BRICS Academic Forum 2022 | Opening Plenary

BRICS,consensus,Consolidation,Continuity,Digitalisation

Remarks by Dr Samir Saran at the Opening Plenary session of the BRICS Academic Forum 2022

It is a pleasure to be back again and be a part of the academic forum that has continued to raise important issues for intra BRICS cooperation and indeed, for the challenges that confront our world.

We are meeting today at an important moment—a moment that will be recorded and studied by future generations. It is important that all of us rise to the challenges that confront us and be creative in discovering solutions. Three major trends are seeking our attention and indeed, resolution.

First, global politics has been upended by the political actions in Asia and Europe. Conflicts, contests, and careless power projection have jeopardised stability, peace, and prosperity for all. Can we discover a new geostrategic balance and what role can BRICS play?

As we emerge from the pandemic—or at least begin to learn to live with it—what are the lessons that we have learnt? Will new development and growth models emerge, and will BRICS and other actors invest in what is most important for humankind?

And finally, we are experiencing the digitalisation of everything. Technology is having an impact on our economy, our politics, our societies, and indeed our individual behaviours, choices, and assessments of the world we live in.

New Politics, Green and Inclusive Growth, and our Common Digital Future beckons us. At the Indian presidency of the BRICS last year, we coined three words—Continuity, Consolidation, and Consensus. These remain relevant even as China steers the group and must continue to define the BRICS agenda.

We have to work together to overcome the contested politics of today. We must be contributors to stability in world affairs. We should reject actions as a group and as individual nations that can create further instability or exacerbate current tensions.

BRICS was always meant to be a grouping that would offer an alternative path to one prescribed by the Atlantic Order. We must continue to strive to do this. Unipolarity must give way to multipolarity. Bipolarity is not an option.

Three key elements will shape the path that BRICS and others must pave.

First, as the political assumptions of the 20th century may no longer be sufficient or valid for a more complex world, we must work together to script a multilateralism that is fit for purpose. It must reflect current realities, the aspirations of different geographies, and a governance structure that is plural, transparent, and accessible. The old hegemony of the Atlantic Order must not be replaced by a new hegemony from another region.

BRICS must continue—individually and collectively—to remain inclusive in shaping the multilateral system. This system must deliver on economic and trade growth. It must find new ways of catalysing financial flows for infrastructure and aspirational needs of multiple geographies. Multilateralism for this century will require new anchors and champions. BRICS can play that role, provided all members are committed to it.

Second, future growth and our economic needs will have to cater to our planetary responsibility. Green transitions must not simply be a buzzword, but the policy design for all. BRICS must work—both within and with others—to put together a template to invest toward a green planet. We have to rethink mobility, urban spaces, consumption, and our lifestyles. We must also work to protect those who are already being burdened by the deleterious consequences of global warming, rising sea levels, and harsh weather conditions.

Thirdly, we have to embrace technology and not allow it to become the new arena for zero-sum politics. The world must see technology as a digital public good and it must serve all of humanity equitably. The rules for this digital future are yet to be written. These rules must not be written only by the western hemisphere. In the absence of such agreed rules, sovereign arrangements must prevail over those written by the boardrooms. BRICS can share experiences and learnings from our individual journeys and offer to the world examples and methods of managing our common digital future. We must ensure that countries, within and outside, do not weaponise technology or game the digital public square.

It is impossible for BRICS to attain its full potential and contribute to global affairs unless each member is committed to the BRICS project and the thinking that led to its creation—peaceful co-existence, within the group and with others, being the primary ethos.

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Stocktaking and Recommendations for Consolidation: Joint Academic Paper by ORF and RIS

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As the BRICS passes through a crucial milestone of its existence, celebrating 15 years of its formation, this report examines the initiatives launched since inception and makes recommendations for consolidating and streamlining the agenda.

The BRICS remains a prominent grouping in the global governance architecture due to the individual influence of each member-state and the collective size of their economies. The confidence in BRICS from within and the perceptions outside the grouping are shaped by its successes in institution-building and resource mobilisation. The highlight of BRICS’s success is its strong focus on issues of financial stability and global governance reforms, particularly in areas related to macroeconomic stability. These are supplemented by attention to sustainable development issues backed by finance and technology.

