subscribeasdf aklsd jflksdj to the flksdjnewsletter flsdkj flksdj df f d f d fd fdfsssflsdjfldsjf lkdsj(click flksdj fklsdjhere) flksdj Issue #20 - July 2014 flkdsjf lksdjf lksdfj BRICS SUMMIT READER SPECIAL E-NEWSLETTER

The Club in the G20 Club

Knowledge Box on Contingency Reserve Arrangement by Kavaljit Singh; Insights on the BRICS by

Vijay Prashad,Trinity Collegue, US, Page Patrick Bond, University of Kwala Zulu, South Africa and s 6 | 10 14 25 Kavaljit Singh, Public Interest Research Centre, India);

2012 2013 Must Read A long-term 2014vision for BRICS, by the Observer Research Foundation, India; Oliver Stuenkel, Getulio Vargas License by istockphoto Foundation (Brazil).

News from the BRICS countries

In “BRICS Bank: In “The BRICS: The In “The Global In “China’s role in In “Club In his article, “High New bottle, how’s Struggle for Global Economic Chessboard G20/BRICS and Governance: Ambitions: the the wine?” Sameer Hegemony in a and the Role of the implications,” Gudrun Prospects for civil Programme for Dossani of Action Multi-Polar World”, BRICS: Brazil, Wacker, Senior fellow society engagement”, Infrastructure Aid International Graciela Rodriguez Russia, India, China, German Institute for Vitaliy Kartamyshev Development in Africa explores questions of Instituto EQUIT and South Africa”, International and of GCAP-Russia, (PIDA),” Mzukisi about the Bank and and member of Professor Jayati Security Affairs, discusses the Qobo, Centre for the the increasing role of REBRIP describes Ghosh of Jawaharlal describes why BRICS evolution and roles of Study of Governance Southern countries as BRICS’s potential to Nehru University may have less the BRICS, Innovation, agents of supplant the orthodox describes the existential importance particularly in University of Pretoria develop- neoliberal model challenges of the for China than G20 and international describes how PIDA ment. with a state-led BRICS, including regional “clubs”, how development. has a blueprint for the economic system. ways it can deal with China is launching the financing of Southern countries Asian Infrastructure megaprojects by the without repeating the Investment Bank. BRICS Bank, among mistakes of the North. others

Pages 3-5 Pages 7-9 Pages 11-14 Pages 15-18 Pages 18-20 Pages 22-25

a Introduction READER Which Development Paradigm Will the BRICS Follow? Introduction Nancy Alexander, Heinrich Böll Foundation - North America Civil society organizations (CSOs) –“Will there be mechanisms to deliver Ghosh of Jawaharlal Nehru are asking important questions about messages to the Leaders and their University describes the need for the future of collaboration by the new institutions? Since, reportedly, BRICS to enhance diversification in BRICS, such as: the BRICS Bank will be based in exports and bilateral currency trade; BRICS SUMMIT –“Are the current Leaders of the Shanghai, China (probably with offices address income and asset inequality; BRICS – Rousseff (Brazil), Putin in other countries), how will this affect integrate the views of developing (Russia), Modi (India), Xi Jinping the capacity of CSOs to relate to the countries; and avoid replicating the (China) and Zuma (South Africa) – NDB? patterns of North-South interaction capable of bringing a progressive (for instance, where the North keeps vision to their collaborative This “BRICS Summit Reader” the monopoly of high-value-added endeavors? Modi, elected as Prime includes reflection on these and production). Minister in May 2014, will make his other important questions. In debut at the BRICS Summit. “BRICS Bank: New bottle, how’s In “China’s role in G20/BRICS and Writing in The Guardian, Jayati the wine? Sameer Dossani of implications,” Gudrun Wacker, Ghosh says that Modi’s election is a Action Aid International explores Senior Fellow, German Institute commanding win for Hindu questions about the bank and the for International and Security nationalism, corporate India, and increasing role of Southern countries Affairs, describes why BRICS may crony capitalism. As Chief Minister as agents of development. Dossani have less existential importance for of his state of Gujarat, Modi doesn’t see the bank moving away China than its regional “clubs” and delivered economic growth without from the development model focused the G20 and the limited role for civil commensurate human development on urbanization, infrastructure society in Chinese-led “clubs” and or tolerance of dissent. development, and market expansion. institutions. Importantly, China is And, he is not optimistic its joining in the launch of the BRICS –“What messages might CSOs deliver sensitivity to environmental and Bank, while also launching the Asian to BRICS Leaders, especially about social questions. But, he expects Infrastructure Investment Bank their two initiatives, which establish a that the BRICS will promote (AIIB) with the same initial BRICS New Development Bank (NDB) industrial transformation, which is capitalization as the BRICS Bank and a Contingency Reserve something that “the World Bank and and the same basic goal of tackling Arrangement (CRA)?” (See Box, IMF…have opposed and blocked.” the deficit in infrastructure below.) CSOs have cogent analyses investment. of how the NDB should adopt In “The BRICS: The Struggle for policies related to, transparency and Global Hegemony in a Multi-Polar Each geographical region is social, and environmental norms. World”, Graciela Rodriguez, developing blueprints for mega- But, CSO analyses of the Coordinator of Instituto EQUIT projects – usually without input from “development paradigm” and Member of REBRIP (Brazilian civil society. In his article, “High (increasingly neoliberal with a state- Network for the Integration of the Ambitions: the Programme for led “twist”) are rarer. The People), describes BRICS’s Infrastructure Development in Africa international financial institutions no potential to supplant the orthodox (PIDA),” Mzukisi Qobo, Senior longer need to enforce some neoliberal model with a state-led Lecturer and Deputy Director, neoliberal policies (e.g., budget economic system. Rodriguez Centre for the Study austerity, public-private partnerships suggests that the creation of the of Governance Innovation, (PPPs) and foreign direct BRICS Bank, the Contingency University of Pretoria describes investment (FDI)), because sadly, Reserve Arrangement, and the how PIDA is developing blueprints most national capitals now consider conduct of trade among BRICS in for African infrastructure, especially such policies as “conventional national currencies have potential to in energy, transport, and water wisdom.” Whereas a growing protect against the cyclical crises of sectors estimated at US$360 billion number of trade and investment transnational and financial capital up to 2040. These mega-projects agreements enforce neoliberal and promote a new development provide a destination for rising policies and handcuff the state, few model. infrastructure finance from external mechanisms exist to monitor or actors, including the new BRICS enforce normative (human rights or In “The Global Economic Bank and the Asian Infrastructure environmental/climate) standards. Chessboard and the Role of the Investment Bank. Qobo concludes BRICS: Brazil, Russia, India, China, that PIDA could become a “bane for and South Africa”, Professor Jayati the continent,” if it fails to create

1 and nurture the governance “Coalition Against Poverty”, “Must Reads” cover reflections by READER

mechanisms to ensure that discusses how years of global India’s Observer Research infrastructure projects are economic expansion only deepened Foundation; Oliver Stuenkel,

Introduction undertaken with greater sensitivity levels of inequality. He analyzes the Getulio Vargas Foundation (Brazil); to the environment and social geopolitical importance of BRICS, Vijay Prashad, Trinity College inclusivity.” their role in fostering results- (US); Patrick Bond, University of oriented policies, and the KwaZulu-Natal (SA); and Kavaljit In “Club Governance: Prospects for opportunities for and challenges to Singh, Public Interest Research civil society engagement”, Vitaliy civil-society engagement in BRICS’ Centre (India).

BRICS SUMMIT Kartamyshev, Co-Chair of GCAP decisions. Russia and President, Foundation

Launch of New Infrastructure Facilities

The BRICS Bank will start up in 2016 with $10 headed by Jin Liqun, chairman of China billion in cash and $40 billion in guarantees, which International Capital Corp., one of the country’s will be used to raise capital on international leading investment banks. markets. Each country will contribute equally. (Source: Reuters articles) --Any country can join the bank with a $100,000 share. Global Infrastructure Facility (GIF), World --In five years the bank's capital should double to Bank. The World Bank is expected to launch the $100 billion through capitalization from funding GIF in 2014. It has a grand name, but an initial members, debt emissions or contributions from capitalization of only about $200 million. The GIF new members. The BRICS will hold a minimum of will demonstrate a new model of investment 55 percent of the bank's shares. finance that combines a project preparation facility --Location: Shanghai, with one or more regional with an investment platform. The pilot facility’s offices. big idea is to create a new infrastructure asset (Sources: Articles in Reuter’s and Folha articles) class, which would enable the financing of infrastructure by global capital markets. There Asian Infrastructure Investment Bank. Whereas are more companies providing infrastructure funds, Japan leads the Asian Development Bank and the such as Allianz Global Investors (Germany), U.S. leads the World Bank, China will lead the BlackRock (US), and IFM-Europe (Australia), but Asian Infrastructure Investment Bank(AIIB), these invest in “advanced economies.” The Group which was announced by Chinese President Xi of 20 (G20) is helping to mobilize long-term Jinping in October 2013. The initial capitalization institutional investors, such as pension funds, to will be US$50 billion for the purpose of invest in emerging and developing economies. infrastructure construction in Asia. China’s (Sources include: The Dakar Financing Summit Finance Minister Lou Jiwei stated “Existing (DFS) for Africa’s Infrastructure, Dakar, Senegal, MDBs, such as the World Bank and the Asian 14-15 June 2014.) Development Bank, put their priorities more on poverty reduction.” The working group for the establishment of the bank is based in Beijing and is

LAUNCH OF THE BRICS CONTINGENCY RESERVE FUND (CRA)

On July 15, the BRICS Summit is expected to launch Singh asks whether the CRA is likely to be used by a USD 100 billion CRA, with USD 41 billion from BRICS. (see p. 6) He states that although there is a China. Brazil, Russia and India will each contribute dire need for an alternative to the IMF and the USD 18 billion and South Africa will provide USD 5 Western financial institutions, not a single member billion. The CRA will come into operation only when of an even larger reserve fund, the Chiang Mai a member country faces a financial crisis Kavaljit Initiative (CMI) has ever opted for its assistance.

