BRICS

Economic diplomacy and development partnerships: Rethinking India’s role and relevance

Samir Saran  and Urvashi Aneja, ORF Website, Oct 28, 2016

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There are two prisms through which India’s role as a provider of global public goods and as a contributor to the evolving global growth and development agenda can be assessed. The first is a continuum starting from the independence of the erstwhile colonies, the Bandung conference and the Non Aligned Movement, to a more recent focus on south–south cooperation. This continuum is located within the narrative of solidarity, justice, economic reparations, development rights, and more recently, around the texture of assistance forthcoming from the emerging economies willing to share their growing available surpluses with their G–77 compatriots. India and its development sector analysts have, for the most part, framed its development partnerships through this prism. The recent BIMSTEC–BRICS meet in Goa, followed this course.

The second view of India’s role could be understood through the phenomenon of ’emergence’, one that breaks away from the above continuum and instead positions India (and some other nations) at a juncture where, beyond solidarity and rights, it is the responsibility of being a global power (and attendant benefits that flow from being one) that compels a certain development partnership agenda. In this view, India has new opportunities that necessitate new responsibilities driven by its expanding global interests, both of which shape the country’s development partnership initiatives. This assessment replaces romanticism with realism and is less frequently voiced for this very reason. India must be careful that this hesitation does not reduce the scope and ambition of its development partnership agenda to one limited to the vocabulary of south–south cooperation.

India has new opportunities that necessitate new responsibilities driven by its expanding global interests, both of which shape the country’s development partnership initiatives. This assessment replaces romanticism with realism and is less frequently voiced for this very reason.

This is not to suggest that south–south cooperation is not important and has not influenced contemporary conversations on development and growth. It certainly has redefined ‘aid’ by introducing new financial and technical ethics and cemented the concepts of ‘partnership’ and ‘national ownership’ as normative benchmarks. Even more importantly, new southern partnerships for development finance and international economic support have shaken up the institutions of the OECD from their ambivalent slumber characterised by a prescriptive development policy agenda and conditional financing. It has made the traditional donors more reflective and considerate in their economic engagements.

But, taken too far, the south–south cooperation framework can reduce the role and ambition of a country like India in global development to a mere extension or function of southern solidarity, one proscribed by the limits to south–south cooperation reflected in its description; one by the ‘south’ for the ‘south’. The global south must be the core constituency and ethical mooring of India’s development partnerships but not its ambition or the philosophical anchor of its economic diplomacy responsibility.

Taken too far, the south–south cooperation framework can reduce the role and ambition of a country like India in global development to a mere extension or function of southern solidarity.

It is too limited a world view for a country of 1.3 billion people that has set itself a goal of becoming a USD 8 trillion dollar economy in the next decade and half. It is inevitably poised to become a net provider of global public goods. It is perhaps destined to inherit the task of managing global institutions that exist and building new institutions that this century will demand. These likely eventualities must steer policy formulation and implementation of India’s economic diplomacy objectives, even as it indulges in the grammar of historic solidarity.

India’s role for itself must be redefined through the prism of its ’emergence’, as an actor with agency already far above its economic weight, and likely to increase significantly over time. This is due to a number of factors. First, the largest incremental capital for global development and infrastructure beyond what exists today will be contributed by India, its institutions and corporations in the next fifteen years or so. Even if this incremental capital only comprises a modest proportion of the total development finance pie, the fact that India will make the largest new contribution will augment its global agenda–setting power in the age of climate change and renewed commitment to sustainable development. In absolute terms as well, back–of–the–envelope calculations suggest that the current $2.35 billion earmarked for overseas grants, concessional loans, and technical training will rise to approximately $10 billion by 2030 if deployment follows GDP growth. To put this in perspective, the UK Department for International Development’s (DfID) annual budget for 2015–16 is $12 billion, a figure likely to come under stress in the days ahead. Other agencies like the German GIZ will also at best be able to maintain their level of contributions.

normative benchmarks, development finance, policy agenda, conditional financing, solidarity, responsibility, emergence, finance pie, climate change, sustainable development, DfID, budget, development narrative, low-income, mid-income, fossil fuel, policy assumptions, human rights

Second, beyond the numbers, India may also have a new path to offer, a new development narrative to share. In all likelihood it will be the first country to move from low–income existence to a mid–income economy in a fossil fuel constrained and climate aware world. It will have to make this transition discarding the key economic choices and policy assumptions that aided Europe and America, Japan and China. Cheap labour, bulk manufacturing, cheap energy, exploitative economic policies with scant regards for human rights and even perhaps the liberal and open trade regimes that have defined the past decades of growth. The India story, if and when mature, will resemble none; it could be a unique and contemporary blueprint for other developing countries attempting similar transitions. While it is impossible to predict the details of India’s transition, some aspects can be anticipated. The economic change will ride on frugal innovation helping a frugal service economy. It will be buttressed by the capacity to at the same time offer high–quality low–cost services to domestic and global markets. It would have also created a new framework to provide skilling, education, employment and security to not only the half a billion population added in the past three decades, but also to the burgeoning senior citizenry growing each year.

The India story, if and when mature, will resemble none; it could be a unique and contemporary blueprint for other developing countries attempting similar transitions.

And finally, India may also lead the way in crafting a new trade architecture in South Asia and with partners in the developing and emerging world. The current global trade regime is under strain as restrictive agreements amongst the OECD countries and some others are undermining the WTO, and the benefits to developing countries are dwindling. The current trading system is also based on an incomplete globalisation. It is biased towards the movement of capital and goods, but much less towards the movement of services and peoples. For developing countries compelled to respond to 21st century challenges through the acceleration of a service economy, this partial globalisation poses clear challenges. For India, its South Asian neighbours, Africa and some others herein lies an opportunity to re–craft their trading arrangements to support their 21st century development trajectories.