The BRICS agenda has witnessed a steady expansion of its scope ever since its inception. During the initial years, the agenda was focused on responding to the trans-Atlantic financial crisis with a special focus on multilateralism, particularly the need to reform the international monetary and financial architecture. Subsequently, the BRICS established the New Development Bank and the Contingent Reserve Arrangement, two flagship financial initiatives that remain the biggest success stories of the plurilateral to date. Notably, with the outbreak of Covid19 in 2020, there has been a special focus on responding to the pandemic and coordinating recovery.

Given the expanding scope, there is a need for consolidation and streamlining of the BRICS agenda. This will help address structural deficiencies and facilitate the smooth coordination for building consensus on key issues. To realise these goals, a thorough review of the BRICS cooperation mechanisms is necessary. This joint academic study presents an assessment of the various tracks under the BRICS framework, such that the grouping can better pursue the collective agenda of economic cooperation and sustainable development.

The year 2021 has been significant, with the Indian presidency underscoring ‘BRICS@15: Intra-BRICS Cooperation for Continuity, Consolidation and Consensus’ as the theme. The aspect of ‘consolidation’ received special attention. The Indian presidency also helped in concretising several action areas that had remained dormant. A case in point is the Agriculture Research Platform proposed by India at the 2015 Ufa Summit with a memorandum of understanding signed during the Indian presidency in 2016. This was launched in the virtual format in 2021, again during India’s presidency.

India’s presidency of BRICS in 2021 has set a definite example for streamlining of the BRICS agenda. As the agenda consolidates, future presidencies will find room for emerging themes that require urgent attention. Consolidation does not always only mean weeding out weaker sprouts, but to have comprehensive approaches towards setting common goals so that even relatively weaker initiatives can be scaled with resources. A preliminary assessment of the initiatives launched by BRICS is presented in this report.

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BRICS Academic Forum 2021 | Valedictory Session

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Opening Remarks at the BRICS Academic Forum 2021

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From Cold War to Hot Peace: Why BRICS matters

13 July 2015 2:47PM, Article, Lowyinterpreter

Original link is here

As BRICS leaders met in Ufa, Russia, for their annual meeting late last week, there were expectations and anxieties galore. The group met as tensions between Russia and NATO rose, Europe’s circus of the absurd (the Greece crisis) continued, impending global agreements on sustainable development and climate action were being negotiated, and celebrations for the 70th anniversary of the UN approached in New York. All of this at a time when the liberal international order was shown to be inept at managing radicalism, barbarism, parochialism and illiberalism across the world.

The BRICS member states are also experiencing their own specific political moments. Russia is struggling to cope up with the dynamics of the energy sector economy and is involved in an intractable conflict in its neighborhood. Brazil seems to have lost the ‘Lula mojo’ and is fighting economic and political inner demons. South Africa and its enthusiasm for being the gateway to Africa has suffered a body blow with reports of a series of fatal attacks on African migrants. India is pre-occupied with rewriting its story under the tireless outreach of Prime Minister Modi, who is exclusively focused on reshaping India’s economic trajectory. And then there is China, which is putting together the plans and institutions that might soon constitute the ‘Beijing Consensus’ that could dominate the geo-economic landscape over the next few decades.

The 77-paragraph outcomes statement from the summit was inevitably going to be a list of ideas that would cater to different expectations and aspirations of each of its members.

What BRICS means for Russia

For Russia, the political takeaways are the key. If one was to go through the list of Russian proposals on BRICS cooperation in the months leading up to the summit (some at the official level others at track II dialogues), you would detect an aspiration to create a political aggregation among the BRICS collective. These proposals included an ambitious agreement on cyber security, cooperation on outer space, peace and conflict treaties, a proposal on planetary defence, a new agreement on non-aggression and peaceful co-existence, non-proliferation arrangements around new technologies and even a new arms control and export control regime.

As Russia’s global legitimacy shrinks, the role of BRICS as a legitimising platform becomes more important for Moscow.

For many Russians, the world has moved on from the Cold War of the last century to the ‘Hot Peace’ of the current one. To them, BRICS must be a force for stability, and one that can counter what they see as the eastward expansion of the Atlantic alliance. That the official statement covers some of these Russian ideas (watered down, no doubt) is Russia’s gain.

