Special Content


Special article vol.31

Brics 2016, Gains and Challenges

Jayanta Roy Chowdhury

The recently concluded BRICS summit at Goa, the 8th held so far,  made a significant shift  from being an economic forum for powerful, upcoming economies to a political platform which  took note of global trends which could impact commerce and economy. In taking on `Terrorism’ as one of its main  agenda, India ensured filling in political content where there was none, except a token anti-Western stance.

Till now, BRICS Summits pussy-footed politics focussed on issues like financial substantiality and infrastructure development. However, in the Goa declaration of the BRICS Summit, India managed to bring in the issue of terrorism in its own context as well as in the context of Afghanistan which has been hit by Pakistan-sponsored terrorrism as it indeed has. The word terror and terrorism had 37 references in the statement issued by the Heads of state, showing its importance to the deliberations of the Group. The declaration said “We strongly condemn the recent several attacks, against some BRICS countries, including that in India. We strongly condemn terrorism in all its forms and manifestations and stressed that there can be no justification whatsoever for any acts of terrorism, whether based upon ideological, religious, political, racial, ethnic or any other reasons. We agreed to strengthen cooperation in combating international terrorism both at the bilateral level and at international fora.”

The Spokesperson for the External Affairs Ministry Vikas Swarup recognised the centrality that the summit gave to terrorism and said :  "The Goa Declaration contains the strongest-ever language against terrorism among all past BRICS summits.” He said there was "unprecedented condemnation" of terrorism at the summit and that BRICS leaders strongly condemned the recent attacks in India."BRICS Leaders for the first time called upon all States to prevent terrorist action from their territories. They agreed that religion is no justification for terrorism," said Mr Swarup. The BRICS leaders, for the first time, called for effective implementation of UN Security Council Resolution on Counter Terrorism and sought enhancing the effectiveness of the UN Counter Terrorism Framework.

Interestingly, the BRICS Summit in its Goa declaration also included a paragraph : “China and Russia reiterate the importance they attach to the status and role of Brazil, India and South Africa in international affairs and support their aspiration to play a greater role in the UN.”  While China has yet to endorse a permanent membership of the United Nations for India or other aspiring powers, this statement comes nearest to that nation agreeing to see them in the same league as the P-5 or Permanent Five members of the UNSC – US, Russia, UK, France and China.

BIMSTEC

BRICS started off in 2006 on the sidelines of the UN General Assembly Session. The idea for it came from an acronym BRIC coined  in 2001 by Jim O'Neill, the chief economist at Goldman Sachs who identitifed the  countries of – Brazil, Russia, India and China - as the next centers of global growth given their vast territorial expanse, large populations and rapidly growing economies. The grouping decided to add South Africa, arguably the most economically advanced African economy as part of the `Club’. Several meetings later, india which hosted the Goa Summit decided to use its prerogative as Agenda setter to arrange a BRICS-BIMSTEC Outreach Summit, thus giving BRICS a regional focus and adding meaning to its economic diplomacy. The Bay of Bengal countries like Bangladesh, Singapore etc., fully utilised the opportunity to reach out to the new dynamic growth markets which make up BRICS.

The BRICS-BIMSTEC Outreach Summit was attended by leaders of all seven member states of the Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) , which besides India, includes Bangladesh, Myanmar, Sri Lanka, Thailand, Nepal and Bhutan on 16 October 2016.In addition to the Outreach Summit, the BIMSTEC countries had a meeting among themselves, which was chaired by Indian Prime Minister Narendra Modi. BIMSTEC member states too issued a strongly worded formulation on terrorism. The declaration also dealt in detail with climate change,  connectivity, disaster management, agriculture, a BIMSTEC free trade pact, mutual assistance in criminal matters, multi-vehicular agreement, fisheries, blue economy, mountain eco-systems, energy, health, tourism, people to people contact etc..

The influential state-run Chinese daily Global Times said of the summit : “A major difference between the Goa summit and the previous ones was that New Delhi put the (BIMSTEC) in tandem with the BRICS meeting.” By bringing regional countries – Bangladesh, Sri Lanka, Thailand, Myanmar, Nepal and Bhutan – together with the major emerging economies of the BRICS, India breathed legitimacy and substance into an otherwise “hallow and moribund acronym organisation”, the newspaper said.

