4th BRICS Summit: Playing Crucial Role at World Level

The BRICS (Brazil, Russia, India, China and South Africa) is a grouping of the world’s emerging economies, representing five continents. The BRICS countries together account for 40 per cent of global GDP ($18.49 trillion). Intra-BRICS trade is worth $212 billion, and is growing at 28 per cent a year. It has set itself a trade target of $500 billion by 2015.
The importance of BRICs in the world economy has increased manifold since the acronym was first coined approximately seven years ago. Few could have imagined then how the US economy would collapse and bring down with it much of the rest of the world. It is worth revisiting the original formulations on the significance of these four major countries that were made by representatives of a major US investment bank
Some member countries in the organization are among the fast emerging economies in the world. At the same time, the world has come to realize that to bring an end to the unipolar world and to maintain the power balance, the importance of Russia cannot be ignored. Countries such as China and Brazil not only want to maintain close relations with the United States, but with Russia as well.
However, the aim of the BRICS is to enhance cooperation among member countries and working together at the international forums. Clearly, it is an opportunity for India to improve and strengthen its relations with China and strive to get their disputes resolved.
The fourth BRICS Summit was held in New Delhi on March 28-29. The summit’s theme was “BRICS partnership for Global Stability, Security and Prosperity.” The participants included Presidents Hu Jintao of China, Dmitry Medvedev of Russia, Jacob Zuma of South Africa and Brazil’s Dilma Rouseff. Prime Minister Manmohan Singh hosted the summit, and also held a series of bilateral sessions with his guests, including China’s Hu Jintao.
The summit held against the backdrop of continued profound and complex changes in the international situation, uncertain prospects in world economic recovery and the steadily rising status and role of emerging markets and developing countries in international affairs. It was yet another important event in the ongoing BRICS cooperation. India has worked effectively in preparing for the summit. China tried to work with other BRICS members to push for positive outcomes. On the summit’s eve, the five nations resolved to resist protectionist tendencies worldwide.
The leaders of five emerging economic powerhouses affirmed not just their growing economic clout but also their impact on the global political order.
Delhi Declaration
At the end of the summit, BRICS leaders issued a Delhi Declaration. The Declaration hinted at backing an alternative candidate for the World Bank president's post which has always been appropriated by an American and exhorted the Bank and the International Monetary Fund (IMF) to quickly realign their priorities and approach to the needs of the developing world. This is an agenda the five countries intend pursuing at the coming G20 meeting in Mexico as well.
The leaders also weighed the consequences of setting up a “BRICS Bank” and opted for a more contemplative approach by asking their Finance Ministers to examine its feasibility and report back at the next summit in Russia. They agreed that the bank should in no way emerge as a competitor to the World Bank and the IMF but provide funds for projects that do not find favor with these institutions.
In line with their professed commitment to multilateralism in economic and political problem solving, the leaders agreed to invest more in the United Nations Conference on Trade and Development (UNCTAD) which played a major role in catering to the interests of developing countries in the run-up to the setting up of the World Trade Organization (WTO).
Seeking to reinforce their growing economic heft with diplomatic clout, the BRICS grouping pitched for a bigger say in global governance institutions, including the United Nations and the IMF, and told the West that dialogue was the only way to resolve the Iranian nuclear issue and the Syria crisis.
The leaders of BRISC’s formulation on Iran came close to condemning the West's pressure tactics to make other countries obey their latest restrictions on trade ties, especially in the energy sphere. Saying that a conflict would have disastrous consequences, it wanted the two antagonists to resolve suspicions over Iran's nuclear program through talks on multilateral fora.
On Afghanistan, BRICS exhorted the international community to stay the course on the development front for 10 years after the West withdraws most of its combat troops by 2014-end and, on Russia's insistence, made a mention of checking narcotic trafficking.