What BRICS means for China

The import of BRICS for the Chinese is starkly different. They are in the process of resetting some key rules that have defined postwar geo-politics and geo-economics. To them, BRICS may be another platform that will institutionalise and promote those facets of global engagement that benefit China. While confrontation between Russia and NATO is something from which Beijing would wish to keep a healthy distance, China’s leaders realise that a beleaguered Russia offers them a chance to consolidate their ‘March west’ agenda, through the central Asian and Eurasian landmass and into the heart of the EU.

Still, never in their wildest dreams would China’s leaders have imagined the servility Russia is now demonstrating.

A Russia that once killed the opportunity to integrate with Western Europe because Moscow was unwilling to play anything less than ‘big brother’ now seems willing to play second fiddle to the Chinese dragon. Such was the level of kowtowing to China’s ambitions and agenda that many at the track II meetings over the past couple of months remarked that Russia had officially replaced South Africa as China’s ‘B Team’ within BRICS. One Russian proposition went so far as to suggest that the New Development Bank (NDB; a joint BRICS development bank but one which is strongly influenced by Beijing) must support and lend to the Chinese One Belt One Road initiative. This was reminiscent of the concentration of all financial flows in the past century serving to reinforce US power.

But for Beijing, BRICS could offer three key benefits vital for its national project. First, BRICS offers a truly large economic landscape on which the experiment to internationalise the Renminbi could begin. The NDB, the trade cooperation agreement and the economic cooperation pact among BRICS could facilitate this. The second key advantage has to be diversification of the Chinese product market by moving towards an eventual BRICS Free Trade Zone, seeds for which were planted in Ufa.

The final advantage of BRICS for China is the affirmation it gives to the legitimacy of the Chinese system, something no democratic bloc has accorded Beijing before. Outside the BRICS context, it’s hard to imagine Brazil, South Africa and India discussing, defending and promoting the Beijing Consensus, which is premised on everything these three democracies otherwise abhor. BRICS gives the Chinese dragon the license to drive a wedge in the liberal order.

What BRICS means for South Africa

South Africa is a BRICS anomaly; it is dwarfed in demographic and physical size by the others in the group. Yet it is this anomaly that makes the BRICS gambit so important for South Africa – effectively acting as its ticket into the big league. Pretoria has been promised a regional hub of the BRICS bank, which means South Africa will be the node for BRICS into Africa. This puts a potent tool in South African hands but also saddles it with the responsibility of reconciling its differences with other African economies and polities.

What BRICS means for Brazil

Brazil is struggling to define its role in BRICS, with its attendance reduced to the mundane. Much of this has been due to the Government being bogged down by domestic problems, leading to a loss of the momentum that President Lula had injected. For a country that is still searching for its place in the world, the Lula vision was to move Brazil from being merely ‘that big country on the left of the map’ to becoming a critical partner in the Asian century. BRICS provided it a free ride to undertake this ambitious plan. But it remains to be seen how and when Brazil will overcome its inertia.

What BRICS means for India

Finally we have India, in many ways the proverbial swing state for which BRICS could offer the flexibility it needs and without which the BRICS would not just lose its ‘I’ but also a fair part of its identity. For a country that is slowly but surely exhibiting signs of becoming part of the liberal order it once opposed, BRICS is the rhetorical, normative and tactical vehicle to affect its transition from ‘trade union leader’ to ‘global manager’.

The BRICS rubric also allows for sustained engagement with China, which could build multiple dependencies. It enables India to demonstrate muscularity on its border dispute with China while concurrently embracing it. For example, the New Development Bank and the Asian Infrastructure Investment Bank enable India to participate in Beijing’s ambitions and benefit from it (it needs huge doses of commercial loans and development finance) without being socialised into ‘Pax Sinica’.

BRICS will be beneficial for India if it opts for pragmatism over ideology and sees the Beijing Consensus as means of shaping the discourse of the ‘east’ until it is able to script one of its own. On the other hand, if Delhi chooses to play the ideological card, it will end up on the wrong end of the bargain as it did with the Washington Consensus – staying out and consequently being excluded from the mechanisms and institutions that shape global development and direct global capital.

BRICS is also the last hand India has to play with Russia, given the dwindling interdependence between the two states. India fears continental encirclement, owing to increased Russian engagement with Pakistan (visible in the diluted treatment of counter-terrorism in the BRICS outcomes statement) and what it believes is a Russian slide into China’s orbit. Consequently, it will be through the normative processes as well as the economics of the BRICS grouping that India can maintain a serious balancing play with Moscow.

