Round The World

New Delhi, 3 April 2012

BRICS and Brickbats

REMAINING A SALAD BOWL

By Shreya Upadhyay

Research Scholar, School of International Studies (JNU)

Yet another year has gone by for the fancy ‘clubbing five’ emerging powers with mother-hood statements and photo ops. Who otherwise remain a disparate group vying for a higher seat at the global power table.

However, the fourth BRICS (Brazil, Russia, India, China and South Africa)  Summit held recently in New Delhi did provide a common thread for Member nations to repudiate the West for financial mismanagement, hinted at backing an alternate candidate for the World Bank President-ship and urged a peaceful solution to the Iran and Syrian crisis.

True, while the five leaders pledged to focus on mutual trade and economic development issues and advocated faster reforms of the Western-dominated global financial system to the needs of the developing world, they failed to ink any agreement on the tangible and the most discussed goal of establishing a new development agency challenging the World Bank, owing to differences between them.

Pertinently, BRICS got its name from Goldman Sachs that predicted in 2001 that Brazil, India, Russia and China would drive economic growth in the 21stcentury. South Africa was a late entrée in the group. Representing 43 per cent of the world’s population, 18 per cent of global trade and attracting 53 per cent of global financial capital, the group poses an unwelcome challenge to the US-dominated Security Council, IMF and World Bank.

Importantly, the five countries criticised the slow pace of reforms in the IMF and called for modified international financial institutions reflecting the present global patterns of power. They also blamed the West for generating excessive liquidity in the global financial system as part of its strategy to boost local financial activity and noted the risks posed by volatile food and energy prices to world economy.

Further, the leaders agreed to invest more in the United Nations Conference on Trade &Development (UNCTAD) which played a major role in catering to the interests of developing countries.

On Afghanistan, BRICS exhorted the international community to stay the course on the development front for at least 10 years after the West withdraws most of its combat troops by 2014-end and noted the need for checking narcotic trafficking.

Undoubtedly, the most concrete outcome expected and  deliberated in the run-up to the Summit was the creation of a South-South Development Bank billed as an alternative to existing global lending agencies for disbursing funds to core sector projects within the five-nation grouping and other emerging economies. If implemented, the agency could coordinate foreign assistance and gradually diminish the global South’s reliance on the whims of the currently under-regulated international financial system.

But, the move which was a Chinese initiative has been postponed and instead a high-level working group been formed to examine the issue and report back at the next meet. Undeniably, this shows the fissures within the group to float a mutual initiative of this kind. India is skeptical that such an institution would essentially be a Chinese bank due to the financial depth Beijing enjoys.  While South Africa supports the move, Brazil is already funding the Latin American Development Bank.

In fact, Prime Minister Manmohan Singh preferred improvements in the World Bank. Also, the Summit only hinted at supporting an alternative choice against the Obama Administration’s nominated Korean American Jim Yong Kim to lead the World Bank, by stating that the “institution should have a governance structure that reflects current economic and political reality and that the leadership selection should be done through an open and merit-based process.”

Moreover, the leaders did not attempt to find a consensus candidate in this regard. Two candidates from emerging-market countries, Nigerian Finance Minister Ngozi Okonjo-Iweala and former Colombian Finance Minister Jose Antonio Ocampo, have however been nominated along with Kim to take over when current President Robert Zoellick steps down in June.

In addition, BRICS signed agreements to enable greater use of local currencies, rather than the US dollar in trade among member countries to reduce transaction costs. The move is seen to be replacing the use of the dollar. But, the members are cautious as this would only legitimise Chinese currency overseas.

Moving beyond economics, the leaders also focused on world politics by pointing to Iran’s right to the peaceful use of nuclear energy. The declaration stressed that military action in this regard was unacceptable and the group was not bound by a looming ban on Iran's oil exports. Notwithstanding, this has much to do with individual nations’ zealous attempts to guard their energy security needs.

Both India and China, together import about one million barrels a day from Iran, which amounts to 40 per cent of Tehran’s total export of 2.5 million barrels per day. Predictably, they are wary of a volatile international situation.

The Summit also supported the Arab League and special envoy Kofi Annan’s peace plan in Syria opposing violence as a way of resolving a political crisis. Notably, on earlier occasions, BRICS has failed to reach a common position on Syria. As Russia and China have twice vetoed resolutions against the Assad regime, while India, South Africa, and Brazil have either voted in favour or have not voted at all.

There are other deep seated differences among the BRICS nations. One, the India-China geo-political rivalry and Russia and China stand-off. Beijing is currently the leader in the pack, much to New Delhi and Moscow’s discomfort. Besides, there is divergence with Beijing on the value of the Chinese currency and trading practices. Brazil and India have problems with China being an importer of raw materials and inputs rather than of manufacturing products leading to a huge trade deficit with China.

Russia, Brazil and India desire the emergence of a multi-polar international system in which they are major actors. On the other hand, China aims for a bi-polar world in which it serves as the counter-balance to the US. As it stands, India and Brazil have been seeking membership in an expanded UN Security Council. In contrast, Beijing has so far opposed India's bid for a permanent Security Council seat.

Furthermore, all have been striving to maintain diplomatic and economic ties with the US, rather than engage among themselves. Trade is the only exception where China rules the roost.

Yet BRICS does share a number of concerns regarding Western policies, changing economic environment, US and Europe policies on Iran, Af-Pak policies that affects China, Russia and India specifically and on climate change. But presently, BRICS is more concerned about development and growth in their own countries.

Unfortunately, domestic issues too cast a shadow on the Summit. Brazilian President Dilma Rouseff is still trying to finding her feet, Russia witnessed a controversial election and China is undergoing a leadership transition. India too is facing governance issues, chaotic coalition politics, corruption, poor human development index records and low per capita income.

In sum, the only common agenda for BRICS is their open animus against the US, West and the institutions they head. Contrary to hopes that BRICS would showcase the developing world’s aspirations and fill the leadership vacuum as Western powers reel under their economic problems, sadly, this coalition is likely to remain a salad bowl with members coming together periodically to demand greater representation in established institutions such as IMF and World Bank but otherwise stay divisive when it comes to other policy matters. ----- INFA

(Copyright, India News and Feature Alliance)