2 BRICS Bank: New bottle, how’s the wine? READER

By Sameer Dossani, Advocacy Coordinator, Reshaping Global Power, ActionAid International Reprint from Bretton Woods Project, 27 February 2014 BRICS SUMMIT News from the BRICS countries

CC BY-NC-SA 2.0 (Dan Klimke

Summary positive developments depends in inequality skyrocketed during this Last year BRICS leaders agreed to part what questions are being asked. period. Even now, with the exception launch a BRICS development bank. If the questions are “Will there be of Latin America, the gap between Whether this is considered positive adequate social and environmental rich and poor continues to grow. depends in parton what questions are protections?” or “Will the NDB being asked. Sameer Dossani of actually finance alternative forms of While the World Bank would be ActionAid International highlights the development such as decentralised quick to point out that it cannot be flaws in the World Bank and IMF, renewable energy production?” the blamed for these failures, it is telling analyses whether a BRICS Bank could conclusion is likely to be negative. that institutions supposedly meant to be different from these institutions and But if the questions are “Does the foster development have to this day proposes what it should do and what it world need a Southern-led and very few examples of countries that should look like. controlled financial institution?” or they have actually helped to develop. “Would NDB loans come with the At the 2012 Delhi summit of Brazil, kind of harmful macroeconomic Part of the failure can be attributed Russia, India, China, South Africa conditions that the IMF pushes?”, to the triumph of ideology over (BRICS), the leaders of the five the conclusion would be more evidence. “Washington consensus” nations agreed to launch a BRICS positive. policies – fiscal and trade development bank. The following liberalisation, privatisation and year in Durban, the initiative was Do we need a new development budget austerity – were required of given a name – the New bank? every developing country that sought Development Bank (NDB). While The World Bank and its sister international assistance. The results perhaps not the most original of institution the International have not been pretty. As has been monikers, the name does beg Monetary Fund, established 70 years extensively documented, the period questions – how new is the New ago, have lent billions to developing from 1980-2010 was in part defined Development Bank? Whose countries. Yet in their heyday – in by extremely slow growth globally. development are we talking about the 1980s and 1990s – these Where growth did occur in the here? And does the world need institutions did not produce results in North, it often turned out to be the another multilateral bank? terms of poverty reduction or even in result of speculative bubbles. In the terms of increasing economic South, the only countries to grow We are still awaiting answers on growth. In almost all regions, were those that ignored Washington these questions, and judging by the consensus policies – China, Malaysia, latest reports, so are the five BRICS Singapore and a few others – and countries. According to reports from In the South, the only used state-backed borrowing and the latest BRICS meetings, aside countries to grow were those investment to drive an industrial from the question of how much that ignored Washington policy. capital the NDB should have in its consensus policies – China, ‘vaults’ ($10 billion per country, $50 Malaysia, Singapore and a few In the last decade or so, middle- billion in total), there is little that others – and used state- income countries, including the the countries seem to agree on. backed borrowing and BRICS, have been investing – and While official information is hard to investment to drive an sometimes giving what we would come by, rumours abound. Whether industrial policy. usually call ‘aid’ – to less developed or not those rumours are considered countries in Asia, Africa and Latin

3 America. China is by far the biggest is the model that these countries are IMF have not supported – in fact the

READER player here, but Brazil, India and following, with megaprojects like the institutions have opposed and others are also extending their Three Gorges dam in China, Jirau blocked these policies. reach. dam in Brazil and Kudankulam nuclear power plant in India being What the BRICS Bank could do What does the increasing role of showcased by their respective Might a BRICS bank be different? It Southern countries as agents of governments as development is certainly possible. Many of the ‘development’ in other Southern successes. But the NDB’s failure to BRICS countries (China being the countries mean for the world’s challenge the lack of environmental most obvious example) are going poorest and most marginalised? Is and social protection in the through the process of industrial BRICS SUMMIT this yet another layer of exploitation, development model does not mean transformation themselves, with or do these events possibly offer a that all hope is lost. state support for domestic companies way out of poverty to communities a key component of economic policy. News from the BRICS countries who have been denied their rights While the neoliberalism of the 1980s And the BRICS countries (unlike the for centuries? Will the NDB help and 90s promoted a worldview in G7 countries who still dominate the countries improve policies and which growth and a certain model of World Bank and IMF) have no practices or will it be a mechanism development are ends in themselves, history of trying to force economic whereby rich countries like China it did not even deliver the growth policy down others’ throats. gain access to more resources and and development that it promised. markets using the fig leaf of Amidst recent triumphalism about To be clear, that does not mean that multilateralism? the achievement of the UN’s we can expect better results in terms Millennium Development Goals sits a of human rights or environmental sad truth: progress against poverty protection. Early development in The process of industrial has been made in only a handful of Great Britain, for example, was transformation is something countries. Take out China, Brazil and characterised by high levels of that the World Bank and IMF a few others, and poverty reduction pollution and worker exploitation at have not supported – in fact has a poor track record in the last 30 every level. But it was a the institutions have opposed years. Even GDP growth has been development process (albeit an awful and blocked these policies. disappointing at the global level one) that centred around the (with a handful of exceptions), and a transformation from an agrarian There are no straightforward lot of the growth that has happened economy to an economy that answers. But before we explore has been deeply inequitable – manufactured goods. The NDB, if deeper, we should be clear about consider Mexico and India for some consistent with BRICS rhetoric so what is not on the table. of the less equitable growth stories. far, should not hinder (and might even support) this process of Whose development model? The failure is not surprising. industrial transformation. Progressives have long critiqued the Neoliberals argue that countries development model of the North should find their comparative Many NGOs critical of proposals for being exported to the South as advantage to create a trade-based a BRICS Bank have pointed to the environmentally and socially strategy to growth – countries should decades of struggles to force the exploitative. The focus on GDP export what they have. However, World Bank and other international growth to the exclusion of other aims neoliberalism has never explained financial institutions to adopt and (externalities, in economic jargon) is why the economies of the US and enforce policies to protect vulnerable highly problematic, especially in Japan are not dependent on the communities and the environment. countries that do not yet have strong export of fur and fish, commodities They point to controversial projects social and environmental regulations. that they were exporting when they like the Brazilian-Japanese- In countries like India, social began their development process. Mozambique ProSavana project, movements have strongly opposed a which involves state-owned Brazilian development model focussed on True proponents of development Agricultural Research Corporation urbanisation, infrastructure understand that industrial adapting Brazilian export crops for development, and on expanding transformation, not comparative Brazilian agribusinesses to start market reach, which almost advantage, is the key to the story. large-scale agriculture projects in necessarily entails the destruction of Countries like the US and Japan northern Mozambique, with export traditional and indigenous were not developed as long as their infrastructure paid for by the communities and lifestyles. economies were primarily exporting Japanese aid agency. The critics say raw materials – only when the it puts Mozambiquan small farmers Even in a best-case scenario, economies began to produce and at risk while benefiting Brazilian and initiatives like the NDB are unlikely export manufactured goods could Japanese multinational companies in to challenge any of this – quite the they be called developed (or even their production and processing of opposite, they are likely to take a developing). The process of soy, maize, sugar cane and other GDP-centred, Northern- industrial transformation is cash crops. development-model approach. That something that the World Bank and

4 These criticisms are certainly valid; (important as those may be) and where that documentation exists it is

READER problems related to bilateral more on sustainable economic usually coloured by the political financing of projects are likely to transformation, industrialisation and agendas of the World Bank and the reappear in these multilateral job creation, we might all be better IMF. The NDB should build up a efforts. But it is unlikely that a off. Both the BRICS and CSOs can counterweight to those narratives development bank can be founded in be part of the process. and work with underdeveloped 2015 and not have some kind of countries who may request help to social and environmental protections A bank that is willing to fund policies develop their own strategies of in place. What those protections will aimed at economic transformation economic transformation. look like and how they will be would be a step in the right BRICS SUMMIT enforced are questions with which direction. But would it really A new global architecture NGOs and other stakeholders should contribute to development and If the NDB is really trying to push in be engaged. poverty reduction? There are a few a different direction, it should be News from the BRICS countries things to look out for on the off cautious about working with the Unfortunately, it is not clear how chance that it can meet this lofty existing IFIs, especially the World NGOs or other civil society actors goal. Bank and the IMF. While those are meant to engage with this institutions are already preparing to process. Unlike other developing greet the NDB as a potential country formations (notably IBSA – If the NDB can establish partner, partnership would come the grouping that includes BRICS governance structures more with a lot of baggage for an countries India, Brazil and South equitable, more transparent, institution promoting itself as an Africa), there is no formal and more tilted towards alternative. In order to create such a mechanism for civil society ensuring that the needs of genuine alternative, it should look consultation or engagement. Even if poor countries are at the fore, elsewhere, perhaps to more this does not change for the BRICS, it may add to the already participatory institutions like the CSOs should be pushing hard to building pressure for Global Fund for AIDS, TB and include CSO consultations on the meaningful reform of the Malaria. policies and programmes of the Bretton Woods institutions. NDB. In addition to a more democratic governance structure – we are Despite its many potential flaws, the hearing rumours that each of the proposal to establish the NDB should First, the NDB should lend not just BRICS countries will contribute an be viewed with cautious optimism. to BRICS countries (who have many equal share of money to the NDB The key countries driving the process other potential sources of income), pot, meaning that they would all – Brazil, India and China – are not but also the world’s poorest have the same number of votes on its motivated only by a desire to expand countries. board – the NDB should ensure that their political and economic representatives from recipient influence. They are already doing Secondly, the NDB should not focus countries are also part of the that without an international on a specific sector, but rather it process. There are many ways in development bank. They are also should fund those projects that which it could do so – the best might motivated by a desire for legitimacy countries identify as key to their be to create a governance coupled with a desire to compete industrialisation and development mechanism that includes with (perhaps even show up) the G8 policies. If that is not feasible – we representatives from other structures countries that did not live up to are already hearing that there will such as the African Union or the promises made in 2008 and 2009 to be sectoral focus on infrastructure – LDCs block as well as members of give developing countries more say it should only operate in countries Southern civil society. over the IMF, World Bank and other where investment in the niche sector If the NDB can establish governance IFIs. At that time, the BRICS is already part of the national structures more equitable, more countries and others were promised development strategy. transparent, and more tilted towards more say over the IFIs in exchange ensuring that the needs of poor for putting in billions which the IMF Thirdly, in addition to financing countries are at the fore, it may add ultimately directed to Europe. The projects, the NDB should be building to the already building pressure for rich countries have yet to live up to up technical expertise, research and meaningful reform of the Bretton their end of the bargain. documenting various development Woods institutions. experiences. Despite the noble The BRICS’ desire to be seen as the efforts of some, such as Cambridge promoters of ‘genuine’ development economist Ha Joon Chang, there still

gives campaigners an inroad to help is not enough documentation on why Dan Klimke ( the BRICS countries define what and how countries develop. There is genuine development is. If the even less documentation putting that development discourse were to focus theory into practice in the context of a particular developing country, and less on mosquito nets and vitamins ? CC BY-NC-SA 2.0 5 READER

KNOWLEDGE BOX

Contingency Reserve Pool of the BRICS countries Must Read In June 2012, Brazil had proposed the dominated by Western institutions and banks. establishment of a BRICS contingent reserve pool Thus, the potential of CRA (and BRICS Bank) in and bilateral swap arrangement which could ease altering the present unequal power relations in