Finally we must acknowledge that for all the talk of a rising democratic India being welcomed with open arms by the great powers, India’s acceptance into the Western-led global order has been lukewarm. A deeper integration into BRICS, as the outcomes statement promises, will give Delhi far greater bargaining power in negotiating its place within the global political and economic governance institutions currently dominated by the West.

Photo by Flickr user MEAphotography.

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Samir Saran & Vivan Sharan: Behind the lines of credit

The government should use lines of credit to transition India’s economic engagements towards a more durable, defined framework

by Samir Saran & Vivan Sharan

March 28, 2015 Last Updated at 21:48 IST, Business Standard

Original link is here

Last year Indian PM Narendra Modi announced a $1 billion concessional line of credit (LoC) on his maiden visit to Nepal. More recently he announced a concessional LoC in his March visit to Mauritius of $500 million for civil infrastructure projects, and a similar line to Sri Lanka of $318 million for development of railway infrastructure. Clearly, LoCs are becoming a key arrow in India’s economic diplomacy quiver.

The Indian government subsidises the interest rate on concessional LoCs under its Development Cooperation Programme. Since LoC projects are demand-driven, recipient countries first have to make a request for a LoC to the ministry of external affairs, which considers political and economic aspects before handing over the structural and disbursement process to the ministry of finance and the Export Import Bank, respectively. The sheer size of the LoCs committed to Nepal and Mauritius in particular is indicative of the shift in India’s foreign policy priorities towards its neighbours.

The importance given to LoCs comes at a critical juncture in the global development discourse. There is little agreement on a ‘universally applicable’ global development agenda. The heydays of structural macroeconomists arguing for deficit reduction as a precondition to ‘development assistance’ are perhaps behind us. In the aftermath of the global financial crisis, OECD countries are racking up large debts in an attempt to spend their way out of deflation. As world leaders prepare to negotiate Sustainable Development Goals to succeed the Millennium Development Goals, key development questions will be up for debate.

The negotiations will be rough and tough. A number of politically sensitive questions must be addressed if a truly inclusive and sustainable development agenda is to be crafted: What should be the measure of effectiveness of financial flows, such as LoCs? Who or which body should have the mandate to measure this effectiveness? How critical a role will financial markets play in the maximisation of development impact? What should be the criterion for assistance? How can economic incentives between development partners be aligned?

A study by the Observer Research Foundation on India’s concessional LoCs to East Africa has helped shed light on some of these issues. One of India’s largest LoC tranches, of $640 million, has been given to the Ethiopian government for expanding sugar refining operations. According to the Ethiopian Sugar Corporation, production from three assisted plants, which would total close to 1.6 million tonnes of sugar annually, would help Ethiopia become a net sugar exporter. The effectiveness of LoCs, therefore, is closely tied to the shift away from structural import dependence. The Ethiopian exchequer could earn $376 million annually through sugar exports from 2015, but the qualitative impact is perhaps wider. The credit extended will help generate livelihoods both directly and indirectly through infrastructure and supply chain creation; it will generate additional revenues for development objectives and create a new industrial ecosystem. Given that this entire process was demand-led, local stakeholders are perhaps best-equipped to measure the developmental and economic impact of the LoC.

From the Indian perspective, two aspects must be revisited to exponentially increase the impact of such LoCs. First, the role of the local agency is central. Often, countries from where LoC demands originate require handholding and technical support. The commercial sections of Indian missions in countries to which large development flows have been committed require support of experts and technocrats. Since the Indian Foreign Service is smaller than New Zealand’s, it is vital that the government breaks down silos reserved for diplomats, and supplements its missions with professionals possessing the requisite expertise in handling and supporting commercial projects. Prime Minister Modi would know that economic outcomes are not going to wait for the Indian bureaucracy to reform or for officials to reconcile themselves to the fact that horizontal hires need to be paid market wages. Billions of dollars are at stake, important relationships need nurturing and none of this should be jeopardised by a handful of egos.