Looking through an emergence prism, India’s development partnerships and economic diplomacy must be built around three concentric circles of interest and influence. The first must encompass India’s immediate neighbourhood and the big powers; the second, would cover its extended neighbourhood extending across Asia and the Indian Ocean littoral with some localities important for what they offer; and the third may include some distant geographies, all global commons and vital global issues and institutions to manage them. Development partnerships and economic diplomacy in each should be driven by a specific set of interests, capabilities and priorities.

Development partnerships built around these three concentric circles will allow India to build direction, specificity, and flexibility into its initiatives; to create a differentiated approach across various geographies; to build alliances and institutions that cut across the north and south; to find a balance between its immediate economic and strategic interests and its global responsibilities; and to manage and respond to the complex and multifarious requirements of a global development provider.

To be clear though, to argue for an emergence prism over a south–south narrative does not imply that India’s economic diplomacy should reject the importance of communities and collective norms for a singularly realpolitik logic; on the contrary, sustaining the role of a leading development provider will require India to be a normative power more than ever before and build communities, create opportunities and discover growth across the binary North–South and East–West divides. As a leading power it must cross this bridge first.

 

Brics Summit in Goa: Ahead of 8th conference, the bloc must focus on institution-building

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When India hosts the 8th Brics Summit in Goa next month, it will need to be the ‘B’ along with the ‘I” in Brics. The ‘bright spot’ that infuses direction, ideas and momentum into a collective whose individual members have certainly seen better days. With a relatively strong economic performance and a vigorous and imaginative foreign policy (on most counts), India has the capacity to help the Brics plurilateral discover a new ethos that will channel cooperative sentiments into concrete objectives, durable institutions and constructive internationalism.

For the Indian Brics presidency to achieve this, it would need to get all members to agree on the need for creating new and agile institutions that can help the group and others respond to the current economic and political realities, and the visceral gridlock that plagues multilateralism and global governance generally.

In a recent article penned by the authors, two organising principles had been proposed as being fundamental to the Brics regimes even as they seek to reform, reshape and steer the contemporary geopolitical and geo-economic environment. The first was the principle of ‘sovereign preponderance’ and the second the principle of ‘democratic equity’. As per the former principle, the state remains the primary and inviolable unit in the international system and its imperatives override all other concerns in setting the international agenda. Intra-state cooperation is possible insofar as such cooperation leads to greater state agency. This higher agency is then channelled to meet the unique developmental needs of each country and, through it, the global community.

(from left)  Michel Temer, Narendra Modi, Xi Jinping, Vladimir Putin and Jacob Zuma ahead of the 8th Brics Summit. Twitter @BRICS2016

The principle of democratic equity holds that the international order, in the economic, political or security spheres, should be shaped equitably after taking due cognisance of the increasing heft and aspirations of emerging powers and economies. These two principles do indeed shape various Brics regimes that contexualise developmental and economic goals, both within the member-states and in the international system at large. They also motivate the stated ambition of this group to redress unfairness (perceived and real), intrinsic to the extant global political and economic governance architectures. With these organising principles as the basis, it becomes apparent that ‘institutions’and ‘institutionalisation’ are imperative for the collective-action plans of the Brics.

The very act of institutionalisation within Brics gives the Brics regimes lives of their own, even while there is contest and conflict on some issues among member states. Institutionalist literature and studies have recognised this aspect. This literature suggests that institutions persist, since the costs of setting up new institutions are often much higher than the benefits that would accrue by dissolving them. Sunk costs (into building institutions) also lock institutions into a path of dependence that leads to increasing (as opposed to decreasing) returns over time.

Institutions codify cooperation and convergence of expectations. They also specify limits to cooperation by delineating formal agreements on some instances and looser norms of cooperative behaviour on others. The former is, by definition, binding while the latter allows wider sovereign leeway.

Taking a leaf from this body of work, the Brics must seek to further their agenda through the creation of four new institutions and institutional arrangements with varying degrees of formalisation.

The first such formal institution must be the New Development Bank Institute (NDBI), the ideational arm of the NDB and perhaps of the wider Brics project itself. The notion of the NDBI was proposed by Prime Minister Narendra Modi last year who described it as “a bank of ideas, a storehouse of experience and a knowledge powerhouse”. The NDBI must become the institution that defines the pathway for the bank but more expansively becomes the laboratory where Brics produces new narratives, discovers new ideas and develops new solutions for the political and economic future. It must seek to become an OECD-like think-tank of and for the emerging world, where issues of economy, currency, credit rating, political risk, industrial models and development options are agitated and sought to be responded to.

A second key arrangement must be developed for trade and commerce. It is apparent that the Brics, more than any other significant group, is invested in the open and democratic trading system led by the WTO, even as the progenitors of the WTO are seeking to subvert the system with mega free trade agreements involving group of similarly placed economies and some others with little choice or agency. One area within this rubric would be the setting up a body that would develop and set Brics-wide standards and benchmarks. While a Brics free trade agreement appears far-fetched, a body that sets benchmarks and standards is in everyone’s interest. It allows Brics to engage on an aspect that decisively shapes global trade and would contribute to strengthening the multilateral trading regime, even as it furthers intra-Brics trade without a formal FTA.

The very act of institutionalisation within Brics gives the Brics regimes lives of their own, even while there is contest and conflict on some issues among member states.