In a fresh assertion, BRICS asked the West to implement the 2010 governance and quota reform before the 2012 IMF/World Bank annual meeting, as well as the comprehensive review of the quota formula to better reflect economic weights. They asked for enhancing the voice and representation of emerging market and developing countries by January 2013, followed by the completion of the next general quota review by January 2014.
In a signature step, the BRICS decided to create their first institution in the form of a BRICS-led South South Development Bank that will mobilise "resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries." The leaders directed their finance ministers "to examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back by the next summit."
The development banks of the five countries signed two pacts, including a master agreement on extending credit facility in local currency and BRICS multilateral letter of credit confirmation facility agreement, which could help scale up bilateral trade from $230 billion to $500 billion.
India’s Major Points
Addressing the summit, Prime Minister Manmohan Singh also said that the grouping has agreed to examine in "greater detail" a proposal to set up a South-South Development bank, funded and managed by BRICS and other developing countries.
Singh also urged member countries to speak in one voice on key issues such as the United Nations Security Council (UNSC) reforms. He suggested that BRICS countries should speak in one voice on issues such as reforms of the international body.
On UNSC reforms, Singh suggested that BRICS countries should speak in one voice on issues such as reforms of the international body.
He also said in their restricted session, the grouping also discussed the ongoing turmoil in West Asia and agreed to work together for a peaceful resolution of the crisis.
Touching upon the issue of terrorism, Singh said the countries should enhance cooperation against terrorism and other developing threats such as piracy, particularly emanating from Somalia.
UN Millennium Development Goals
BRICS nations are the defender and promoter of the interests of developing countries. In their cooperation, BRICS countries have committed to promoting South-South cooperation and North-South dialogue, endeavored to implement the UN Millennium Development Goals, worked for early realization of the goals set out in the mandate for the Doha development round negotiations, strived to secure a greater say for developing countries in global economic governance and fought all forms of protectionism.
Cooperation among BRICS countries is made necessary by the ongoing economic globalization and democratization in international relations. It is consistent with the trend of the times characterized by peace, development and cooperation, and fully conducive to building a harmonious world of durable peace and common prosperity.
Role of China
An impression is sought to be created that with its massive monetary reserves and political clout, China may exert undue influence in this bank. This is unlikely. Such a bank will not require too much paid-up capital (relative to the average size of respective sovereign reserves) if intelligent financial engineering can help sequester foreign reserves. This would mean that the smallest BRICS economy, South Africa, could easily commit an amount similar to that of China in the capital structure. Such doubts could be further allayed with the institution of a rotating Presidency of, say, a two-year term that could initially be restricted to the BRICS countries alone.
India-India Strategic Ties
The China-India strategic and cooperative partnership has made all-round progress in recent years. A sustained, sound and steady growth of relations between China and India, the two large developing countries sharing borders with each other, will serve not only the well-being of the two peoples but also peace, stability and prosperity in Asia and the world as a whole.
The Delhi Summit will be remembered forever for one major achievement, at least. Its expected decision to set up a BRICS bank on the lines of the World Bank may change the course of economic activity in the member-countries. The setting up of this new financial institution by the bloc that has brought together half of the world’s population may speed up infrastructure development programs in the BRICS countries and serve as a second line of financial defense in times of economic crisis as is being faced by Europe today.

UN Trade and Development Report 2011

The overall recovery of the world economy is slowing down in 2011 with strong downside risks, according to the United Nations Trade and Development Report (UNCTAD) 2011.
“Global Gross Domestic Product (GDP) is expected to grow by 3.1 percent following an increase of 3.9 percent in 2010,” the report stated.
International Trade
The volume of international trade, particularly in developed economies, is expected to return to a single-digit growth rate in 2011, from 14 percent in 2010.
Regarding South Asia, of which India is a part, UNCTAD said the region is likely to be among the best performers with a growth of 7 percent in 2011.
With several factors hindering growth, recent developments across the Middle East have also contributed to and been affected by the global economic crisis.