The second key issue is the involvement of Indian vendors in funded projects. Under the concessional LoC framework, recipient countries have to procure a variable proportion of goods and services (between 65 and 75 per cent) from Indian firms towards project implementation. Anecdotal evidence gathered for the ORF study suggested that the pre-tendering and tendering processes have much scope for improvement. Given this government’s emphasis on expanding the Indian industrial base, there is an opportunity to make the LoC-linked tendering process more competitive and inclusive. Many stakeholders privately confessed that the process is not transparent and is geared to cater to a select few. The government must, therefore, use the new commitments to Nepal and Mauritius as an opportunity to revise the tendering process and to offer a level playing field. The bureaucracy must be kept at arm’s length from market operations in order not to replicate the very system of state patronage that the Indian PM hopes to dismantle.

In 2012, the total amount of open LoCs crossed $10 billion and this instrument is only likely to gain further prominence. Yet India is itself a developing country with urgent development needs of its own, and a limited budget. Thus the Modi administration must extract maximum ‘bang for the buck’ from LoCs, while making sure that the concessional lending programme can stand the strictest tests of public scrutiny. For this, the first step is to institute a stakeholder feedback process that would include the private sector, civil society and perhaps even unbiased voices from recipient countries. Recipient governments rarely critique the Indian government, as it would be considered ‘undiplomatic’. What would distinguish the new administration from its predecessors would be the willingness to actively solicit criticism and refine existing processes for the larger public good and efficacy of its primary instrument for economic diplomacy.

In the early post-independence years, the thrust of India’s external engagements and economic diplomacy (not necessarily described as such) was with countries with similar colonial experiences and economic realities in the neighbourhood and Africa. More recently, its engagements in groupings such as BRICS have resulted in new development financing instruments like the recently announced New Development Bank. The country’s involvement in the G20 following the financial crisis compelled India to commit to an IMF-led euro zone-focused stabilisation fund. The new government must now attempt to transition India’s economic engagements towards a more deliberate, durable and definitional framework. Well-administered LoCs offer a great avenue to do this – and therefore must be given commensurate strategic priority and attention.

The writers are with the Observer Research Foundation, New Delhi

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A LONG-TERM VISION FOR BRICS

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The objective of this document is to formulate a long-term vision for BRICS. This in turn flows from substantive questions such as what BRICS will look like in a decade and what the key priorities and achievements will be. It is true that BRICS is a nascent, informal grouping and its agenda is evolving and flexible. Therein lays the uniqueness of BRICS. The BRICS leaders have reiterated that BRICS will work in a gradual, practical and incremental manner. Nonetheless, the grouping needs a long-term vision to achieve its true potential for two reasons: (1) to dove-tail the tactical and individual activities into a larger framework and direction; and (2) to help in monitoring the progress of the various sectoral initiatives in a quantifiable manner.

The Track II BRICS dialogue, under the chairmanship of India in 2012, has been robust. On March 4th – 6th, 2012, academics and experts from the five BRICS nations—Brazil, Russia, India, China and South Africa— assembled in New Delhi for the 4th BRICS Academic Forum. The overarching theme was “Stability, Security and Growth.” This theme is useful for understanding the motivation and ethos of BRICS as a platform for dialogue and cooperation on issues of collective interest.

The dialogue led to the drafting of a comprehensive set of recommendations for BRICS leaders (Annexure 1). The 17 paragraphs that capture the recommendations to the BRICS leaders were reached through a consensual process between 60 academics and experts from the five countries. Forum delegates contributed a number of research and policy papers that formed the basis for the enriching discussions. Each of these papers highlighted key areas for cooperation, within the overall construct of the BRICS agenda. This research led to a significant build-up of knowledge on BRICS. This long-term vision document is an attempt to aggregate the dialogue and research that has fed the Track II process so far and to build upon it.

Broadly speaking, the document is divided into four sections. The first, on ‘Common Domestic Challenges’, aims to pinpoint multiple areas in which sharing experiences and best practices within the BRICS Forum will help to respond to common problems. For example, BRICS nations have vastly differing levels of educational attainment and healthcare policies. As large developing countries with significant governance challenges, but also ‘demographic dividends’ and other drivers of growth to reap, BRICS can greatly benefit from innovative ideas emanating from similarly positioned nations.