ECONOMY

The BRICS nations also took forward their mandate by signing agreements on the establishment of BRICS Agricultural Research Platform, mutual cooperation between diplomatic academies and regulations on Customs Cooperation Committee of the BRICS. It was also decided that  “to fast track the setting up of a BRICS Rating Agency” based on market-oriented principles to “further bridge the gap in the global financial architecture.” Besides, the grouping also decided to establish BRICS Railway Research Network, BRICS Sports Council, and various youth-centric fora”

The need for a BRICS ratings agency has been felt by most BRICS financial experts as Western rating agencies ratings differ widely from national rating agencies. While Gazprom, Russia’s best known oil and gas entity enjoys a AAA rating in Russia, it is rated as BB+ by Standards & Poor, as any Russian entity’s rating is capped by its country rating according to methodology used by US or european based rating agencies. Similarly, India’s State Bank of India which in its nearly century-long history has never defaulted on any instrument and has over $ 300 billion in assets, was rated BBB- by S&P, while enjoys AAA rating by all domestic rating agencies. A CRISIL paper on the rating agency which India had commissioned points out that while national scale rating is limited by it being a comparative assesment of credit risks within a country, global scale ratings were limited by “ratings getting capped by or closely linked to sovereign ratings” and “unable to offer finer differentiation of credit quality.”

India's finance ministry which has worked closely with Exim Bank and CRISIL in designing a draft sketch of the BRICS rating agency wants the rating agency to be located in Mumbai, though that would be a decision to be taken by the heads of state who would have to agree to the rating agency. BRICS nations who held a trade fair for business houses from ithe five nations as well as BIMSTEC nations at New Delhi ahead of the summit to encourage inter-group trade flows, agreed to continue to work to combat the unfavourable economic headwinds together,  by pushing towards greater integration of markets, facilitating mutual ease of doing business and providing accessible capital to its businesses. On the concluding day of the 8th Brics Summit in Goa, Prime Minister Narendra Modi called upon leaders of the group of emerging economies to double the size of the intra-bloc trade to $500 billion by next five years. Though the BRICS nations “In 2015, intra-BRICS trade stood at about $250 billion. We should set ourselves a target to double this number to $500 billion by 2020,” Mr Modi said. Intra-Brics trade stood at $ 297 billion in 2014 or less than 5 per cent of global trade, even though the BRICS nations together account for a fourth of the World’s GDP. The grouping stressed it stood for free trade and effectively sought an end to protective barriers that were being set up by developed economies in the wake of recessionary trends sweeping their economies.  Mr Xi Jinping, China's President, issued an unusually stark warning. "Some countries are getting more inward-looking," he said. "Protectionism is rising and forces against globalisation are posing an emerging risk."  The need to avoid protectionism which was being espoused by some western countries to protect their economies and which could jeopardise global economic recovery, was one of the themes which dominated the Summit.

Said the respected Straits Times of Singapore : “The grouping (of Brazil, Russia, India, China and South Africa) has lost some of its sheen of late, with Brazil, Russia and South Africa struggling, in particular. As China tries to avoid a similar slump, only India looks in robust economic health. Still, these struggles should give the Brics a taste of what is to come, if the financial integration and trade growth that supported their rise continues its current reversal.”  The summit also stressed the need for co-operation in crucial matters relating to Intellectual Property Rights and the digital economy. The Goa Declaration spoke of  “open and non-fragmented” nature of digital spaces, which was a reference to the desire of the BRICS powers to keep cyberspace open for commerce, and prevent exclusive trading regimes to subvert the freedom of commerce through the net.

NEW DEVELOPMENT BANK

An immediate outcome of the Summit was the signing of the ‘BRICS Inter-Bank Co-operation Mechanism’ two days later (18 October) in Shanghai, between NDB and a representative bank from each country, which will facilitate, among other practices, interest and currency swaps between member states.

The 8th BRICS summit also marked implementation of its $ 100 billion Contingency Reserve Arrangement which  came into force to further trade and financial integration between its member countries. The New Development Bank, BRICS groupings’ newly minted international lending arm,  will also issue Rupee bonds targeting the overseas rupee market to help it lend money for Indian projects. This issuance follows a succesful Renminbi bond issue worth 3 billion Renminbi in China earlier this year. The New Development Bank was set up by BRICS nations with an initial corpus of $ 50 billion contributed equally by the 5 nations – Brazil, Russia, India, China and South Africa - as an alternative to the World Bank-IMF with the promise that the new bank would lend without the conditionalities which World Bank imposes on borrowers. Till now it has lent $ 811 million in loans to renewable energy projects to BRICS nations.

 

(The author is a senior journalist. Views expressed are personal.)