A third key Brics institutional framework that must be created, is for the digital economy where Brics members are already key stakeholders. Currently, the Atlantic powers are embarking on a major programme to shape the norms that will govern the digital space. The proposed ‘Digital 2 Dozen’ principles of the Trans-Pacific Partnership, and the digital regulation initiatives of the European Union are examples of this. As leading consumers as well as creators of digital technologies, products and solutions, Brics needs to be influential voices in the norms-making space. They must act to shape the discursive space around the digital world and inform debates around contentious issues such as encryption, supply chain integrity, data management and data flows and appropriate stakeholder models to manage these aspects.

Finally, Brics must formalise institutional collaborations that explore the unique opportunities and challenges lying at the intersection of the twin imperatives of economic growth and sustainable development. The Brics development agenda should be one that promotes the latter without sacrificing the former. This could be tasked to a standing conference on development partnership, an initiative to discover and promote a Brics development agenda. It would also catalogue experiences of member states and others, diffuse lessons learned to those who seek it, and track progress unobtrusively within a voluntary and democratic framework.

It will follow and measure Brics’ implementation of the ambitious multilateral agreements pertaining to sustainability and climate action, but in a way that does not constrain imperatives of states as they chart their unique developmental trajectories. This new ethos of managing development and assisting others in their own endeavors correspond to both the organising principles of sovereign preponderance and democratic equity.

Samir Saran is vice-president and Abhijnan Rej is a fellow at the Observer Research Foundation. This article is drawn from a forthcoming monograph by the authors titled Thinking BRICS: A Theoretical Inquiry Into Emerging-Powers Plurilateralism

BRICS, globalisms, and the return of the state

Samir Saran and Abhijnan Rej

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As New Delhi gets ready to host the 8th BRICS Summit in Goa in October, both the sceptics and believers are tentative in their support or criticism of the BRICS project. Commentators are also unable to comprehend or explain the nature of the grouping and the regimes it seeks to promote. In order to understand the means-ends logic of BRICS, we must situate it within the longer arc of contemporary history while seeking a better explication of the evolving relationship between liberalism, multilateralism and multipolarity.

This is crucial if we are to make sense of this unlikely grouping and its role in a world that now resembles 19th century Europe, post the Congress of Vienna in 1815. The order that emerged then was starkly driven by national interests of a constellation of powers, and arranged according to balance-of-power principles. As such, it was one of the earliest historical examples of how great powers could “cooperate under anarchy,” to riff a term from late 20th century institutionalist literature. What we are witnessing now is a similar reassertion by states and return to balance-of-power politics at a time when multipolarity and multilateralism are in an uneasy relationship.

Without doubt this European analogy is imperfect. After all, the re-emergence of the ‘sovereign imperative’ in the 21st century, under contemporary conditions of interdependence, is unlike the 19th century. It has more to do with the excesses of the unipolar moment that began with the fall of the Berlin Wall in 1989 and ended with the global financial crisis of 2008. What transpired then is crucial to understanding the beginnings and relevance of the BRICS.

Recent Western engagement in the Middle East tells part of the story. The first Gulf War of 1991 saw the US intervene to secure its energy interests by leveraging the UNSC. By the second Gulf War in 2003, the US saw the UNSC as an impediment. Thereafter, American, French and British interventions in Libya, Syria and elsewhere institutionalised subversion of the UN led multilateral order under the garb of ‘Responsibility to Protect’. State assertiveness was not limited to the politico-military sphere alone. Germany rode out of the global financial crisis with a new zeal for geoeconomic statecraft, raking up huge surpluses often at the expense of EU partners. The German idea of “Gestaltungsmacht” (a shaping power) is predicated not on a principled adherence to liberalism but on the fungibility of economic power. Witness the German willingness to let Greece leave the Eurozone in 2015 (and risk a Eurozone-wide crisis) but unwillingness to write off some of the Greek liability.

BRICS 2016, Multilateralism, Multipolarity, Geoeconomics, Geopolitics, Gulf War
Protests against the Gulf War, Bristol, 1991 | Courtesy: Christopher Bulle/CC BY 2.0

BRICS is a child of this era — when liberal democracies subverted multilateralism and the economic order was reduced to serving interests of a few. It was indeed a moment ripe for sovereign reassertion. It should be no surprise then that BRICS puts a premium on Westphalian sovereignty as an organising principle for the international order, and seeks new norms that would make that order more representative. Put differently, the regime-complex around BRICS is built on two principles: that of ‘sovereign preponderance’ and of a ‘democratic equity’.

The principle of sovereign preponderance holds the state is paramount, independent and inviolable, and inter-state cooperation is possible where trade-offs between autonomy and cooperation result in greater ‘state’ agency. Indeed it is this principle that allows China and Russia to come together in a forum with three democracies. For each of them, the ideology of global capitalism is not an end in itself, but only a means to meet developmental objectives of the state. Their objections to interventions in regions that are outside their own core interests and neighbourhoods must also be seen in this light.

By promoting norms around democratic equity in the international architecture, BRICS seeks to find space in structures and institutions that are increasingly seen as subservient to Atlantic powers. These powers have subverted multilateral institutions whenever they saw these institutions as impediments to furthering their agenda. A case-in-point is the multilateral trading regime with the World Trade Organization (WTO) at its center. The United States, by promoting new and exclusive mega-regional trade regimes like the Trans-Pacific Partnership as well as the Trans-Atlantic Trade and Investment Partnership, has dealt a serious blow to the WTO’s raison d’être. By persistently objecting to the WTO grant of “market economy status” to China, the United States has shown that the multilateral trading architecture — at its core — remains bound to the hegemon’s perception of fair practices. Norm-setting remains a predominantly western exercise.