The second the matic section focuses on ‘Growing Economies, Sharing Prosperity’. Given the huge distance that the BRICS nations have yet to cover in tackling poverty and providing livelihoods to their rising populations, there is no option other than maintaining and accelerating economic growth. This section outlines the necessity of deepening intra- BRICS and worldwide trade and economic synergies. Additionally, it documents growing energy needs and discusses how the economic growth imperative affects the BRICS discourse on climate change.

The third section, titled ‘Geopolitics, Security and Reform of International Institutions’, outlines an enhanced role for BRICS within an increasingly polycentric world order. Within the United Nations (particularly the Security Council), enhanced BRICS representation can institutionalise a greater respect for state sovereignty and non-intervention. In Bretton Woods Institutions, like the IMF and World Bank, BRICS seeks to reform voting shares to reflect the evolved global system, different from that forged in the immediate aftermath of World War II. Finally, as leaders in the developing world, BRICS nations seek to create a development discourse that better represent their aspirations.

The fourth thematic section, on the ‘Other Possible Options for Cooperation’, outlines possible developments to further collective engagement once the necessary prerequisites are achieved. At the present juncture, it may be too early to think of BRICS becoming a formal, institutionalised alliance. However, it is important for the grouping to envision a commonality of purpose, continuity of operation and dialogue beyond annual summit meetings.

There are five prominent agendas of cooperation and collaboration that emerge from this vision document. These themes are integral to the very idea of long-term engagement between the BRICS nations and provide a framework for accelerating momentum and increasing significance over the long term:

1. Reform of Global Political and Economic Governance Institutions: This is the centrepiece of the BRICS agenda, which in many ways resulted in the genesis of the grouping. With the move towards a polycentric world order, BRICS nations must assume a leadership role in the global political and economic governance paradigm and seek greater equity for the developing world. Over the coming years, they must continue to exert pressure for instituting significant reforms within institutions—such as the United Nations Security Council (UNSC), the World Bank, and the International Monetary Fund (IMF). Various suggestions outlined in this report provide a constructive framework for enabling substantive reforms.

2. Multilateral Leverage: There are multiple formats for engagement and cooperation in order to leverage the BRICS identity at the global high table. The outcome of the BRICS officials meeting on the sidelines of the November 2012 G20 in Mexico, where it was decided to create and pool a currency reserve of up to USD 240 billion is one instance of enhanced intra-BRICS cooperation. Similarly, the Conference of Parties, the United Nations, and the World Trade Organisation are existing cooperative frameworks,

within which BRICS countries can collectively position themselves by fostering intra-BRICS consensus on issues of significance. The United Nations is central to a multilateral framework, and there is significant potential for BRICS to collaborate and assume a more prominent role in global political and economic governance, conflict resolution etc., through institutions such as the Security Council.

3. Furthering Market Integration: Global economic growth has been seriously compromised in the years following the Global Financial Crisis. Each percentage point reduction in global growth leads to a significant slowdown of economic development within BRICS which hinges upon a necessary component of economic growth. In this regard, market integration within BRICS, whether in the context of trade, foreign investments or capital markets, is a crucial step to ensure that the five countries become less dependent on cyclical trends in the global economy.

4. Intra-BRICS Development Platform: Each BRICS nation has followed a unique development trajectory. In the post-Washington Consensus era, developing economies within BRICS must set the new development agenda, which in turn must incorporate elements of inclusive growth, sustainable and equitable development, and perhaps most importantly, uplifting those at the bottom of the pyramid. The institution of BRICS-specific benchmarks and standards, as well as more calibrated collaboration on issues of common concern including the rapid pace of urbanisation and the healthcare needs of almost half the world’s population represented by BRICS, must be prioritised.

5. Sharing of Indigenous and Development Knowledge and Innovation Experiences across Key Sectors: Along with the tremendous potential for resource and technology sharing and mutual research and development efforts, coordination across key sectors—such as information technology, energy generation, and high-end manufacturing—would prove immensely beneficial for accelerating the BRICS development agenda. Moreover, the BRICS nations must share indigenous practices and experiences to learn and respond to the immense socio-economic challenges from within and outside. This vision document contains multiple suggestions for instituting such sharing mechanisms through various platforms and cooperation channels.

This document analyses the above themes in detail. Each section concludes with recommendations specific to the chapter’s theme. The final section contains synthesised suggestions which serve as an outline/framework for enhancing intra-BRICS cooperation and collaboration. The official declarations/statements of BRICS leaders are available in Annexure (s) 2 to 5.