BRICS SUMMIT short-term liquidity pressures and strengthen the financial world cannot be denied. However, it financial stability in the event of a balance of is important to emphasize that whether these payments or liquidity crisis. It was at the Durban instruments can really fulfill potential roles would Summit (2013), the BRICS Leaders decided to be primarily judged by their official mandate, create a US$ 100 billion Contingency Reserve policy framework, governance and the Arrangement (CRA) to tackle any potential operational aspects. financial crisis. At the same time, one cannot Currently, the central banks of ignore the fact that reserve BRICS are working on the arrangements similar to the modalities and operational BRICS CRA currently exist, aspects of the CRA. Unlike the are inoperative and have not BRICS Bank, the self-managed challenged the hegemony of CRA could come into operation the IMF. In the aftermath of soon once BRICS Leaders reach the Asian financial crisis of on a final agreement in 1997-98, Asian countries Fortaleza (Brazil) in July 2014. (ASEAN plus China, Japan and South Korea) launched It is important to note that the the Chiang Mai Initiative CRA will only come into (CMI) to develop a self- operation when a member- managed reserve pooling country faces an imminent arrangement and a regional CC: BY-SA Roman Leskov financial crisis. In normal times, financial safety net which each member-country of BRICS will preserve the could provide immediate liquidity support to funds’ reserve as part of its foreign exchange member-countries in the event of a balance of reserves. payments or liquidity crisis. The CMI was the first regional currency swap arrangement launched The establishment of a Contingent Reserve with much fanfare in 2000. Arrangement (CRA) of $100 billion looks very promising as we are living in a post-crisis world However, it is surprising to note that not a single full of financial risks and shocks. It offers a rare member-country facing an impending financial opportunity to reshape the global financial crisis of one sort or another has, so far, opted for architecture by providing concrete financial this regional financial safety net. This is despite mechanism of $100 billion to BRICS (possibly to the fact that the size of reserve pool of the CMI other poor and developing countries as well) has been substantially expanded over the years which may suddenly face a balance of payments (currently at $240 billion) and new facilities on or liquidity crisis. The proposed CRA could crisis prevention and resolution have been added. potentially sow the seeds of an alternative Many of its member-countries (for example, financial architecture if it could expand its Indonesia and Philippines) are more vulnerable mandate and reserve pool. to liquidity shocks at present than in the past. Therefore, the recent unappealing experience of Few can dispute the fact that such an alternative CMI raises several pertinent questions which arrangement was badly needed as poor and BRICS leaders cannot choose to ignore. developing countries had no option but to accept the misdiagnoses and harsh conditionalities of the IMF which provoked huge public outcry and Kavaljit Singh works with Madhyam, a policy bitter resentment in the 1980s and 90s. research institute, based in New Delhi The relevance of CRA becomes even more (www.madhyam.org.in). important in the present financial landscape

6 The BRICS: The Struggle for Global READER

Hegemony in a Multi-Polar World

By Graciela Rodriguez, Coordinator of the Brazilian Instituto EQUIT and the “Empowering CSO Networks in BRICS countries in an Unequal Multipolar World” Project; Member of the Coordinating Team of REBRIP – Brazilian Network for the Integration of the People BRICS SUMMIT News from the BRICS countries

Source www.postwesternworld.com

Many authors have sought to processes currently under by dismantling safety nets and other understand and express the strategic negotiation; the agenda for mechanisms. significance of the BRICS – namely, addressing the roots of the global Brazil, Russia, India, China, and, crisis does not yet appear to have While many commentators more recently, South Africa. At the gained traction, despite the obvious emphasize the differences among the first BRICS Summit in 2009, there urgency. BRICS, there are also similarities. were urgent calls for regulation of For instance, when the crisis the global financial system. The exploded in 2008, the BRICS were summit process generated certain among the countries that were best expectations that the BRICS would Since their incorporation into positioned to tackle the crisis in their tame the global “casino” of the G20, the BRICS member domestic spheres, largely due to the speculative activity that contributed states have focused more on fact that they had preserved the to the crisis. Since then, however, increasing their own capacity and controls to manage there has been very little progress in participation in the global their economic, financial and terms of regulating the financial system than changing the monetary policies. In contrast, a system due, in part, to various system and delivering on large number of globalized countries contradictions within the bloc. In commitments that they have been weakened by relinquishing fact, since their incorporation into announced with great fanfare such controls. The policies of the the G20, the BRICS member states in 2009. BRICS enabled most of them to have focused more on increasing confront the financial crisis with their own participation in the global This crisis, which initially brought policies that supported higher levels system than changing the system and the BRICS countries closer together, of consumption, redistribution, and delivering on commitments that they demonstrated the severe and social spending, which helped to announced with great fanfare in profoundly systemic nature of the keep their economies afloat and 2009. financial collapse. Even though crises minimize the pain inflicted on the are cyclical elements of capitalism citizenry. In spite of having made only a few (part of its very essence), this advances, the BRICS continue to particular crisis showed the negotiate and build the collaborative magnitude of the problem of over- This particular crisis showed links and programs within their bloc. accumulation in the capitalist/ the magnitude of the problem In 2014, they will gather at the 6th neoliberal model of production, of over-accumulation in the BRICS Summit, which is likely to be which now overlaps with the capitalist/neoliberal model of held in July in Fortaleza, Brazil. environmental crisis. The expansion production, which now overlaps There, they will have the challenge of globalization and its neoliberal with the environmental crisis. of moving ahead with the creation of project has weakened the power of the BRICS Development Bank and nation-states and reduced their The control that BRICS countries the Contingency Reserve capacity to overcome cyclical crises continue to hold over the apparatus Arrangement (CRA) – two important of the state can be attributed to

7 political models and historical not imply that we are witnessing a global crisis. These moderates are

READER circumstances that vary greatly from “paradigm change” or a profound joined by the BRICS, who have one country to another. The models transformation of the global taken ownership of this debate and vary from the hegemonic visions of capitalist system. It does not even insist on a substantive state presence communist or left-wing parties that mean that the current reforms are and role. wagered on maintaining a strong necessarily “progressive”. Even so, role for the state in their economies these changes can be interpreted as Several other actors challenge the to situations where the national elite steps towards overcoming uni- logic of imposing globalization at all agreed on a regulatory role for post- polarity and the beginnings of a cost and bowing to the interests of colonial states, including broad multi-polar global governance corporations and the speculative BRICS SUMMIT power-sharing by a range of political system. markets. They represent the “third parties in order to mitigate profound way” (beyond state and market), class conflicts, as in the case of India which seeks to resolve so-called

News from the BRICS countries The BRICS have emphasized or South Africa. Such control over “market failures” and guarantee the the importance of the role of state power and especially over stability of the global system. Yet, the state in regulating the public or renationalized state despite the system’s obvious loss of system. This is a key dimension enterprises does not necessarily legitimacy and hegemony, these in the current dispute for world mean that these enterprises escape actors fail to introduce significant hegemony. the logic of neoliberalism. To the reforms. contrary: in some cases, state-owned enterprises can strengthen The BRICS have emphasized the According to Robinson, these “third neoliberalism; however, the role importance of the role of the state in way” reformists they can play in guiding and regulating the system. This is a key regulating the market merits a dimension in the current dispute for do not transgress the essential 1 separate analysis . world hegemony. We have before us premises for the liberalization of the a scenario where, on one side, we world market or the freedom of find the driving forces behind the transnational capital, nor do they The reconfiguration of the G7 propose reforms that imply to form the G20 recognizes neoliberal model, which remain committed fully to liberalizing trade redistribution or State control of that decisions about the new capital’s prerogatives. Yet a choir of financial architecture and the and the flow of transnational capital. As promoters of the so-called voices from the transnational elite is exercise of global power can no calling for a broader global regulatory longer be made without the “Washington Consensus” they enforce a diminished state role framework that could stabilize the emerging countries, especially financial system and attenuate some of China. through the array of economic and institutional prescriptions and loan most acute contradictions of global conditions of the international capitalism in the interest of ensuring financial institutions, the World the system’s political stability.3 The crisis gave rise to a new Trade Organization (WTO) and the international geopolitical context web of free trade agreements that which can no longer be explained are proliferating around the world2. For these reformists, the state using the "center-periphery" model. On the other side, we find sectors of should create an environment Instead, we see a new model in global capitalism insisting on some that is favorable towards which emerging countries (formerly kind of state control and regulation capital without challenging its at the periphery) began to occupy an over financial flows, a new global rights and prerogatives. uncommonly pivotal role in the economic/financial architecture, and efforts to find solutions. In reality, even moderation in the processes of the reconfiguration of the G7 to form social polarization and the Thus, for these reformists, the state the G20 recognizes that decisions concentration of global wealth. should create an environment that is about the new financial architecture favorable towards capital without and the exercise of global power can For a few years, this debate has challenging its rights and no longer be made without the been culminating in a dispute for prerogatives. The interventions of emerging countries, especially China. hegemony, which has been the state would be based on In fact, it was the BRICS members intensified by the arrival of the appropriate regulations and involve that salvaged the IMF’s financial BRICS. The project of the elites of oversight and supervision of the structure and restored its power, and major transnational corporations to global financial system. Some even even its legitimacy, by injecting a form a seamless global market is see the state as having significant amount of their resources now being confronted by more responsibilities in the area of social into its reserves. moderate actors from the welfare and the promotion of global establishment (e.g., Stiglitz, Sachs, public goods. Current geopolitical changes and the Krugman) that defend a neo- competition for global hegemony do Keynesian vision of solutions for the

8 Faced with neoliberal orthodoxy, It is important to understand the active, positive role. Even so, despite

READER these dissident voices calling for roles that the BRICS could assume all of the weaknesses and profound reforms of the Washington in a transition to a multi-polar world. political and economic contradictions Consensus are aware that the For instance, they could mobilize within the BRICS, we must consider neoliberal project began to suffer a sectors that still submit to the their strategic importance on the legitimacy crisis at the end of the dominant logic, thereby broadening international level. Civil society must 20th century, especially with the counter-hegemonic resistance to the pressure them to assume an active, protests at the 1999 WTO neoliberal model and formulating transformational role and force Ministerial in Seattle and the new approaches to “development” in actors, including the G20, to emergence of the “anti-globalization the Global South. This is why it is strengthen financial regulation and BRICS SUMMIT movement”, as it was then called. important for social movements in the implementation of rules on For these reasons, reformists are the BRICS countries to pressure capital controls and taxation, and seeking to preserve the current their governments to confront the especially those on profit remittances News from the BRICS countries configuration of global hegemony by current hegemonic model, even if of major transnational corporations. “giving globalization a human face”. their governments have not been very proactive since 2009–2011, We still witness the hegemony of when they first took small steps Western nations and transnational BRICS members appear to be forward. corporations, but their hold on power aligned in their quest for some is slipping. That is, we can detect form of regulation of the global Among the tasks the BRICS have schisms and fractures in the formerly system, especially of the global taken on, their priorities are the unyielding neoliberal order. The financial system. Their efforts creation of the BRICS Bank and the BRICS countries should work to appear to be directed towards Contingency Reserve Arrangement deepen these fractures and abandon replacing the orthodox (CRA). Both mechanisms have been conciliatory stances towards the G7. neoliberal model with a state- approved and are in the process of At the next BRICS Summit in led economic system. being implemented; both are Fortaleza, Brazil, they will have relevant on the international scene, another opportunity to strengthen even though they are being designed their common position in order to to conform to the traditional create a different global economic Despite their weaknesses and international financial institutions order. vacillations, the BRICS have been which came under criticism from the strengthening the voices of critical BRICS themselves not so long ago. actors. In fact, since the bloc’s 1 Author’s note: While the role of the state in appearance and in spite of enormous The BRICS Bank, the CRA, and the itself and its democratic functioning merit a differences and difficulties in interesting possibility of conducting very broad and profound critical analysis, reaching consensus, BRICS members trade among the BRICS in national which will not be addressed in this article, criticisms of the state have recently been appear to be aligned in their quest 4 currencies all aim to protect reinforced in light of the generalized for some form of regulation of the countries in the bloc from external corruption in various countries, the lack of global system, especially of the vulnerability and, on a broader level, responses from the political elite to broad global financial system. Their efforts provide protection for developing popular mobilizations around the world, and appear to be directed towards the criminalization and state repression of countries against the cyclical crises social struggles. replacing the orthodox neoliberal of transnational and financial capital. model with a state-led economic Moreover, they have the possibility 2 Many of these agreements (Trans-Pacific system; some of them would of promoting “proactive Partnership (TPP), Transatlantic Trade and contribute to the democratization of development strategies.”5 Investment Partnership (TTIP), etc.) are global civil society, although this is being configured with a logic that is almost not an explicit objective of the “anti-China”.