It is here that BRICS differs from the democratic and equitable order that was sought to be promoted by the Non-Aligned Movement or the G77. Instead, this current impulse stems from varying degrees of disaffection of each BRICS member with the global marketplace of norms. BRICS strives to restore balance-of-power in the agenda-setting space. And as it attempts to do this, it is indeed ironic that the task of democratisation of the international system has become a central endeavour of a group that has two large authoritarian countries as members.

Herein lies the central paradox at the heart of contemporary geopolitics and geoeconomics. Liberal democracies are undermining multilateralism whereas ‘illiberal states’ are rallying behind it, and both are doing so out of self-interest. Individually BRICS states realise they need the multilateral architecture since the pursuit of other arrangements requires both political and economic heft, which all BRICS members lack. As a collective, BRICS seeks to leverage each of its member-states’ significant geopolitical and geoeconomic strengths to preserve the multilateral system, albeit in a way that recognises the significant stakes of emerging powers. In other words, plurilateralism becomes a pathway to the preservation of multilateralism. At the end of the day, this is what unifies BRICS.

This post is part of a forthcoming monograph by the authors. A short version appeared in the Economic Times.

 

What the Moscow Communique on Internet Governance Says About India’s Role in the Global Order

BY ON 19/04/2016

Original links are here

Samir Saran article with Arun Mohan Sukumar on Moscow Communique on Net Governance & India’s Role in the Global Order – priyaverma@orfonline.org – Observer Research Foundation Mail

The communique is testament to India’s role as the bridge between the liberal international regime and its counter-construct.

The Heart of the Internet: Fiber optic switches that can each handle up to 60GBs. Photo: Shawn HarquailThe Heart of the Internet: Fiber optic switches that can each handle up to 60GBs. Photo: Shawn Harquail

 

The joint communique from the recently concluded Russia-India-China (RIC) Foreign Ministers meeting in Moscow, as it relates to internet governance, reflects the unique role New Delhi plays within BRICS. The operative paragraph of the Moscow communique reads:

The Ministers advocate a peaceful, open and secure Internet space. Considering the Internet a global resource, they are convinced that all states should participate in its evolution and functioning on an equal footing. In particular, the Ministers underlined the primary role of the States in promoting security, stability, and economic cooperation in the use of ICTs. The Ministers emphasised the need to ensure Internet governance based on multilateralism, democracy, transparency with multi-stakeholders in their respective roles and responsibilities.

The reference to “multi-stakeholder” internet governance in the communique is significant for two reasons and possibly unprecedented. First, the suggestion to include this came from India, which in 2015 unequivocally endorsed ‘multi-stakeholderism’. Chinese and Russian interlocutors — plainly aware that India’s multistakeholder line is uniform and has no BRICS variant — agreed to this inclusion, reflecting India’s ability to inject a “Western” norm in a decidedly different setting. Second, the RIC communique was drafted in Moscow, with Russia holding the pen. Russian Foreign Minister Sergei Lavrov is one of the sharpest minds in the business, and Moscow and Beijing agreeing to India’s input on “multi-stakeholder” governance indicates that New Delhi is no longer a pushover at the joint meetings.

That said, give-and-takes are part of multilateral diplomacy. The Moscow communique also emphasises the “need to internationalize Internet governance and to enhance in this regard the role of International Telecommunication Union.” The role of the International Telecommunication Union (ITU) in Internet governance is contested, given that it is an inter-governmental platform. Its inclusion in the document is a concession from the Indian side, but also an acknowledgement of the role that states play in addressing security related concerns in cyberspace. The BRICS declaration signed at Ufa last year tipped its hat to the UN’s “facilitating role” in Internet policy making. The Moscow communique arguably goes a step further with its pointed reference to the ITU. New Delhi is actively engaged both at the ITU and in multi-stakeholder venues like the Internet Corporation for Assigned Names and Numbers (ICANN), so the communique does not change any negotiating stance. Information Technology Minister Ravi Shankar Prasad’s call at ICANN 53 in Buenos Aires for “multi-stakeholder, multi-layered” Internet governance still animates the Indian line.

The larger lesson here is India’s ability to carry its own distinct preferences with the RIC group, which is at the core of BRICS. Consider the international context: China, under President Xi Jinping’s leadership, has supported a state-led “duobian” (multilateral) model of Internet governance. Russia has unwaveringly opposed multi-stakeholderism and it would be remiss to forget the larger, Cold War-levels of antagonism between Moscow and Washington, D.C. today.

The Moscow communique on Internet governance, therefore, is testament to India’s role as the bridge between the liberal international regime and its counter-construct. New Delhi has engaged agnostically with multilateral and plurilateral forums, allowing for its own global orientation to be independent of bigger and dominant players. The RIC meeting suggested it can not only absorb norms but also transmit them, while conditioning their application to the context at hand. Therein lies the value of BRICS for India. The group, especially in light of the political and economic challenges that many of its members face, has long invited criticism for being a talk shop or a forum for solidarity. But it is patently in India’s interests to support a bloc that presents a formidable political challenge to the global order. For one, it helps New Delhi — whose own strategic interests are clear — to influence evolving norms at BRICS. If G20 meetings under the presidency of China this year lead to a confrontation between the great powers — there are many indicators that it may — there are few countries better positioned than India to act as an honest interlocutor. Conversely, its diplomatic “legroom” to manoeuvre multilateral rights-based forums is a strategic lever that India must deploy to assist neighbours and partners like Maldives and Sri Lanka.