BRICS, Columns/Op-Eds

Why BRICS is important to Brazil

Original article can be found here

Brazil has a prominent role to play in the global governance architecture. The country has sustained structural economic growth on the back of favourable demographic drivers, growing middle class consumption and broad scale socio-economic transformation. As a result, the business environment in the country has steadily improved; and the number of people living in extreme poverty have halved over the last decade. It is time for the country to place commensurate emphasis on consolidating its position as a regional leader; and as a key stakeholder on the global governance high table. BRICS provides the perfect platform to marry the dual imperatives.

HOT TOPICS: BRICS

Brazil boasts of one of the world’s largest domestic markets and a sophisticated business environment. It ranks 53^rd on the World Economic Forum’s Global Competitiveness Index (2001-12), and is ahead of the rest of the BRICS nations in the availability of financial services among other key indicators of financial market penetration. Brazil’s upwardly mobile middle class and its elite have inexorably embraced the liberal globalisation framework, promoted by the developed world. Consequently, since the 1990’s they have shown a greater willingness to engage with the international system, and accept transnational regulations and norms.

As a willing signatory to international norms, ranging from those around mitigation of climate change to preventing nuclear proliferation, Brazil has often broken its own historical typecast of being defensive. What superficially seems to represent a systemic re-prioritisation – requires deeper investigation. According to the Economist’s Economic Intelligence Unit, domestic savings rates in the country are below 20 percent. Mid-sized industries still largely rely on external markets for raising money and channelling investments. By default, international perception about the Brazilian economy is an important component of national strategy. Concomitantly, the Latin American identity is one that successive governments have strived to shed.

Being part of the BRICS grouping has helped Brazil to leverage its ‘emerging market’ identity and de-hyphenate from its Latin American identity (which had its own convoluted dynamics in any case). This is evident both in the global economic and political spheres. BRICS has provided Brazil with a platform to engage with the international system more progressively. It can now navigate the international rules based architecture, with greater bargaining power and seek greater representation in institutions of global economic and political governance. Using the BRICS identity, Brazil no longer has to drive a wedge between its development and growth imperatives. It can shield its poor from international regulations, without fear of its ‘investment worthiness’ being diluted. It can participate at the global high table, while simultaneously catering to nuanced regional imperatives.

The recent death of Hugo Chavez was termed “an irreparable loss” by Brazilian President Dilma Rousseff. This serves as an example of the ideological flexibility, which the country employs to engage with a neighbourhood that is strictly divided on the Venezuelan President’s legacy. Indeed fine balancing tactics are not new to Brazilian foreign policy, also termed ‘a study in ambivalence’. The pluralistic construct of BRICS fits perfectly with Brazil’s strategic outlook on its neighbourhood and the world. Brazil has taken on more regional commitments over the same twenty year period during which it has enhanced its engagements with the international system. This is evidenced from increased participation in regional working group meetings, official summits and informal gatherings by the government.

There are numerous accounts of Brazil’s deployment of regional priorities as a bargain chip. Through MERCOSUR (Southern Common Market), Brazil has been able to successfully negotiate trade agreements in favour of its national interests. It is a pivotal founder member of the five-member trading bloc, which recently included Venezuela within its fold. In the on-going negotiations for a Free Trade Agreement with the European Union (EU), Brazil has pulled out all the stops, shielding its local industries from cheaper foreign made imports; with support from other members including Argentina. Similarly, common interests rather than common ideologies dictate the BRICS agenda. Brazil’s membership of the grouping is in complete consonance with its regional and global strategic imperatives.

Aside from the adaptive flexibility that the informal BRICS grouping offers, it allows Brazil great latitude in bringing specific agendas around innovation, intellectual property rights and green growth at its core. Brazil is home to nearly half of the world’s biodiversity; the overarching sustainable development agenda is not surprisingly a national priority. Similarly, Brazil has the opportunity to use mechanisms such as the BRICS Exchange Alliance for attracting investments. While the current framework enables investors to trade in cross-listed futures indices, if there is political will, the mechanism could eventually encompass various products with different underlying assets including equities. Another relevant sector specific example is commercial aerospace cooperation, where Brazil has unmatched expertise within the grouping.