group. In reality, all BRICS 3 Among the tasks the BRICS Our translation. Robinson, W. “Una teoría countries need some form of social have taken on, their priorities sobre el capitalismo global: Producción, clases democratization that allows them to y Estado en un mundo transnacional”. are the creation of the BRICS advance on the path towards Ediciones Desde abajo. Bogotá, D.C., Bank and the Contingency overcoming poverty and inequalities, Columbia. June 2007. Reserve Arrangement (CRA). which have become powerful 4 Both mechanisms have been In the way of a substantive expansion of obstacles for their own development. approved and are in the process commercial exchange. In recent decades, we have seen that of being implemented. 5 many of the policies required to Mineiro, A. “Os BRICS e a participação overcome these obstacles are not social sob a perspectiva de organizações da Yet, disappointment with the BRICS’ Sociedade Civil” Pág 29. INESC/REBRIP. compatible with neoliberal Brasil. 2013 prescriptions. role has grown significantly and it is becoming harder to envisage the possibility of the bloc playing an

9 READER

Must Read MUST READ

INSIGHTS ON THE BRICS

In “Neoliberalism with Southern Characteristics: toward launching a BRICS-led ‘New The Rise of the BRICS” (Rosa Luxemburg Development Bank’ and Contingent Reserve BRICS SUMMIT Foundation), Vijay Prashad of Trinity College Arrangement (CRA). But, Bond points out that (Connecticut) puts the emergence of the BRICS the anticipated $50 billion capitalization of the in an historical perspective that includes the eras Bank is pitiable compared to the size of existing of colonialism and the failure of the Third World development banks, particularly the Brazilian Project (1928-1983). Wearing technocratic National Economic and Social Development (rather than political) masks, neoliberalism Bank (BNDES). Likewise, a $100 billion for the triumphed and sharply diminished the role for the CRA could be trivial compared to the potential state. The BRICS are not transforming global costs of a serious financial meltdown. power relations or neoliberalism, but only seeking to join and modify global governance. Still, this In “Why is the Indian Rupee Deteriorating?” challenges the “hub and spokes” model of global Kavaljit Singh (Madhyam Briefing Paper), governance (wherein the U.S. is the “hub”) and describes the plans of the U.S. Federal Reserve creates a multi- to taper (or polar world. gradually Moreover, “an curtail) its aggressive move monetary to transfer the stimulus surpluses of the program of South to their bond-buying. own populations Due to this alongside shifts in program (known the growth as “quantitative model…would easing” (QE)), have an investors have immediate impact borrowed cheap on the CC BY-NC-SA 2.0 (Blog do Planalto) money in the possibilities of an U.S. and institution, such as invested in higher the BRICS Bank.” yielding assets in emerging market economies. Among others, India used these inflows to finance In Are BRICS Any Use For Rebuilding the its trade and current account deficits rather than Collapsing Global Financial Architecture? addressing their underlying structural causes. (ZNet), Patrick Bond, Director of the Centre for Just the Fed’s suggestion of the need to taper Civil Society of the University of KwaZulu-Natal (rather than the actual tapering) has led to in Durban, South Africa, describes the currency capital flight out of emerging markets and sharp crashes in emerging market countries and quotes depreciations of currencies, particularly the assertions that the BRICS are already breaking Indian rupee. Singh describes a range of factors apart in material ways, leaving China to push that have affected the Indian economy and ahead. Bond also emphasizes how the ‘talk-left’ currency, such as a contraction in manufacturing of BRICS foreign policy officials is negated by the and mining; a sharp rise in domestic food prices; ‘walk-right’ behavior of BRICS finance officials rising global oil prices, and the role of speculation and central bankers. Due to this dynamic, the in derivative markets. Singh suggests that the BRICS are not challenging, much less stopping or Indian government consider policies, such as reversing, the ways in which the global financial curbing inessential imports, trading goods in local architecture is self-destructing. He also currencies, entering currency swap agreements anticipates the outcomes of the March 2014 with trading partners, reining in speculation, and BRICS Summit in Forteleza, Brazil where the imposing capital controls to protect the economy Leaders are expected to announce progress from capital flight.

10 The Global Economic Chessboard and the Role of the BRICS: READER Brazil, Russia, India, China, South Africa By Jayati Ghosh, Professor of Economics, Centre for Economic Studies and Planning, School of Social Sciences, at the Jawaharlal Nehru University, India Reprint from Global Research, November 10, 2013 Third World Resurgence No. 274 1 June 2013, pp 5-7 BRICS SUMMIT News from the BRICS countries

CC: BY-SA Roman Leskov

Despite its strange origins and some although it remains important); and Africa, in 2013. The BRICS now serious challenges confronting it, the Russia and Brazil would dominate as cover 3 billion people, with a total bloc of countries that has emerged exporters of raw materials. estimated GDP of nearly $14 trillion into the international arena under and around $4 trillion of foreign the acronym BRICS (Brazil, Russia, In a process that has since surprised exchange reserves. Each country is India, China, South Africa) has the many, this initial statement caught effectively a sub-regional leader. Of potential for being a positive force in the imagination not only of the course, that does not mean there are world affairs. Strange things happen global financial community and the no other potential candidates for in the world. Imagine a grouping of mainstream media, but even of inclusion. Indeed, several countries countries spread across the globe, policy makers in the countries are often mentioned as possible which gets formed only for the themselves! Although geographically members of an enlarged group on simple reason that an analyst for an separated, economically and the basis of their actual and potential investment bank decides that these politically distinct, with different global economic significance: for countries have some things in levels of development and with not example, South Korea and Mexico common, including future potential such strong economic ties at that (both OECD members), Indonesia, for growth, and then creates an time, these countries began to see Turkey, Argentina. acronym of their names! Bizarre but themselves as a group largely true. because of foreign investor and BRICS is one of several new media perceptions. initiatives of different countries in The original categorisation of the the world to break out of the BRIC countries (by Jim O’Neill of Northern axis: G12 (G20-G8), The BRICS now cover 3 billion Goldman Sachs in an article in IBSA, BASIC (BRICS minus 1) and people, with a total estimated 2001) contained only Brazil, Russia, so on. While the origin of the GDP of nearly $14 trillion and India and China. He described the grouping may be odd, and the around $4 trillion of foreign countries with the most economic countries are indeed remarkably exchange reserves. Each potential for growth in the first half diverse, there are some country is effectively a sub- of the 21st century, based on commonalities that are important. regional leader. features like size of population and Subsequently, in fact, these countries therefore potential market; have since shown significant interest demography (predominantly young in meeting periodically, working populations with likely falling The group had its first summit together, and finding some synergies dependency ratios); recent growth meeting in June 2009 in and new ways of cooperation. rates; and embrace of globalisation. Yekaterinburg, Russia. In 2010 So China was to become the most South Africa was included (at the So trade between BRICS countries important global exporter of instigation of China). The enlarged soared after they became recognised manufactured goods (which indeed BRICS have since had summit as a combination (although of course has already occurred); India the meetings in Brasilia, Brazil, in 2010; this is a period when trade between most significant exporter of services Sanya, China, in 2011; New Delhi, developing and emerging markets in (which has not occurred as expected, India, in 2012; and Durban, South general has grown much faster than

11 aggregate world trade). Investment in a world where intellectual uniquely positioned to take this

READER links have been growing too, mainly property rights still largely process forward. This would involve through Chinese involvement in controlled by Northern multinational developing mechanisms to finance different countries and some interest companies have emerged as a major imports by countries with low shown by large Indian capital. And constraint on development. There is incomes and low levels of more recently there have been other also great potential for ‘Marshall development, simultaneously moves that suggest an appetite for Plan’-type capital flows from surplus delivering markets to other newer and further forms of close to deficit countries (even those developing countries and more economic and political interaction outside the BRICS) to enable them development potential to the and co-ordination. They have to withstand the impact of global recipient countries. BRICS SUMMIT recently acted in concert in several recession – and a BRICS Bank could international platforms, most be a first step in that direction. The other challenges are more recently pledging $75 billion to the internal, but surprisingly common News from the BRICS countries International Monetary Fund Common challenges across the BRICS. The recent (conditional on IMF voting reform). But it is not only comparing growth process has been Other economic initiatives include experiences of the recent past and substantially associated with agreement to denominate bilateral learning from each other’s increasing income and asset trade in each other’s currencies, and approaches that may be important. inequality (other than in Brazil, plans for a development bank. There Despite their many differences, the which once again provides some have also been declarations in favour BRICS countries do face some lessons for the others, but where of a shared approach in foreign common challenges, and the very Gini coefficients still remain among policy, particularly responses to US urgency of these challenges points to the highest in the world). It is now and European policies in the Middle the benefits of cooperation to more evident that such inequality is East and elsewhere. develop new strategies. At least four socially and economically such challenges deserve mention, as dysfunctional, and also that it gives In fact there is great potential in do some possibilities of combined rise to political tensions that can be these five countries not just action to confront them. even more damaging. So there must combining to address global issues, be measures to address this. but perhaps even more significantly, The first is the fact of the continuing learning from one another. For global crisis and the near-certainty Inadequate productive employment example, India has much to learn that the Northern economies (the US generation has been a central from Brazil and China in the matter and Europe in particular) are feature of the past growth process, of development banking. From the unlikely to provide much positive and is clearly linked with the early 1990s, India has set about stimulus to the global economy. For growing inequality. Economic destroying the potential of its own all the BRICS, these countries still policies within BRICS countries must development banks, in both dominate as export destinations and be concerned with this, and in agriculture and industry – but there the domino effect of declining particular with how to promote more is still scope for their renewal and Northern markets must be accepted. opportunities for decent work. rejuvenation. And the example of So clearly, there is a need to Brazil, and in particular the diversify exports, a process that has Another major aspect of inequality Brazilian Development Bank already started but still needs to go a has been the inequality in access to (BNDES), in entering areas and long way. Of course bilateral basic social services and utilities. promoting activities that would not currency trade would encourage The strategies of privatisation and occur purely through the incentives more trading activity between the reduced public spending in such determined by the market, could BRICS, and this is desirable. areas in all the BRICS countries provide some guidance about how have not only reduced access for the this can occur even in a very open The domino effect of declining poor but also created tremendous and largely market-driven economy. Northern markets must be inequalities. It is increasingly accepted. So clearly, there is a necessary for innovative strategies to Similarly, there are areas in which need to diversify exports, a promote more universal provision of other BRICS countries could learn process that has already necessary services and utilities. from India, while the description of started but still needs to go a the work of the South African long way. Finally, recent growth in all the Development Bank illuminated the BRICS countries has been associated strategy of creating financial with a construction and real estate structures and mechanisms to But the current state of the global boom, and it is interesting to note promote the ‘green economy’ economy suggests the need for that this boom is also in the process through environmentally desirable greater ambition. In particular, the of winding down in all five countries. activities and technologies. There time is clearly ripe for some sort of This creates all sorts of difficulties, are also immense possibilities for ‘Marshall Plan’ for the developing in terms of both the employment technology sharing and even co- world, and the BRICS countries losses as well as the health of the ordinating technology development, (particularly China and Russia) are financial sector, and it is particularly