Inhabiting these two political universes is not an easy task and the Indian establishment must consider its autonomy before making diplomatic moves, be it with the US, Russia or China. “Alignment” with norms, ideologies or regimes is first and foremost a political act — South Block has realised it is time to harvest them for strategic consequences. Just as India seeks to move political outcomes in its direction, its actions will attract a greater degree of visibility and criticism, for which New Delhi should be diplomatically prepared.

Arun Mohan Sukumar heads the Cyber Initiative and Samir Saran is Vice President at the Observer Research Foundation, New Delhi.

 

 

Building new alliances with BRICS

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“India should not hesitate to join or create other BRICS initiatives that may have strategic implications for global trade, finance, cyberspace, and the larger economic system.” Picture shows Prime Minister Narendra Modi and other leaders at a BRICS summit in Russia. — FILE PHOTO: PTI


The grouping creates space for India to move the contemporary international order towards alternative models of development and governance

India’s assumption of the presidency of BRICS (the Brazil-Russia-India-China-South Africa grouping) last month comes at a time when many are questioning the group’s raison d’être. The economic health of the group is patchy and the contemporary political trajectories of its members are, to put it mildly, pulling in different directions.

The decision to form BRICS was based neither on the attractiveness of the economies of these countries nor on a cozy ideological confluence. To understand the need for this group to exist is to understand the need for flexibility mechanisms to achieve larger geo-economic goals. There is a need for New Delhi to take a long view on the purpose of BRICS and the space it creates for India within the contemporary international order.

Three expansive experiments

This order, as it exists today, is the result of three expansive post-World War II experiments. One was Pax Americana. It was built around the Washington Consensus, the simultaneous expansion of U.S. military might and of military alliances like NATO (North Atlantic Treaty Organisation); the creation of institutions like the World Bank and the International Monetary Fund, serving an Atlantic economic order; and finally the consequent expansion and consolidation of markets and market-led globalisation that undermined and crushed the alternatives.

The second experiment was the creation of the European Union (EU). With a collective desire to avoid the war and destruction witnessed in the first half of the 20th century, Europe’s leaders quickly realised that deeper economic integration and mutual interdependence was the best guarantor of regional stability. The European project was different from the American one. It saw no need to expand its military might, having already closely integrated its security interests with that of the U.S. It became a collective that was — as European leaders are wont to remind us in moments of crisis — primarily a convergence of shared values. Arguably, the greatest successes of the EU were its ability to be able to softly prise out Ukraine and other former satellites of the Soviet behemoth from the Russian sphere of influence, and a renewed vision for Europe that went beyond “Mitteleuropa”. However, with the ongoing refugee crisis, growing entente with China, and the inevitable policy confusion that comes with being a monetary union without being a fiscal union, the European liberal project is seeking better days.

The third and most recent experiment is the emergence of the Chinese global play and the efforts to put together a new world order defined by state control and underwritten by state capitalism. China is also expanding its military might as it seeks to be a Pacific and Asian power. Through initiatives like the “One Belt, One Road”, it is vastly expanding its market access, and selectively drawing in countries that would simultaneously serve China’s strategic as well as economic interests. China is also creating new institutions like the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB), where India has significant stakes. However, the Chinese creation of new institutions is offset by its seemingly unyielding belief that the current rules-based global order is neither fair nor sacrosanct, and a new rule-framing moment is upon the world.

How BRICS lends heft

One may argue that India’s strategic interest must be in the continued existence of an open economic order and, as a rising power, liberal internationalism serves its interests best. Put differently, India could potentially (as its gross domestic product rises in the decades ahead) be the inheritor of the liberal international project for the very same realpolitik reasons as the U.S., and must seek to contribute to it through supporting institutions that serve it even as they cater to India’s national interests. But for this, it needs space within the old order to respond to its unique development and specific needs. It also needs to acquire weight within these institutions that would allow it to reshape the old establishment to work for new stakeholders and respond to contemporary realities. India cannot do this by itself. Given its fiscal and geopolitical constraints, it must engage with all stakeholders who could aid in this endeavour. India’s involvement with BRICS — and the NDB — should be read in this context.

Here, it is important to clarify what BRICS ultimately is: it is not a trading bloc or an economic union per se. Nor is it a political coalition — given the divergent geopolitical trajectories of each country. Brazil, India and South Africa broadly orient themselves towards the liberal end of the political spectrum, China pursues a trajectory that will, sooner than later, put it on a collision course with the U.S., even as it leverages the Atlantic economies in the medium term for its economic growth. And finally, Russia has once again begun to be perceived by NATO as an all-out threat, and not just a “frenemy”. From an Indian perspective, BRICS is a strategic geo-economic alliance that seeks to move the narrative emerging from the Bretton Woods institutions towards alternative models of development and governance — through the sheer weight of the incongruent collective. BRICS helps create new instruments for global relevance and influence for each of its members, and is itself one. Viewed through this prism, the development of BRICS institutions and the effectiveness of the NDB is what will define the success of the coalition in the coming years. For India, the success of the NDB and the AIIB may also ironically allow it a greater role in the institutions established in the middle of the last century.