There are in fact multiple opportunities for Brazil within BRICS, not limited to the economic sphere. In many ways, the grouping brings Brazil from the left corner of the world map to the centre, where the geopolitical theatre is most active; in Asia and the Indo – Pacific. However there are two oddities in the Brazilian agenda which would require circumnavigation if Brazil is to be brought to the heart of the geopolitical discourse. The first is to moderate its insistence on pursuing ‘euro-styled’ agendas such as interventionist doctrine ‘responsibility to protect’ (R2P), with an ambiguously defined alternative ‘responsibility while protecting’. Sovereignty matters to other BRICS and there is some time before supra-national initiatives would pass muster. And the second is to shed its reluctance on the agenda for creation of a BRICS led Development Bank. In this instance Brazil, with its considerable Development Bank experience, can help shape a credible institute that will empower billions south of the equator.

Vivan Sharan is Associate Fellow and Samir Saran is Vice President at the Observer Research Foundation (ORF), New Delhi.

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Generosity within BRICS offers China passport to power

The original article is available here

George Orwell once remarked “Whoever is winning at the moment will always seem to be invincible.” China’s long-running growth juggernaut has resulted in a steady conversion of China skeptics into believers, so much so that a Pew Global Attitudes report released in July 2011 indicated a widespread perception that China has either replaced or will replace the US as the world’s sole superpower, with the Americans themselves just about equally divided on the subject.

For the Chinese establishment, even as being the preeminent global power remains their ultimate aspiration, China’s own outlook has been far more pragmatic.

There is a realization that the critical vectors that fuelled China’s impressive growth have either played out or are near to playing out their potential.

Exports are slowing, and the near double-digit growth in domestic consumption leaves little room for additional growth without triggering unbridled inflation.

Compounding this is fast depleting surplus labor in China’s rural backyard and steady increase in wage costs, which have grown at an annual rate of 15 percent over the past years.

This and stagnating Western demand for goods are impacting China’s growth algorithm built around the premise of inexpensive labor and competitive exports.

China’s redemption as the preeminent global power is hinged as much on its capacity to sustain its economic momentum as in its ability to influence the principles, values and rules that define global institutional mechanisms and frameworks.

However, China’s stellar economic engagement with the world has not resulted in commensurate political weight or perceptional dividends within global institutions.

To realize its aspirations, China urgently needs to find a way around this predicament, and BRICS offers it a plausible option and opportunity.

BRICS is today the most promising entente of high growth economies. BRICS’ national economic and political transformation agendas are fuelling huge domestic demand for newer types of products and services. China is uniquely positioned to gain enormously from this dispensation.

Standard Bank estimates China is party in over 85 percent of intra-BRICS trade flows, which have grown by about 1,000 percent over the last decade to over $300 billion, and are estimated to reach $500 billion by 2015.

While intra-BRICS trade accounted for close to 20 percent of BRICS’ total trade in 2012, it remains disproportionately weighed in China’s favor. Hence in any BRICS growth story, China will be the biggest net gainer.

While the BRICS nations have formed a close bond between themselves, they haven’t consummated any traditional model of interstate alliance.

The model affords sufficient space to accommodate intra-group differences and independent strains of national discourse.

It is still bilateral relationships rather than allegiance to group ethos that predominantly inform the intra-BRICS economic and political dynamic.

Group identity and collective consciousness will result from co-creating and co-managing institutions and instruments. A BRICS development bank, a stock exchange alliance and a BRICS fund are all vital next steps.

For China to unleash and benefit from the full potential of the group, it needs to work on such initiatives. These will offer it a new economic landscape and will also help take the edge out of bilateral relationships.

However, for China to command the moral weight to realize its power ambitions through BRICS, it needs to morph from a trading partner seeking profits to a strategic ally helping shape a common world.

As the partner that stands to benefit the most from any expanded BRICS play, China needs to be singularly more magnanimous and mindful in accommodating the legitimate interests and aspirations of other member states.

A disproportionate generosity, whether it is in resolving bilateral disputes or legacy issues, or, sharing of power at BRICS institutions, independent of economic contribution and effort, will reap very rich political and economic dividends, while also permanently insulating China from the politics of power imbalance within the group.

Samir Saran is vice president at Observer Research Foundation and Jaibal Naduvath is a communications professional in the Indian private sector. opinion@globaltimes.com.cn