Economic “BRICS” to cement a new partnership

Economic “BRICS” to cement a new partnership

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Did you know #BRICS nations house 40% of the world population. Read more on their economic partnership http://bit.ly/1g1kQvF

@OxfamIndia simplifies the recently concluded #BRICS summit for you. Read on. http://bit.ly/1g1kQvF

On July 9, 2015 five countries -- Brazil, Russia, India, China and South Africa, also known as BRICS, signed the Ufa Declaration in Ufa, Russia concluding the seventh BRICS Summit. 

The 43-page Declaration ends with India offering to host the eighth Summit in 2016. The BRIC idea was first conceived in 2001 by an investment banker Jim O’Neill at Goldman Sachs as part of an economic modelling exercise to forecast global economic trends for the next half century. South Africa was added to the group in the third Summit in 2011. 

The five countries together account for 20% of world’s GDP, represent 18% of world’s economy, and house over 40% of world’s population. 

China and India pride themselves in being two of the fastest growing economies in the world. On the other hand, earlier Oxfam research notes that Brazil is the only country among the five where income inequality has reduced from early 1990s to the late 2000s. 

In some ways, the rationale for the grouping was also to address the phenomena of inequality as it aimed to improve the global economic situation (by protecting countries from global economic shocks) and reform existing non-transparent financial institutions. 

It also sought to find ways for more effective co-operation and ensure developing countries influence global affairs unlike in the past. With these objectives, the sixth BRICS Summit announced setting up of the BRICS Bank or the New Development Bank (NDB) with an initial startup capital of $100 billion, but which is yet to commence operations.

The NDB aims to invest in infrastructure projects for development and environmental protection although the criteria are not yet known. Setting up of the NDB is also seen as a response to the alienating international financial institutions (IFIs) such as World Bank and International Monetary Fund (IMF) that have significantly impacted development policies and alienated the communities owing to rigid conditionalities tied to their investments. 

Civil society, including Oxfam, has demanded for greater transparency and effective accountability mechanisms by the Bank. 

A year since its announcement, the recently-concluded Summit merely reaffirms the commitment to the “earliest launch of the Bank” (para 15, Ufa Declaration) and proposes commencing projects in early 2016. 

The announcement by China launching the Asian Infrastructure Investment Bank (AIIB) in 2014, with 57 founding members (including India), and a proposed startup capital of $100 billion (initially committed to $50 billion that is soon to be doubled) makes for an interesting comparison. With analysts already pitting one against the other, ongoing developments continue to be closely watched.

The Ufa Declaration,  endorses and links with several ongoing global processes such as the UN-led post-2015 process to finalise the Sustainable Development Goals (SDGs), the third International Conference on Financing for Development (FfD), the climate negotiations led by the UN as part of its Framework Convention on Climate Change (or the UNFCCC), and the G20 processes to strengthen economic cooperation. 

In what is a clear message by the developing to the developed countries asking them to fulfil their commitments towards development finance, the Ufa Declaration upholds the primacy of North-South Cooperation while endorsing the need for better South-South Cooperation. In this regard, development cooperation is only one of the identified sources of finance, as domestic resource mobilisation and private partnerships are also encouraged.

Additionally, cross-border impacts of the global financial regulation reform, adaptation to new rules introduced by the Action Plan on Base Erosion and Profit Shifting (BEPS) and the Common Reporting Standard for Automatic Exchange of Tax Information (AEOI) are highlighted as critical aspects to be addressed in the coming year. 

These also form agenda points for the ongoing G20 discussions and would be discussed later this year in the November G20 Summit in Antalya, Turkey.

From a civil society standpoint, commitment to the ‘right to development’ along with a generous sprinkling of the term ‘human rights’ across the document (twelve times) is welcome. 

Announcing the first meeting of the BRICS Ministers of Labour and Employment in February 2016 that will focus on creation of decent jobs and share information on labour and employment issues is an initiative worth monitoring.

However, scant reference of inequality can no longer be ignored as we advocate for a more equal, just and inclusive world for all. The observation that private sector be encouraged across a gamut of areas, such as ensuring health for all, addressing environmental challenges, and push for greater economic growth invites scepticism. This stems from the fact that private sector is profit-centric. 

In conclusion, global realities continue to change and evolve rapidly. The prevailing socioeconomic and political contexts are creating new blocs of influence and power. This makes groupings such as BRICS critical as it must find ways to address some of the persistent economic and developmental policy challenges that require global cooperation among countries. 

At the same time, the BRICS must be cognisant that development would be unsustainable if not cemented by the right bricks, i.e. consulting with and involving the communities in deciding the agenda for development. More than any other partnership, it is the one with the communities that would ensure success.

Written by: Pooja Parvati, Research Manager, Oxfam India

Photo credit: Reuters/Sergei Karpukhin