BRICS should be an integral part of India’s grand strategy, and a vehicle in India’s journey from being a norm taker to a norm shaper. The bloc offers New Delhi greater bargaining space as India seeks to gain more prominence in institutions of global governance, and shape them in the liberal international tradition with a southern ethos. For instance, India trades more with the global South than the global North. It is the only member of BRICS that is likely to foster an open and rule-based economic architecture with the global South. It is uniquely poised to do so, thanks to New Delhi’s leadership role among the G77 and G33 groupings at the World Trade Organisation and the UN. Actions taken by India in its own developmental interests have the unintended consequence of strengthening the plurilateral economic agenda because it has scrupulously (on most occasions) adhered to the norms of the Washington Consensus. BRICS gives India the room to continue being an important player in the liberal international order while being part of a group which, for the old guard, could potentially emerge as the single most important reason for its dramatic reform.

As with the AIIB, India should not hesitate to join or create other BRICS initiatives that may have strategic implications for global trade, finance, cyberspace, and the larger economic system. Indeed, the U.S. and other European powers should encourage it. Since it does not strive to create disruptive norms, India is the best bet that the international community has to “slingshot” past the illiberal impulses in geopolitics. The Atlantic powers need to recognise that India’s role within BRICS is a bulwark against such impulses, and encourage its leadership in similar plurilateral forums.

(Samir Saran is Vice-President and Abhijnan Rej is Fellow at the Observer Research Foundation.)

Waking up to the BRICS

Opinion» Lead 

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BRICS members should democratise the New Development Bank’s functioning if new stakeholders are included in the future. If anything, the NDB must be a template for change, not a mirror to the existing hegemony of money

In his 2001 paper titled “Building Better Global Economic BRICs”, economist Jim O’Neill of Goldman Sachs calculated that “if the 2001/2002 outlook were to be extrapolated, over the next decade, China would be “as big as Germany” and Brazil and India “not far behind Italy” on a current GDP basis. Cut to 2013; Jim O’ Neill’s expectations seem modest. Last year, China was the world’s second largest economy, Brazil ahead of Italy and India just one rank behind in terms of current GDP. In purchasing power parity (PPP) terms, all the BRIC countries were within the top 10, with China and India at second and third position respectively. BRIC, in Wall Street lingo, is an “outperformer.”

Despite the crippling financial crisis, BRIC has done better on pure economic terms than most expectations. But the acronym is today representative of much more than an investment narrative alone. With the inclusion of South Africa, BRIC became BRICS, giving a pluralist and inclusive veneer to an economic idea. This group now has a significant political dimension, as is evidenced by the increasing number of converging positions on political issues.

In a follow-up paper in 2003, titled, “Dreaming with BRICs: The Path to 2050,” Goldman Sachs claimed that by 2050, the list of the world’s largest 10 economies would look very different. It is remarkable then, that in 2014 the list already looks radically different, and it is clear that it is time to “wake up” to the BRICS.

NDB versus existing banks

In this context there were at least two concrete arrangements inked at the sixth BRICS Summit in July, which will have a large economic and political impact. These were the Contingent Reserve Arrangement and the New Development Bank (NDB). Conversations and reportage on these two were shrill, coloured and obtuse in the run-up to the Summit. It continues to follow in the same vein. Indeed the NDB is at once the most celebrated and critiqued outcome of the Fortaleza Summit. Now that we are a few weeks away from its public conception, it is time for a reality check on this widely discussed BRICS achievement.

The first reality is the NDB can neither replace nor supplant the role of the existing development banks. The NDB will not be able to compete with the reach and expanse of existing institutions such as the World Bank, which has a subscribed capital of over $223 billion. The bank borrows $30 billion annually by issuing Triple-A rated debt in international bond markets. Such easy access to capital markets on the back of high promoter creditworthiness allows the bank to have a lower cost of funds. Other development finance institutions enjoy similar financial backing. The Asian Development Bank (ADB) too has a large balance sheet, backed by 67 member nations and a subscribed capital of $162 billion.

In contrast, the NDB will require over half a decade before it can accumulate the stated capital base of $50 billion from within BRICS and another $50 billion (approximately) from other countries and institutions. Indeed, in the immediate term, only a modest $150 million has been promised by each of the BRICS countries. A contribution of $1,850 million thereafter, staggered over five to six years, will require some doing as the BRICS countries are grappling with weak balance sheets, fragile current accounts and other domestic imperatives.

Then, there are other questions that will need to be answered in the days ahead. If China is unable to dominate this institution, will it prefer to prioritise investments through its (proposed) Asian Infrastructure Investment Bank? How soon can the central banks of the member countries devise arrangements to act as depository institutions for the NDB? And, how will the NDB raise funds in different countries? What will be the currency or currencies of choice? All important posers which can be addressed if the resolve is unerring.

Development finance

The second reality is, in spite of its modest economic weight in the initial years, the NDB can change the ethos of development finance irreversibly. Rather than replacing or supplanting existing development finance institutions, the NDB will seek to supplement existing resources. In fact, the World Bank President, Jim Yong Kim, has welcomed the idea of the NDB and acknowledged its potential in infrastructure development and the global fight against poverty.

An important difference could be in the way conditions and restrictions are imposed on loan recipients. Bretton Woods Institutions such as the World Bank have been known to impose conditions for lending that create structural mismatches between project funding, demand and supply. As recently as last year, the World Bank Group decided to restrict funding for new coal plants in developing countries, deciding instead to invest greater resources in “cleaner” fuels. Of course, the World Bank would be well advised to reconsider this decision given lifeline energy needs and the energy access realities in developing countries such as India.

The NDB’s mission must be to create a business structure where borrowing countries are given greater agency in prioritising the kinds of projects they would want funded. Over a decade, this could become the demonstrator project through which the relationship between donors and recipients, lenders and borrowers, will be rewritten. Hopefully this will be in favour of developing economies and will enable the reimagining of economic pathways.