12 galling given the continued shortage keeps the monopoly of high-value- ones, not just in terms of the of adequate mass housing. All of added production. By contrast, trade protection they afford to corporate READER these countries will need effective and investment links between investors but even in guarding strategies to deal with this countries in the Global South were intellectual property rights! challenge, even while they continue supposed to allow for more to promote affordable and better- diversification because of their more As always, the reality is complex. quality mass housing, and so surely similar stages of development, thus Primary exporting countries are there are opportunities here for creating more synergies. better off if there is increased creative policy thinking that can be competition among imperialists or shared. However, recent global economic traders, since that allows for better BRICS SUMMIT patterns have led many to question terms of such exports. Even China’s South-South relations these easy generalisations. The relationship with poorer countries is What of the relations of the BRICS emergence of East Asian countries not based on colonial-style control of News from the BRICS countries with other countries of the Global (especially China) as giant political power, but more arm’s- South? Two issues are important manufacturing hubs has been driven length. New manufacturing hubs here. The first is whether the BRICS to a significant extent by North- with increasing import demand have or the G20 will ignore or substitute South trade and investment. Even allowed less developed countries for the views of the G77 or larger the interaction between developing indirect access to the developed- bodies of developing countries whose countries has not always been along world market, while the fast growth voices are only too rarely heard in the predicted lines. Accusations of of the BRICS has resulted in rapidly international policy discourse. This is ‘new colonialism’ are now more growing internal markets from which a concern, and one that it is common – especially in the these countries stand to gain. This important for the BRICS themselves hypocritical North, but also in the provides an important source of to address directly. The recent South. There are questions about demand stimulus even as developed attempt by South Africa to include whether groupings like the BRICS countries are increasingly mired in many other African nations as will feed into this, especially by financial crisis and economic observers or participants in the latest controlling their own backyards and stagnation. BRICS Summit was in that sense other weaker developing countries. welcome, but the nagging question is whether this was simply a cosmetic So there are fears that growing The first is whether the BRICS attempt at suggesting wider trade and investment links of the or the G20 will ignore or representation than actually existed. BRICS with poorer developing substitute for the views of the countries seek to exploit the natural G77 or larger bodies of resource base of these countries, developing countries whose Cheaper exports from these siphoning them off in ways that are voices are only too rarely semi-industrial countries can ecologically damaging, inherently heard in international policy undermine the unequal and of little benefit to the discourse. competitiveness of local local people. There are concerns that production in the poorer cheaper exports from these semi- countries. industrial countries undermine the The basic point is that it is not competitiveness of local production economic interaction per se, but its in the poorer countries, thereby nature, that has to be considered. The second issue is whether the causing further shifts into primary Much of recent South-South BRICS countries’ dealings with other commodity exporting and thereby interaction (including amongst the countries of the South are following stunting their development process. BRICS) has been corporate-led, desirable patterns or simply China is said to be dumping its which has determined the focus on replicating North-South interaction. products in economies across the trade and investment and the It used to be believed that economic world, and using the resulting encouragement of particular patterns interaction between developing foreign exchange surpluses to invest of trade and investment. To the countries (South-South integration) in and provide aid to authoritarian extent that companies everywhere would necessarily be more beneficial regimes that allow access to natural have similar interests (the pursuit of than North-South links. After all, resources. Similarly Indian corporate their own profits), it is not surprising North-South economic interaction investors are said to be engaged in that older North-South patterns are mostly reproduced the global division large-scale land grabs in countries of replicated. of labour that emerged by the North Africa and predatory mid-20th century: the developing behaviour elsewhere. Many recent But surely the focus should be to world specialises in primary South-South trade and investment democratise the interaction itself, to commodities and labour-intensive agreements (and the resulting work out the ways in which the (and therefore lower productivity) processes) have been similar in patterns of trade and investment manufactured goods, while the North unfortunate ways to North-South flows can be altered to emphasise

13 the creation of decent employment. economic diversification to higher- provides a valuable opportunity to For this, a change of direction is value-added and ecologically viable encourage and develop new ways of READER required both within and outside the activities remains the key to growth taking such strategies forward BRICS. The potential for positive and development not just in the through cooperation. change exists, but process needs to BRICS countries but in other be more people-oriented, not profit- developing countries as well. This determined. Ultimately, sustainable period of global flux actually

BRICS SUMMIT MUST READ

News from the BRICS countries A long-term vision for BRICS, Submission to the 2013 Academic Forum By the Observer Research Foundation, India

In 2009, a BRICS Academic Forum was created countries as minority equity holders as well as to gather experts from the five member countries having convertible assets, such as gold and silver, to guide the BRICS leaders. In 2013, the Forum as guarantees in the event of currency created the BRICS Think Tanks Council (BTTC), appreciation. Lastly, they see the possibility of comprising the following five official think tanks issuing debt for sustainable infrastructure – using to lead the academic research in each member the model of the World Bank’s Green Bonds. country: The first chapter analyzes common challenges of the group and concludes that a more formal, BRAZIL: Institute for Applied Economic Research institutionalized alliance will not be a reality (IPEA) anytime soon. The topics analyzed include: social RUSSIA: National Committee for BRICS mobility, poverty and inequality, skills, healthcare Research (NRC/BRICS) and urbanization. INDIA: Observer Research Foundation (ORF) CHINA: China Centre for Contemporary World In the second chapter entitled “Growing Studies (CCCWS) Economies, Sharing Prosperity” the report calls SOUTH AFRICA: Human Sciences Research for diversifying currency reserves; promoting a Council (HSRC) BRICS Business Council; deepening capital markets (through, for instance, participation of Each year, the think tank of the Summit’s host insurance companies) to expand investment in country convenes the BRICS Academic Forum, an sectors, such as infrastructure, social services, intra-BRICS cooperation event that takes place mining and power generation (including nuclear prior to the Leaders Summit. The Academic energy). Forum brings together academics and policy experts from a wide array of institutions from the The third chapter calls for a major overhaul of BRICS countries. global political and economic governance institutions. The first priority is to update the IMF In 2012, since India was the Summit host, ORF, quota formula of voting rights. Another priority is the official Indian Think Tank wrote “A Long to foster closer cooperation among BRICS Term Vision for BRICS,” which envisions a long- financial regulatory and supervisory authorities, term cooperation strategy for the BRICS and i.e., setting up a Financial Markets Board to act summarizes the discussions and conclusions as a formal supervisory authority. A third priority generated at the Summit that year. The document promotes the strengthening of domestic bond was submitted to BTTC to be discussed and markets, financial inclusion, and financial literacy. finalized during and after the South African Summit and Forum in 2013. The fifth chapter provides “Other Possible Options for Cooperation”. Special attention is drawn to The report is divided into five chapters. The technology sharing and innovation, primarily in fourth chapter dealing with the creation of the aeronautics and outer space research, high-speed BRICS Development Bank is significant, because vehicles and exploration of mineral resources. India has appointed ORF to draft a design for the Within cultural exchange mechanisms, the report BRICS Bank during 2014. In this document, the suggests that BRICS leaders should work intensely authors envision a ‘one country, one vote’ system on streamlining mutual accreditation of workers, with consensus-based decision-making. They also expanding tourism, expediting visa processes and propose raising capital from other developing boosting inter-parliamentary cooperation.

14 China’s role in G20 / BRICS and Implications READER

By Gudrun Wacker, German Institute for International and Security Affairs, Berlin BRICS SUMMIT News from the BRICS countries

CC BY-NC-SA 2.0 (Chris) ) 1) Introduction own institutions which might also these publications on the G20 and push for a different set of rules. BRICS focus on the comparative The main objective of this article is economic performance and to assess China’s roles in the G20 The growing importance of China at competitiveness of member and the BRICS (consisting of Brazil, the global stage is reflected by its countries, while there is relatively Russia, India, China and South role in the G20 and the BRICS. As a little on their respective political Africa) and identify some reaction to the global financial crisis, dimensions. It is only in recent years implications for the future. China is the G20 was “upgraded” to heads of that the Chinese decision-makers now an important member of these state level, and China – together have assigned some think tanks to do groupings that might play a with other emerging countries – more systematic research on the G20 significant role as building blocks in became a regular member of this and BRICS. global governance, but for the “club”. Then, on the initiative of purpose of this article, it was Russia, the BRIC group began to The second step consisted of a series necessary to evaluate how important hold its own summits in 2009 and in of interviews conducted in Beijing. these two groupings are from the 2012 accepted South Africa as the For these interviews, an extensive Chinese perspective and how their fifth member (so the acronym is now list of questions was prepared and future prospects are seen in China BRICS). distributed beforehand to the experts (officially and academically). interviewed in Beijing for this There is a belief that China article. The questions focus on the China has steadily stepped up its would lose credibility and political relevance of G20 and international/global engagement legitimacy in the developing BRICS and, to a lesser extent, on over the last two decades. It is now a countries if it joined the “club the economic/financial dimensions of member of basically all international of rich countries”. the groupings. organizations and institutions and a significant investor in virtually all 3) Findings regions of the world. While Deng These developments are Xiaoping’s dictum for China’s foreign manifestations of a global power G20 policy – to “keep a low profile” – shift that has implications for global From the interviews conducted in has not officially been given up, it is governance and the industrialized China, it seems clear that the G20 is clear that China’s interests have nations of the global North, but also seen as “indispensable” for become global and this is for South-South cooperation. addressing global issues, especially accompanied by a domestic debate after the global financial crisis. On about what kind of role China should 2) Approach the G7/8, there was a lot of debate play in the world. One central in China in 1999/2000 -- after question raised is whether China is a This article probes China’s German chancellor Schröder invited status quo power that accepts the relationship with these two groups China to participate. In the end, international order and its rules and through research and interviews. The China declined, mainly because at norms or if it will try to change the research involved identification of the time it saw itself very clearly as international system by creating its Chinese publications on the G20 and a developing country. Moreover, the BRICS over the last years. Overall, topics discussed in the G8 –

15 macroeconomic management, In China, the role and mandate of position in the G20, because both