Although the expansion remained relatively strong in all developing countries, North Africa and some West Asian countries were the exception, “where political unrest has adversely affected investment and tourism, and thus also growth.”
In countries like Egypt, the January 25 Revolution, which eventually toppled president Husni Mubarak, came about to demand social justice, democracy and equal opportunities. For this reason, the state faces continued pressure to modify its economic and trade policies in order to keep up with the changes in society.
“There needs to be a complete reappraisal of wealth distribution and employment opportunities in the country,” Ibrahim El Issawy, professor of economics at the National Institute of Planning, said during the launch of the report in Cairo.
“After the January 25 Revolution, we need to increase production in the country, it is the state’s role to change current policies that will help encourage an increase in production,” said El Issawy.
The issue of taxes was also raised by El Issawy. “Taxes should be reviewed,” he said. “Those who make LE 40,000 a year should not be taxed the same as those who make LE 1 million, for example.”
“We need a strategy to rehabilitate Egypt’s economy, we need an intensive national plan to achieve this,” he added.
Emerging Markets
However, several other developing markets have been able to sustain relatively fast growth when compared to the US or Europe because of their reliance on domestic demand.
Emerging markets including Brazil, South Africa, Turkey and India have all had to cope with the challenge of short-term capital inflows, “attracted by higher interest rates that reflect higher inflation rates or tight monetary policies.”
According to the report, these inflows have been putting “enormous appreciation pressure on their domestic currencies, and tend to weaken their export sectors and widen their current-account deficits.”
In order for developed countries to stride past this ongoing global economic crisis, they have to work together.
“There needs to be collaboration between developed countries in order to come out of this next period to boost trade development on a national and international level,” he added.
Since the global economic crisis of 2008, recovery of the US has been stalling with the pace of growth below where it is needed to be thus hindering employment.
“Even the second round of quantitative easing has failed to translate into increased credit for domestic economic activities, as domestic demand has remained subdued due to stagnating wages and employment,” the report stated.
“With little scope to lower interest rates further — as they are already at historically low levels — and fiscal stimulus waning, a quick return to satisfactory growth trajectory is highly unlikely.”
America’s slow recovery has been affecting several of the world’s largest economies, which are more dependent on trade with the US market.
The report pointed out that the recovery of the Japanese economy has also slowed down due to the impact of the unprecedented earthquake and tsunami that hit the country in March.
The European Union, also facing a debt crisis and recessions in countries like Greece and Ireland, expects growth to remain below 2 percent in 2011.
Furthermore, due to negative indications across many of the global markets, the report found that “international trade in both goods and services rebounded sharply in 2010, after having registered its steepest fall since the Second World War.” The report expects trade to return to single-digit growth.
“Commodity prices recovered very early in the cycle and have been exhibiting high volatility, owing largely to the greater presence of financial investors in commodity markets.”
Moreover, another dangerous factor for world economies is slow wage growth, which hinders domestic demand in developed and emerging markets. Wage growth is “essential to recovery and sustainable growth.”
“However, in most developed countries, the chances of wage growth contributing significantly to, or leading, the recover are slim,” the report pointed out.
Debt Restructuring Process
Slow wage growth also triggers discontent among populations and could significantly hinder production.
To combat these risks that global markets continue to face, the report suggested several points, among them is the change of policies, which may have not proven to be successful before.
For example, in the case the US debt crisis, debt restructuring would be necessary. “When defaults occur, debts need to be restructured, and the complexity of the restructuring process depends on the structure of the defaulted debt,” the report stated.
Growth-Enhancing Fiscal Policies
Moreover, “the best strategy for reducing public debt is to promote growth-enhancing fiscal policies and low interest rates.”
The report underlined that "unless there is a reversal of the current trend of diminished income expectations of the average household and a return to policies that emphasize the importance of mass income growth as the basis for sustainable and balanced development in rich and poor countries alike, all other attempts to regain growth momentum will be in vain."