Location and ownership

The third reality — perhaps, the most debated — is that the location of the NDB is immaterial when governance and ownership is equally shared. Location has frequently been confused with ownership, skewed by our imagination of existing institutions such as the World Bank. According to its Articles of Agreement, major policy decisions at the World Bank are made through a Super Majority — 85 per cent of votes. Vote shares in turn are determined by the level of a nation’s financial contribution. With around 16 per cent voting share at the World Bank, the U.S. has a de facto veto. Conversely, BRICS, with 40 per cent of the global population and a combined GDP of $24 trillion (PPP), collectively accounts for a mere 13 per cent of the votes at the World Bank.

As such, the concentration of voting power and headquarter location in Washington DC in the case of the World Bank is merely a coincidence. Japan dominates the functioning of the ADB with a 15.7 per cent shareholding, despite the headquarters being located in the Philippines.

It is also useful to note that previous World Bank presidents have been U.S. citizens and the International Monetary Fund’s (IMF) list of managing directors is composed entirely of Europeans. Even the ADB’s presidents have been Japanese citizens, with almost all of them having served in the Finance Ministry in Tokyo. In this regard, the NDB, with its intention of rotating leadership, seeks to overhaul the existing governance framework prevalent in the international development finance institutions. Through equal shares of paid-in capital in the NDB, there is a clear intention of creating an alternative model that focusses on voting-power parity. The smallest country can negotiate at par with the biggest country.

Will BRICS create a framework that is as democratic in sharing governance space with other investors and stakeholders? This will be something to watch for as the systems and structures evolve. The notion that the NDB has been “Shanghai-ed” is perhaps a shallow understanding of this exciting new initiative.

With an equal voting share, all five countries have to be on board to move in a particular direction. Admittedly, this can be hugely inefficient and troublesome. Therefore, it is incumbent upon BRICS members to ensure that this initial at-par equity in governance does not unexpectedly allow for a super majority like gridlock, restricting decision making because of a lack of consensus. The NDB must be dynamic and lithe, much like the BRICS grouping itself. It would be useful for BRICS members to institute a professional management body for steering everyday operations of the NDB as well as all non-policy related decisions, including those dealing with project funding.

And most importantly, as discussed earlier, BRICS members should democratise the bank’s functioning if new stakeholders are included in the future. They must find ways to engage the recipients and beneficiaries in its decision-making apparatus. If anything, the NDB must be a template for change, not a mirror to the existing hegemony of money.

(Samir Saran is vice-president at the Observer Research Foundation and available at @samirsaran on Twitter.)

First Xi-Modi meeting finds common ground

Global Times | July 20, 2014 19:33

Original Link

When India and China meet, the world watches” were the words Chinese President Xi Jinping used to capture the interest generated by his first meeting with India’s new Prime Minister Narendra Modi.

Whether the world was watching or not, the public in both countries keenly followed the first interaction between the two Asian leaders on the sidelines of the BRICS summit in the Brazilian town of Fortaleza.

The meeting passed the initial hurdle of establishing camaraderie between the two leaders. The images and videos that have found their way across the news and social media portrayed a favorable body language and easy chemistry. That the meeting, slated for 40 minutes, lasted nearly twice as long also signals the importance both leaders attached to this engagement.

The meeting can be captured in two words: pragmatic optimism.

That Modi chose to address the contentious border issue in his very first meeting demonstrated a sense of political realism. The Indian leader understood that such a vital element of the partnership cannot be swept under the carpet, even as the BRICS summit itself was gearing up to announce some very positive outcomes.

That Xi also chose to underscore the need for finding an early solution demonstrates their acknowledgement of the negative implications of this lingering border dispute on the larger relationship.

Both countries surely realize that any further economic integration will inevitably hit the political wall if an early solution to this legacy dispute is not discovered.

While it may seem an onerous task, a degree of progress has already been made.

During the previous decade, a great deal of effort has been invested by the empowered special representatives to discover a mutually acceptable and creative solution. In fact, those in the know suggest that it is not impossible to finalize a settlement. What was lacking was the political leadership capable of implementing the same.

With two strong leaders, there exists a golden opportunity to move beyond the border defense cooperation agreement signed last year to one that is conclusive and sustainable.

However, the serious nature of the conversations around the border issue did not deter the two strong leaders from making a strong and optimistic case for deeper economic cooperation and coordination.

The leaders discussed an enhanced role for China in the Indian economic story. The new Indian leadership seems ready to invite large Chinese investments in industrial parks, infrastructure and other key sectors of the economy. At the same time, India seeks reciprocity from China by allowing more efficient and larger market access to Indian goods and services.

Both of these measures would help balance the current large trade deficit in favor of China.

The convergence in the positions of the two countries on most global economic and political governance issues helped the BRICS arrive at an acceptable framework for the new development bank and contingent reserve arrangement. This growing proximity was specifically established when Xi invited India to the APEC summit later this year.

These are early days for Xi and Modi. There are plenty of hurdles that will need to be managed. There is a whole universe of professional naysayers on both sides and in other parts of the world that will exploit negative developments.

Both leaders will have to carry along their security and strategic establishments with them; not the easiest groups to handle. They also have to manage and guide the public mood in favor of more robust ties with each other.

The recent interaction emphasized people-to-people relations and tourism, and perhaps that is one of the ways to do this.

But the crucial factor that can help transform this bilateral is Modi himself. For the first time, the Chinese will interact with an Indian leader who can be politically strong in safeguarding India’s sovereign interests, while at the same time being very welcoming in embracing China economically.

The author is vice president and senior fellow with Observer Research Foundation in Delhi. opinion@globaltimes.com.cn

 

 

नरेंद्र मोदी ब्राज़ील से क्या लाएँगे?

