and technological changes (including ICTs).

The downside of entering production and export markets through the international production system is the uncertainty associated with it, as companies can easily relocate or restructure activities - implying that no country can take it for granted that today´s competitive activities will still be competitive tomorrow.

Rapid technological change further accentuates the pressure on countries to keep up with skills, investment in infrastructure and access to markets. Only countries that have managed to acquire the capability needed to add value (rather than simply assemble imported inputs) can secure long-term benefits from their involvement in the international production system.

There are countries that have managed to increase their share in world trade while at the same time expanding their share in world manufacturing value-added. All this being said, we should not forget that, as I have indicated, these new trends have so far benefited only a relatively small group of developing countries, and that for a majority of countries in the South, little has changed in the past 40 years.

The social and economic concerns that held the attention of the founders of UNCTAD and the G-77 are with us still. The developed world remains dominant in international economic relations and is still the main source of demand for world imports.

Market access barriers in the North, and the difficulties and high costs of market entry and anti-competitive market structures, continue to hamper the trade and growth potential of most developing countries.

UNCTAD will continue to play its part in supporting developing countries in their efforts to integrate into the global economy on terms that are favourable to their development.

It will also pursue its work on South-South cooperation, building on the emerging trends in South-South trade and investment flows. Important aspects of this work include the space for policies needed to enhance productive capacity, economic growth and competitiveness, and best practices in good economic governance, as mandated by the outcomes of UNCTAD XI.

(Edited speech of the Officer Incharge of UNCTAD delivered at Doha Forum on Trade and Investment).