READER international trade or energy were the G20 (after its upgrade to a countries are in similar positions. at the time not seen as relevant to summit level meeting) is mainly seen For example, both countries were China’s domestic debate: China had in the economic field. It provides the criticized by the other G20 countries no stake in these topics. After a new best vehicle for solving global for their over-reliance on exports generation of leaders came into economic problems. In contrast, on and both countries have criticized power in 2003-4, there was a turn all political topics, the UN is still the the US for its easy money policies. towards a more active foreign policy main organization and platform for and therefore a more positive China. attitude on the issue of the G8, Especially if compared to BRICS SUMMIT resulting in the decision to Academics and officials debate regional institutions and participate in the North-South whether China should host a G20 groupings such as APEC, dialogue together with other big summit. There could be a bid to ASEAN-plus formats or the News from the BRICS countries developing countries. Even today, chair the 2016 meeting. However, Shanghai Cooperation China does not consider itself as a since Japan will host the G7/8 Organization (SCO), BRICS developed country and therefore summit in 2016, it would make sense appears to have less existential does not want to become a member to hold the G20 back-to-back with importance for China. of the G7. It does not want to this meeting in Japan. Another shoulder more international candidate for hosting the G20 responsibility and there is a belief summit is Indonesia, but it might not BRICS that China would lose credibility and be interested due to its elections in In comparison to the G20, the legitimacy in the developing 2015. importance of BRICS is more countries if it joined the “club of rich controversial among Chinese countries”. There is also the The G20 is seen in China as an experts. Especially if compared to conviction that China could not play important consultation mechanism regional institutions and groupings a real role in the G7, where it lacks for the governments, where it is such as APEC, ASEAN-plus formats friends or like-minded countries. good to have a seat at the table. For or the Shanghai Cooperation However, the global financial crisis the emerging countries, the G20 is a Organization (SCO), BRICS appears in 2008 fundamentally changed the platform for finding new roles in to have less existential importance notion that the international financial international affairs. Whether the for China: It is not absolutely architecture and its future G20 should take political issues like essential for China to be a member development are not relevant for Syria on the agenda (as it did at its of BRICS. Organizations that include China’s domestic situation. St. Petersburg Summit in 2013) is a some or many of China’s direct matter of debate in China. neighbors have a higher ranking On all political topics, the UN is from the Chinese perspective, since Most interview partners agreed that China’s development and still the main organization and the effectiveness of the G20 has platform for China. modernization process requires that declined since its handling of the neighboring countries at least refrain 2008-09 global financial crisis (what from forming an alliance against would have happened then without China. China’s new leaders have the G20?). There seems to be some CC: BY-SA Wang Xiaoping formulated a new good neighborhood frustration with the big differences policy (mulin youhao) which between the positions of G20 underlines this point. BRICS, members. Some believe that the therefore, is more a “nice to have” broadening of the G20 agenda (after than an absolute must. the worst of the global financial crisis was over) has made the G20 From the Chinese perspective, less effective. BRICS is mainly held together by the similar development stages of the According to official documents and countries involved and their focus on announcements of China’s leaders, development issues (with the notable China’s engagement in the G20 is exception of Russia). Officially, the likely to grow. This may be due to the fact that China is assigning greater importance to issues such as All BRICS countries share the the international financial order than interest of fostering it has previously. cooperation, especially now that economic growth has Two interview partners in two slowed down in all BRICS different institutions suggested that countries. China and Germany coordinate their

16 (AIIB), which was announced by acceptable if conducted within the

READER The reserve pool is considered Chinese President Xi Jinping in framework of BRICS, in other words more urgent than the October 2013. Although initial BRICS would provide more development bank. According capitalization may not be an legitimacy to China’s actions. to one interview partner, it is accurate indication of their ultimate also important within the size, both banks are being context of the capitalized at US$50 billion. The internationalization of China’s working group for the establishment currency. of the bank is based in Beijing and is headed by Jin Liqun, chairman of BRICS SUMMIT China International Capital Corp., main mission of BRICS was one of the country’s leading presented as a full-fledged investment banks.

News from the BRICS countries coordination platform, a mechanism to coordinate its members’ The goals of the AIIB and the economic, political and practical BRICS development bank are cooperation to build closer ties basically the same – that is, to close among the BRICS countries. “Global a gap in infrastructure financing in common goods” was presented as emerging and developing countries. the main driver of BRICS. While China would have a leadership role bilateral differences and even in the AIIB and BRICS Bank, conflicts between BRICS countries whereas Japan leads the Asian certainly exist, these usually do not Development Bank and the U.S. surface at the summits, since all leads the World Bank. BRICS countries share the interest of fostering cooperation, especially CC: BY-SA Wang Xiaoping now that economic growth has The BRICS Bank is being slowed down in all BRICS countries. founded in the same timeframe China is playing a less assertive role (This slow-down was mainly as the Chinese-led Asian in BRICS than in the Shanghai attributed to external factors without Infrastructure Investment Cooperation Organization (SCO). which structural reforms in all Bank (AIIB), which was According to one interview partner, BRICS economies would be well announced by Chinese the future of BRICS depends on the under way.) President Xi Jinping in October future performance of the G7/8 and 2013. G20: If the G20 develops into a real BRICS has been working on two big coordination mechanism, there might projects: a BRICS Development The two new banks are touted as be less Chinese interest in BRICS. Bank and a Contingency Reserve complements not competitors to the The future prospects of BRICS were Arrangement (CRA), which is a US traditional institutions such as World presented as less promising than $100 billion reserve pool acting as a Bank and ADB. But both, the World those of the G20, since BRICS will “firewall” to shield BRICS against Bank and ADB, are expanding their not be able to solve global problems. financial risks. infrastructure lending and the World Bank is launching its own Global While all interview partners While the reserve pool was officially Infrastructure Facility (GIF) in agreed that BRICS does not described as almost ready to go (“90 2014, so competition will inevitably aim at creating a new, anti- % of the details agreed”) – maybe ensue. Western world order, it can be at the next BRICS summit in Brazil seen as a response to the US- – there still seem to be many details led world order. of the development bank that need to China would have a leadership be hammered out (“50 % of the It is not yet clear whether the main details agreed”). The reserve pool is role in the AIIB and BRICS Bank, whereas Japan leads the deliverable of BRICS will be considered more urgent than the directed at cooperation among its development bank. According to one Asian Development Bank and the U.S. leads the World Bank. members or at third countries. While interview partner, it is also the idea of BRIC as a group was important within the context of the originally picked up by Russia (the internationalization of China’s The significance of including South invitation to the first summit, as a currency. Africa in BRICS may be mainly due move toward “extension” of the to the fact that it is seen as the door strategic triangle Russia, China. Interestingly, the BRICS Bank is or gateway to the rest of the African India?), its members are now all being founded in the same timeframe continent. The argument was made active in certain fields. For China, it as the Chinese-led Asian that China’s activities in the is also an important effort to emerge Infrastructure Investment Bank developing world would be more from its isolation (Copenhagen

17 climate summit). Another factor 4) Attitudes and strategies of China Therefore, depending on the topic

READER shaping the future of BRICS might toward NGO participation in BRICS/ they are working on, civil society be the development of US-China G20 groups are still walking a fine line in relations: While all interview China. On international issues, such partners agreed that BRICS does not NGOs and civil society in general as human rights or non-proliferation, aim at creating a new, anti-Western have come under suspicion in China China has in the past created its own world order, it can be seen as a in the last years. At least, one can organizations (GONGOs), i.e., groups response to the US-led world order. say that the official attitude vis-à-vis consisting of non-officials, but civil society and NGOs is ambivalent, receiving official support for Coordination among BRICS even contradictory at times. This becoming active in the international BRICS SUMMIT While there is no formal BRICS general trend started under the arena. coordination mechanism within the previous leadership in China. In part, G20, the eight emerging countries the official suspicion can be China’s participation in the newly News from the BRICS countries within the G20 usually meet within explained by events and founded network of think tanks the context of G20 summits to developments outside of China, within BRICS, officially BRICS exchange views, so the format of which China seeks to avoid, like the Think Tanks Council (BTTC) (see these meetings includes non-BRICS color revolutions in former states of http://www.bricsforum.com) can be countries. However, coordination the Soviet Union, including China’s seen as such an effort: According to among BRIC countries did take place direct neighbor Kyrgyzstan (“Tulip the Ministry of Foreign Affairs, the in 2011 through regular meetings in revolution”) and more recently, the BRICS think tank consortium is a New York when all (then four) “Arab spring”. In this context, stand-alone mechanism with no states were in the UN Security concerns about spill-over effects into involvement of the government. Council. (Since South Africa was not China of these events have emerged. However, it can give advice to the a member at the time, it was not government and sometimes part of these meetings and therefore While it has become clearer that the government officials are invited to the only country that voted in favor Chinese state lacks the capacity to meetings as observers. This is the of the Libya intervention, providing handle some social issues and, usual way in which track two one of the nine necessary votes to therefore, needs the engagement of meetings are conducted in China. pass the resolution.) civic groups, it remains ambivalent China’s think tanks are not with respect to civil society and its independent – even though their Civil society groups are seen as activism. Civil society groups are academics might do independent a potential threat to domestic seen as a potential threat to research. Therefore, they cannot stability, especially if they are domestic stability, especially if they really be considered as representing active in political areas. are active in political areas. civil society. Under the new leadership, there In general, the question is: what role have been inconsistent signals as civil society can play in both clubs, There was no mention of a special well: On the one hand, Xi Jinping the G20 as well as BRICS? So far, focus on Asian partners within either encouraged society to engage in this role has been quite limited. G20 or BRICS. It seems that within fighting corruption, but when Asia, there are other organizations activists publicly demanded that that China considers more important officials disclose their private assets, (“existential necessity”) for China’s they were arrested. policies, such as APEC (China’s major trading partners), ASEAN plus formats and the SCO (where China can control the agenda). Within Asia – but also beyond – bilateral relations are still most important from the Chinese perspective. Also, within the G20 China sees itself primarily as an emerging country, not an Asian one. As mentioned above, two interview partners saw potential in a closer coordination between China and Germany in the G20. This shows that perceived shared interests also play a role for China.

CC BY 2.0 (APEC 2013)

18 “Club Governance” READER Prospects for civil society engagement A Perspective from Russia By Vitaliy Kartamyshev, Co-Chair of GCAP Russia President, Foundation ‘Coalition Against Poverty’ BRICS SUMMIT News from the BRICS countries

Alternative power politics or partnership of necessity?