मंगलवार, 15 जुलाई, 2014

ब्राज़ील में हो रहा ब्रिक्स शिखर सम्मलेन प्रधानमंत्री के रूप में नरेंद्र मोदी का पहला महत्वपूर्ण अंतरराष्ट्रीय दौरा है.

यह ब्राज़ील, रूस, भारत, चीन और दक्षिण अफ़्रीक़ा का संयुक्त मंच है.

 

इस यात्रा में मोदी पहली बार इन देशों के प्रमुखों से मुलाक़ात करेंगे. अपने दो दिवसीय दौरे के पहले दिन ही उनकी दो महत्वपूर्ण बैठकें हैं.

इस सम्मेलन के दौरान पाँच ऐसे मुद्दे हैं जो भारत की दृष्टि से महत्वपूर्ण रहेंगे.

इस यात्रा से नरेंद्र मोदी को क्या हासिल हो सकता है? जानने के लिए पढ़िए ऑब्ज़र्वर रिसर्च फ़ाउंडेशन के उपाध्यक्ष समीर सरन का विश्लेषण.

 

रिश्ते बेहतर करने का मौक़ा

SS 2

 

यूक्रेन के मुद्दे पर रूस और यूरोपीय संघ के बीच एक तनावपूर्ण स्थिति बनी हुई है. वहीं पूर्वी एशिया के दूसरे देशों के साथ चीन के रिश्ते तनावपूर्ण चल रहे है.

ऐसे में रूस, चीन और भारत के संबंध काफ़ी महत्वपूर्ण हो जाते हैं.

सम्मलेन के बहाने द्विपक्षीय संबंधों को सुधारने का भी मौक़ा मिलेगा, चाहे वो भारत चीन के रिश्ते हों या भारत और रूस के बीच.

ब्रिक्स वित्तीय संस्थान?

 

SS 3

 

ब्रिक्स देशों के पास अब यह अच्छा मौक़ा है जब वो अपना एक अलग वित्तीय संस्थान और विकास का एक अलग मॉडल बना पाएं.

इस बार उम्मीद की जा रही है कि सम्मलेन के दौरान कंटिंजेंसी फ़ंड, ब्रिक्स विकास बैंक के गठन की औपचारिक घोषणा हो जाए.

जो देश इस तरह के कंटिंजेंसी फ़ंड का समर्थन कर रहे हैं वो वर्ल्ड बैंक और अंतरराष्ट्रीय मुद्रा कोष यानी आईएमएफ़ की मुख्य धारा में नहीं हैं.

आपसी व्यापार

SS 4

 

व्यापार तीसरा बड़ा महत्वपूर्ण मुद्दा है क्योंकि अमरीका और यूरोपीय संघ के बीच खुले व्यापार का समझौता होने वाला है.

अगर यह समझौता हो जाता है तो वैश्विक सकल घरेलू उत्पाद यानी जीडीपी का 66 प्रतिशत आपस में सम्मिलित हो जाएगा.

इस समझौते का भारत, चीन, रूस और दक्षिण अफ़्रीक़ा पर असर पड़ेगा.

अमरीका और यूरोपीय संघ के बीच समझौता ब्रिक्स देशों के लिए एक बड़ी चुनौती है क्योंकि यह विश्व व्यापार संगठन की अहमियत को कम करने वाला है.

क्षेत्रीय सुरक्षा और स्थिरता

SS 5

 

क्षेत्रीय सुरक्षा और स्थिरता एक महत्वपूर्ण मुद्दा है.

पश्चिमी एशिया में हालात काफ़ी चिंताजनक हैं. अफ़ग़ानिस्तान में राष्ट्रपति चुनाव को लेकर भी काफ़ी कड़वाहट है. अमरीकी फ़ौजें इस साल अफ़ग़ानिस्तान से वापस जा रही हैं.

भारत को अपने आर्थिक विकास के लिए इलाक़े में क्षेत्रीय स्थिरता और राजनीतिक शांति चाहिए.

भारत के लिए यह ज़रूरी होगा कि चीन और रूस इसमें उसका सहयोग करें.

 

पिछले पाँच सालों की समीक्षा

SS 6

यह ब्रिक्स देशों की छठी बैठक है.

यह मौक़ा है जब भारत को पिछले पांच सालों में अपनी उपलब्धियों की समीक्षा करनी चाहिए, उसके बाद भविष्य की रणनीति तय होनी चाहिए.

लैटिन अमरीका के देशों से संबंध बढ़ाने का भी यह अच्छा मौक़ा है क्योंकि भविष्य में ऊर्जा और खाद्य सुरक्षा के लिए हमें इन्हीं देशों की तरफ़ देखना पड़ेगा.

(बीबीसी संवाददाता सलमान रावी से बातचीत पर आधारित)
Original link is here

 

India leading BRICS Bank bodes well for future says Samir Saran

BRICS Summit’s decision to establish a development bank gives a sense of achievement for India as well as fellow nations. India has invested the most in the Bank after much deliberation during the last years. Author and commentator Samir Saran says that with India having the bank’s stewardship, it is a welcome start to a financial institution such as the BRICS Bank. The Bank should not be seen as if it is in competition with other international financial institutions. Rather, it should be viewed as an additionality. BRICS Bank will cater to the scarcity gap, changing the ethos of financial institutions. The Bank’s headquarters being in Shangai should not deter India’s hopes as we will have the bank’s stewardship during these formative years and this will be fruitful to the economy.

Original link is here

Pic 2  Brics