Here in Busan, at the High-Level Forum on Aid Effectiveness, there is strong momentum around South-South Cooperation  and Knowledge Exchange. The main Thematic Session on South-South, moderated by WBI Vice President Sanjay Pradhan, drew a crowd of close to 500 people. In the intense negotiations over the Busan Outcome Document, the South-South agenda is also front and center. Why?
First of all, South-South is a great way to support development. Let me give an example.
Let us go back to 2009. We are in the midst of the financial crisis, and Nepal realizes that its banks are overexposed. They have a bubble on their real estate and equity markets. What will happen if it bursts?
Nepal knows that it urgently needs to stress test its banks. But existing stress tests designed by rich countries for their own banks aren’t appropriate for Nepal. And a long process of sourcing specialized expertise to develop a customized stress test would defeat the purpose.
As it happens, the State Bank of Pakistan has a simple and potentially relevant model for stress testing that Nepal does not know about. But there is a World Bank finance expert who does. So, he connects them up. Six weeks later, the Nepalese have assessed their bank exposure and the government has established contingency plans to prepare for a burst.
This is a powerful story of doing development differently. Nobody threw money at the problem, nobody hired a consultant to solve the issue, nobody wrote a study. And yet, we have results. In six weeks time, at very little cost.
How is that possible? Let us pause for a moment.
Nepal is very motivated to solve this pressing problem. It actively shops for a solution: the western model doesn’t cut it, but the Pakistani model does. It is not an academic piece of work, but a practical experience that inspires. They adopt it, they adapt it, it works.
Pakistan is eager to share. They feel thattheir expertise is valued and who doesn’t like that? Sharing an experience is a not easy thing to do. It forces one to analyze a reality that is past, not present, and to reconstruct that reality in a critical, coherent way. People who share also learn - and, in the process, they get better at what they do.
The World Bank expert goes out of his comfort zone: he does not prepare a loan, nor does he provide the expertise himself. Rather, he brokers the exchange: he knows the demand, mobilizes the supply and facilitates the learning. As he watches Nepal and Pakistan learn, he himself is learning a great deal – and with him, the World Bank.
That is what I call three-way learning. The win-win-win of South-South.
The consensus here in Busan is that there is enormous scope to scale up South-South. Countries need and want to invest in their capacity to engage better in South-South and multilaterals need to organize themselves as brokers. The Bank has already made a lot of progress on this, but more work is needed to truly become a systematic Global Connector.
So, South-South as a tool for development has a great future. But that is not the only reason why it is such a hot topic in Busan. There is also a political twist to this.
For countries like China, India and Brazil, South-South is their way of doing development differently. They insist that South-South Cooperation is different from traditional North-South aid: it is flexible, non-conditional and based on trust and mutual benefit. The principle is: “What is in it for you? And what is in it for me?” Aid on the other hand, they argue, is based on principles of charity. It is a one-way transfer. Therefore, rules on aid do not apply to South-South Cooperation.
But, argues the traditional donor community, while South-South might be somewhat unique, it certainly has similarities as well. It might not be aid, but it is a form of development cooperation. How can we, in 2011, reasonably have a global conversation about this topic and not talk about new sources of cooperation? In the sixties, traditional aid represented 70% of capital flows going into developing countries, today only 13%. Talking about aid alone does not make sense.
The hope for Busan was to present a new Global Partnership for Development that would include all development players, not just a few. Are there principles that we can all agree on? That is what the political discussion is about. It is a difficult conversation. The final outcome document reflects that: the BRICS did sign up, but for them living by the principles is on a voluntary basis.
But in the end, politics aside, what sticks with me is the powerful notion of three-way learning. Thanks to the Nepal-Pakistan story and many others , we do know that we can do development differently. That is what we, as a development community, should invest in.