CC: BY-SA Roman Leskov

In these challenging economic times, BRICS, must integrate the issue of such an ‘elite club’ was evident, as we should measure the effectiveness financing for development-- including their combined economic output over of any supranational “club improving education, health care, the past 15 years contributed so governance” structure by its capacity employment creation, support to significantly to global growth. to come up with concrete, practical small and medium-sized enterprises Arguably, such unprecedented policy recommendations and ensure (SMEs) and agricultural production. growth alongside the relative decline their successful implementation. This should be obvious to political of the G7 marked the biggest Decades of global economic leaders and policy-makers. economic shift in history. Although expansion known as the “Great Especially from the perspective of China has been the engine for much Moderation” contributed to Russia, this article analyses the role of this growth, the BRICS, as a significant improvement in living of the BRICS in fostering results- whole, have prospered until recently. standards for millions of people. oriented policies that will lead to However, it also demonstrated that positive development outcomes as economic growth alone without a well as the opportunities and Arguably, such unprecedented targeted poverty alleviation policy challenges for civil society growth alongside the relative failed to produce the “trickle-down” engagement in fora, such as the decline of the G7 marked the effect for many more millions BRICS. biggest economic shift in trapped in poverty. history. Although China has BRICS Analysis: Global Forum for been the engine for much of Even during economic alternative power politics or this growth, the BRICS, as a expansions, the gap between partnership of necessity? whole, have prospered until rich and poor has continued to recently. grow until, currently, only 0.5% The BRIC (Brazil-Russia-India- of the population controls China) Forum was a political and nearly 35% of global wealth. economic formation that had its first Along with their upward economic official meeting in 2009 after the trajectory, the world witnessed the Even during economic expansions, global financial crisis erupted. new political assertiveness of the 5 the gap between rich and poor has Shortly thereafter, South Africa nations which insisted on the reform continued to grow until, currently, joined. It was the desire of the 5 of governance quotas at IMF and only 0.5% of the population controls emerging countries to have joint World Bank and presented their nearly 35% of global wealth. The positions on policy decisions combined positions and demands in growth narrative of supranational affecting them, specifically in the international forums, such as the “club gatherings,” such as G20 or management of financial systems. G20, the UN, and the UN The political and economic clout of Framework Convention on Climate

19 Change (UNFCCC). The influence of Prospects for positive global source of the BRICS’ development

READER the BRICS is underpinned by the fact influence or pure business? policy and priorities resides more in that all 5 nations are important their domestic experiences, regional powers with access to One key factor that distinguishes the corporate structures, and prospects numerous different regional BRICS from other supranational for access to markets and natural groupings (CIS, APEC, African groups is that, despite some resources. Their approach is Union, CSTO, UNASUR, SADC, economic similarities and catch-up evidently acceptable to developing Asian Association for Regional strategies, the member countries are and low-income countries. However, Cooperation, Mercosur and others)1. fundamentally very different. In if BRICS are to evolve into Clearly, the BRICS jointly can contrast, the countries of the OECD, responsible donors, it is imperative BRICS SUMMIT exercise strong influence through EU, and G8 share a set of values, that they agree to guiding principles these regional bodies, as long as principles and approaches that, at and a common mechanism for their positions and priorities are in least in theory, guide their accountability for clear and News from the BRICS countries sync, which gives them a strong development programs. They have quantifiable results. The BRICS advantage over other ‘clubs’. adopted accountability mechanisms guiding principles should ensure that at different international forums they do not uphold political regimes (e.g., the Paris Declaration on Aid that impoverish communities, exploit In 2012, the BRICS produced Effectiveness and the subsequent natural resources, and undermine the about 20% of the $71.6 Accra Agenda for Action as well as development prospects of recipient trillion world output. But, the the Busan Global Partnership for countries. slowdown of the economic Effective Development Cooperation). giants is striking. These agreements took a long time to evolve and adopt and are now the foundation for policy implementation Will the BRICS be able to In 2012, the BRICS produced about in many areas. It is no secret that 20% of the $71.6 trillion world affect a fundamental shift in BRICS and other regional power relations? The answer output. But, the slowdown of the formations have emerged as global economic giants is striking. (See to this question depends on economic alternatives to western- whether they can resist the chart, below.) While the 2013 dominated institutions and principles growth rates are still impressive temptation to play to their that, in the wake of multiple crises, short-term advantages and be when compared with sluggish (or have suffered sharp criticism. Such negative) growth performance in co-opted by the G7 countries. alternatives are a source of optimism It also depends on whether the Europe and other OECD countries, for supporters of the BRICS. the contribution of the BRICS to 5 emerging nations succeed in world output, the internal drivers of building a larger and more growth, and external factors, such as influential bloc. high commodity prices, is The development policy of the diminishing. BRICS defies the traditional It is clear that the BRICS, as a principles (e.g., those of the group, are emerging to challenge the BRICS Economies are Braking Development Assistance influence and institutions of the G7. Committee of the OECD) and Until recently, developing countries has fewer scruples about the have had a limited capacity for 2007 2013* norms (e.g., human rights, influencing global affairs and the Brazil 6.1% 2.5% democracy, gender and ethnic management of the international minorities) in countries that financial system. In the post-World Russia 8.5% 1.5% receive their aid or investment War II era, the Bretton Woods India 10.1% 3.8% resources. Institutions (i.e., the IMF and World China 14.2% 7.6% Bank) were built to ensure the South Nevertheless, to be successful, the supremacy of the U.S., Europe and 5.2% 2.0% Africa BRICS will need some degree of Japan. Global decision-making can commonality of approaches, no longer rest with traditional *Sources: IMF, “World Economic principles and values. In particular, powers in today’s multi-polar world. Outlook, 2013,” October 2013 and the development policy of the BRICS Will the BRICS be able to affect a The Economist, “When giants slow defies the traditional principles (e.g., fundamental shift in power down” July 27, 2013. those of the Development Assistance relations? The answer to this Committee of the OECD) and has question depends on whether they fewer scruples about the norms (e.g., can resist the temptation to play to human rights, democracy, gender their short-term advantages and be and ethnic minorities) in countries co-opted by the G7 countries. It also that receive their aid or investment depends on whether the 5 emerging resources. Perhaps to a greater nations succeed in building a larger extent than Western countries, the and more influential bloc, including

20 other G20 members such as governance” model is that decisions Nevertheless, many groups are READER Argentina, Turkey, Mexico, and reached by the leaders of the establishing an international BRICS Saudi Arabia. BRICS, G20, G8 and other forums advocacy network and looking for are poorly understood by the Russian partners. The emergence of The BRICS could be important for populations of these countries and, this network is a measure of how other reasons as well. The more fundamentally, citizens lack a civil society is strengthening its voice emergence of an alternative democratic role in shaping these at the global level as well as helping leadership can foster enhanced decisions. to make “club governance” more regional and global opportunities for transparent and effective. BRICS SUMMIT South-South collaboration, trade, development and security. A network can also share knowledge As a global player, member of and best international advocacy News from the BRICS countries The sceptics point out that, in the the G20 and BRICS, and practices to help ensure that civil absence of a clear set of principles President of the G8, it pursues society representatives from the that guide the aid and investment an increasingly active BRICS and G20 countries are adding policy, the BRICS could pose a international role, including in value to the new political discourse challenge to development and human the area of development aid. and the shaping of the Post-2015 rights in developing countries. The However, Russian citizens Development agenda. Finally, a current enthusiasm of political have a low level of network is an essential resource for leaders in developing countries for understanding and support for government to facilitate that public dealing with new donors may result this policy. interface with governments, as from their aversion to the stringent suggested by Alexei Kudrin. Clearly, rules and regulations of Western the power shift at the ‘club Arguably, the level of awareness of donors concerning democracy and governance’ level is not happening in journalists and civil society activists human rights. However, these rules a vacuum, and similar shifts are is quite low as well. The number of should not be thrown out the evident within global civil society civil society activists in Russia who window. Civil society should help groups. Traditional “Northern can meaningfully participate in shape the new terms of engagement, NGOs” are aligning their policy dialogue (let alone explain the resources and opportunities that approaches, policies and modes of issues to the public) is counted in could otherwise be seized by operation to reflect the changing less than hundreds in a country with business and political elites in reality. a population of more than 140 developing countries. Arguably, the million. BRICS risk losing their credibility and enthusiasm for power-sharing if Establishing links from National to they don’t behave as responsible 1 Global Processes CIS is the Commonwealth of donors. There is growing evidence Independent States (countries of the reported by the “BRICS-from- Any government aspiring to a global former Soviet Union, excluding the below” movement that business role needs to have a strong domestic Baltics); APEC is the Asia-Pacific practices and resource grabbing by constituency that can support its Economic Cooperation Forum; CSTO is corporations and donors from BRICS the Collective Security Treaty international aspirations, in general, countries damage the environment Organization; UNASUR is the Union of and its development aid and and economic prospects for South American Nations. Union of South investment policies, specifically. For communities in poor and developing American Nations; SADC is the The historical reasons, Russia inherited countries. Southern African Development inward-looking policy-making that Global civil society’s role can be Community; and Mercosur is extended to countries in the an economic and political crucial in monitoring and calling for Commonwealth of Independent agreement among Argentina, Brazil, transparent and inclusive States (CIS) or countries in the so- Paraguay, Uruguay, and Venezuela development, aid and trade policies. called ‘socialist’ camp. Presently, the and Bolivia. Russian government faces a Opportunities for civil society dilemma. As a global player, engagement member of the G20 and BRICS, and President of the G8, it pursues an Speaking at the June 2013 Civil 20 increasingly active international role, Summit in Moscow, Alexei Kudrin, including in the area of development former Russian Finance Minister, aid. However, Russian citizens have highlighted the Russian public’s lack a low level of understanding and of an interface with its government support for this policy. They need to and the fact that civil society can address the disconnect between play a crucial role in this regard. The global and national decision-making. major problem with the “club

21 High Ambitions, High Risks: Programme for READER Infrastructure Development in Africa (PIDA) By Mzukisi Qobo, Senior Lecturer in International Political Economy and Deputy Director, Centre for the Study of Governance Innovation, University of Pretoria BRICS SUMMIT News from the BRICS countries

Source www.globalvillagedirectory.info

What is PIDA? nationally to help ensure subsequent input into human capital. Moreover, successful implementation. poor infrastructure creates a The Programme for Infrastructure competitive disadvantage and Development in Africa (PIDA) was PIDA’s projects are estimated at US adversely affects growth, as it raises adopted by African Heads of State in $360 billion up to 2040. For its 51 the transaction cost of trading across 2012 as a strategic framework that priority projects, the cost estimate borders, among other things. It is a will run through 2040, for the stands at US$68 billion from 2012 daunting constraint for landlocked development of continental to 2020, or US$ 7.5 billion in countries, of which there are 15 in infrastructure (Energy, Transport, expenditure per year. This article the continent. According to the Information and Communication describes PIDA and its relationship African Development Bank: “Poor Technologies (ICT) and Trans- with external actors, including new infrastructure accounts for 40 boundary Water Resources). The and existing financial institutions. percent of transport costs for coastal initiative is spearhead by the African countries, and 60 percent for Union Commission (AUC), the New Background landlocked countries.” Partnership for Africa’s Development Planning and The African continent comes off a There are large-scale projects Coordination Agency (NEPAD very low base in its growth that are in the PIDA pipeline, Agency), and the African trajectory. It is still early times to which could have negative Development Bank (AfDB). PIDA’s make projections about its future, consequences for environment main purpose is to strengthen the but there are already signs of if they are not underpinned by consensus and ownership of resurgence. This article focuses on clear policy frameworks to infrastructure development the challenges of infrastructure as an achieve sustainability continentally, regionally and aspect of development, and more objectives. specifically assesses the efforts undertaken by PIDA, African The imperative for increased policymakers and external actors to infrastructure investment in overcome these challenges. A major challenge is that, to get the the African continent is self- private sector excited about evident, especially if one takes The imperative for increased investing in infrastructure, at least, at face value the proposition infrastructure investment in the two conditions have to be in place. that infrastructure can be a African continent is self-evident, The first is the existence of catalyst for growth and an especially if one takes at face value “bankable” projects; and the second input into human capital. the proposition that infrastructure is security of investment, something can be a catalyst for growth and an that is a function of a country’s legal

22 framework, especially its ability to Features of PIDA framework; good governance

READER enforce commercial law. policies; and prevailing stability set PIDA is a worthwhile framework to the stage for a conducive business In addition, infrastructure projects develop the critical infrastructure environment. on the African continent require sectors, but making it functional will sufficient project preparation to require significant capital The core principles that guide PIDA make them bankable, at which point commitment, greater coordination include: an integrated vision of it becomes easier to mobilize amongst various actors (including infrastructure sectors; regulatory financing. The cost of project affected community stakeholders), and institutional frameworks; a preparation is estimated at between and a private sector that is convinced strategic prioritisation of BRICS SUMMIT 3 – 3.5 percent of total project costs. of the commercial viability of programmes; regional capacity for Donors apply their own criteria and Africa’s infra-structure. programme development and preferences before committing to implementation; innovative financing News from the BRICS countries project preparation support; these Commercial viability hinges on the architecture oriented to the private can diverge from those of the effectiveness of public-private sector; and stronger partnerships and recipient country. partnerships (PPPs). Among coordination. Harmonisation of other things, a clear and national policies is also important if Importantly, throughout the project transparent there is to be a consistent standard cycle (including project selection and regulatory applied across the African continent preparation), the association for implementing and evaluating between infrastructure and infrastructure projects. However, sustainable development should not this will not be without difficulties be taken for granted. There are given the weak record of large-scale projects that are in the institutionalization in the regional PIDA pipeline, which could have economic communities of Africa. negative consequences for environment if they are not Nonetheless, it remains important underpinned by clear policy that African governments champion frameworks to achieve greater sensitivity to environmental sustainability objectives. and social norms in their projects, rather than having such norms imposed by donors. There is an expressed commitment by African policymakers to CC BY-SA Heinrich Boell Foundation

PIDA’s Energy Ambitions and the Case of Ruzizi III

Two-thirds of Africa’s 800 million people lack developed.” Using low-cost renewable resources access to power. For power generation, PIDA such as hydro-power and geothermal energy could comprises 15 projects worth US$ 40 billion focused go a long way in expanding energy access to on building 12 hydropower facilities, 4 transmission citizens, but also hold promise for economic growth. projects connecting power pools, and 2 regional oil It is also hoped that this form of economic pipelines. These projects would increase the cooperation over a resource that is vital for the continent’s power capacity by five-fold. three countries will act as a pivot for stability.

An example of a promising project is the Ruzizi III This hydropower plant generates electricity in equal hydropower project located on the Ruzizi River that portions for Rwanda, Burundi and the Democratic flows between Lake Kivu, which borders the Republic of Congo (DRC). Like many large-scale Democratic Republic of Congo and Rwanda, and projects, this is not without risks. One such risk is Lake Tanganyika in Tanzania. The cost of the 145 political instability, especially because the project MW plant is estimated at US$400million – US falls within a politically sensitive area that has a $600 million. As is well-known, for over two history of conflict with rebel movements still decades this part of Sub-Saharan Africa has existed roaming about. Second, there are concerns that the under a cloud of internal and cross-border tensions project could have cost inflation that may raise that took on ethnic dimensions. tariffs. If such risks materialize and the government picks up the tab, the risks of this This is also an area that has high poverty levels, commercial project would, effectively, be socialised. with countries that are characterised as “least-

23 address the environmental and social agenda under the theme of ‘shared bank may play a pivotal role in READER impacts of PIDA projects, including and inclusive growth,’ including an financing infrastructure projects in claims that are often not infrastructure pillar. At the 2011 other developing countries, substantiated, e.g., that PIDA G20 French Summit, the Report of especially on the African continent. projects will lead to reduction in the High Level Panel and the MDB South Africa could possibly pressure green-house-gas emissions. The Action Plan were presented to its Summit partners to support reality is that, since projects are Leaders. Today, under the G20 PIDA. undertaken at the domestic level, it Australian Presidency, the challenge is difficult to impose environmental is being addressed by two G20 The architecture of the bank is not BRICS SUMMIT and social measures, especially in groups: the Infrastructure yet clear. It is expected that the contexts where there are no Investment Working Group and the work of the BRICS development governance mechanisms (institutions Development Working Group bank and the CRA will begin in

News from the BRICS countries or regulations) to ensure such co- (DWG). earnest after the Sixth BRICS benefits. Summit in Brazil in July 2014. Since the G20 High Level Panel According to Russian officials, the External Actors and PIDA made its recommendations, the G20 Bank’s draft charter is being has worked to promote a strong prepared by Brazil while Russia is To help fund PIDA, the new supply of bankable projects as well drafting an intergovernmental Africa50 initiative, a commercially- as mobilize long-term institutional agreement on the bank’s creation. oriented financial institution, aims to finance to develop infrastructure in mobilize equity investments of USD its member countries as well as low The bank is not intended as a 10 billion, thereby attracting USD income countries. The multilateral substitute for the work already 100 billion of local and global capital development banks took up an undertaken by the World Bank and to finance and develop PIDA and important recommendation – other regional development banks. related projects in the next three namely to review existing project Indeed, in 2014, the World Bank years. The EU, the G8, the preparation facilities (PPFs). The will launch a Global Infrastructure multilateral development banks, and Australians’ Global Development Facility and regional banks will the G20 make constant reference to Agenda states that, in 2014, the G20 further re-orient their portfolios to PIDA, and some offer direct will expand its assessment of PPFs. finance infrastructure. Rather the financial support. Some aspects of The assessment of Africa’s PPFs, proposed BRICS development bank this support include: entitled “Tunnel of Funds,” was aims to complement multilateral concluded in 2012. development banks, especially to fill European Union (EU). There is a in key deficiencies in infrastructure shift of emphasis in the character of The multilateral development banks development. EU’s developmental support to and the Panel also recommended Africa more towards infrastructure, improving the quality of data relating It will not bode well for Africa’s with the social sector still remaining to infrastructure development development to have multiple an important dimension. projects and bringing project uncoordinated or even competitive sponsors and financiers together in infrastructure efforts. What may Group of 8. Commitments through the way that the Sokoni platform compound the challenge is the fact the Infrastructure Consortium for does. that individual BRICS countries, Africa (ICA) have been made by the such as China and India, already G8 countries as well as institutional Such capacities facilitate an pursue relationships with African members, such as the World Bank improved flow of information, but countries at a bilateral level, using a Group, the European Commission, they may be difficult to realize if the model that cannot be easily and the European Investment Bank. actions of individual governments are replicated at the regional level. ICA members have decided to focus not reliable. on implementation of PIDA’s Conclusion medium-term Priority Action Plan The BRICS Bank and (PAP). Infrastructure Development There is no doubt that the African continent requires a significant drive Group of 20. The G20 too has At the BRICS Summit hosted by for infrastructure development. positioned itself for relevance on the South Africa on 26 – 27 March, There is a recognition that theme of infrastructure, which has 2013, Leaders promoted the infrastructure can in fact create gained currency in low-income creation of a BRICS development conditions that could allow countries in Asia and Africa. A High bank in order to facilitate governments to tackle social and Level Panel on Infrastructure was infrastructure and sustainable economic challenges. mandated by the G20 countries at development and the creation of a the 2010 Seoul Summit, where contingency reserve arrangement Yet, if there are no policies or Leaders adopted a development (CRA). This BRICS development governance mechanisms in place (at

24 the regional and domestic level) to Rising”, GLOBAL Insights, Volume 2 No. 7, and regional constraints to infrastructure READER ensure that infrastructure projects October 2013. development with an emphasis on regional are undertaken with greater infrastructure. The membership of ICA also - World Economic Forum, Strategic includes the AfDB and the Development Bank sensitivity to environmental and Infrastructure in Africa: A Business Approach of South Africa. social inclusivity and that benefits to Project Acceleration, see pages 12-13. are harnessed towards improving - “BRICS development bank, currency reserve quality of life, this endeavour could - A detailed account of the project including pool to begin work in 2015” by Russian very well turn out to be a bane for technical specifications can be found here: Foreign Ministry Sous-Sherpa to the G8, Ruzizi III Hydropower Project., Number E. Vladimir Lukov, http://en.itar-tass.com/ the continent. 12.1. economy/727212 BRICS SUMMIT

- PIDA Executive Note, “Interconnecting, - See Table 1: PIDA stakeholders from the Integrating, and Transforming a Continent”, 1

News from the BRICS countries PIDA official site at: http:// April 2012. Unpublished Note. www.pidafrica.org/about_us.html - Africa50 http://www.afdb.org/en/topics-and- - World Economic Forum, Strategic sectors/initiatives-partnerships/africa50- Infrastructure in Africa: A Business Approach infrastructure-fund/background/ to Project Acceleration (2013). - ICA was launched at the G8 Gleneagles - African Development Bank, Africa in 50 summit in 2005 with a mission to accelerate Years’ Time, p.87. progress to meet the urgent infrastructure needs of Africa in support of economic growth - Ruiters, Michele, “Africa Infrastructure and development. It addresses both national

Missing Political Will? Brazil’s Leadership of the 2014 BRICS Summit

By Oliver Stuenkel, Assistant Professor of International Relations, Getulio Vargas Foundation, São Paulo, Brazil In July, Brazil will organize the 6th BRICS Summit provide a unique opportunity to develop new in Fortaleza. Since the host has the right to set the development paradigms and, perhaps, start a real agenda, Brazil has a unique chance to give the conversation between established lenders and rising Summit its own imprint – and thus engage the powers about the future of development. The leaders of China, India, Russia and South Africa on BRICS Bank could also be an important motor for one or several topics of its choosing. This is a change within established institutions such as the tremendous opportunity for Brazil. Yet the public is World Bank. Interestingly, the World Bank intends likely to remain skeptical of the usefulness of the to create a Global Infrastructure Facility (GIF) this BRICS concept, particularly as growth in the Global year, perhaps out of a sense of competition with the South has slowed markedly. Moreover, President BRICS. Dilma Rousseff never really warmed to the idea of the BRICS and her foreign policy team faces a Yet progress in setting up the BRICS Bank since tough challenge: to maintain momentum and show the 5th BRICS Summit (in Durban, South Africa in that Brazil benefits from being part of the group. In March 2013) has been painfully slow. When asked the midst of all the gloom, the BRICS will launch about the new bank, diplomats in Brasília, Pretoria the BRICS Development Bank, marking the most and Delhi keep pointing out the difficulty of setting important step towards institutionalization in its up a multilateral development bank. Coordinating young history. such a process between five countries is indeed a challenge - but that cannot mask the fact that true This development is highly significant; it is the first political will from the top may be missing at this step towards institutionalizing the collaboration of point. Currently, Brazil's foreign ministry is coming the BRICS, fundamentally altering its to grips with budget cuts after years of expansion. characteristics of a non-binding, informal, And, importantly, Dilma Rousseff seems more intent consultative group. While most details about the on consolidating Brazilian foreign policy rather than Bank still need to be resolved, it is clear that engaging in new, costly initiatives, such as the operating such an institution will require the BRICS BRICS Bank. to agree on a set of guiding rules and norms. It will

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