Diplomatic Enclave:Matter of chance

Tags: Knowledge

The BRICS summit will be Narendra Modi’s first foray into an international summit

Would anyone have thought that an acronym thou­ght up by an investment consultant would ever become a viable organisation? The five emerging econ­omies that gave the first alphabet of their names to Brics have helped evolve it into an organisation with great potential. With 40 per cent of the world’s population and a combined GDP of $ 24 trillion, the five countries have similar views on a number of international issues such as the west Asian crisis, but it is the economy which dominates their discussions.

BRICS has an even greater significance as a grouping these days when member countries are facing lowered growth rates. Critics often point out that BRICS is no longer the flavour of the season; its days of glory were short lived as the growth rates in these countries are declining. Other acronyms are sprouting up on the back of increasing economic growth in other regions.

BRICS has its five members spanning three continents, but a similar organisation spanning three continents is languishing. IBSA or the tripartite group comprising India, Brazil and South Africa was meant to promote international understanding as part of south-south cooperation; it was formed after the three countries felt marginalised at the G8 meet at Evian in 2003. IBSA missed a summit last year, it is likely to have a meeting when the leaders of the three members are in Brazil. The inclusion of China and Russia to the three-member IBSA has given a new dimension and thrust to BRICS. Two potent ideas — a development bank and a BRICS reserve fund have emerged.

The BRICS are to meet in Fortaleza in Brazil for their sixth summit. The story goes that Chinese president Xi Jinping, an avid soccer fan, had made it known that he was keen to attend the Fifa World Cup matches being held in Brazil. The BRICS summit was due to be held in March this year, but the long drawn out Indian election would have meant a distracted and limited attendance from an Indian government at the end of its term. So Brazil offered dates in mid-July just after the Fifa finals. President Dilma Rousseff invited president Xi Jinping and the rest of the BRICS leaders to attend the final matches. Prime minister Narendra Modi had to decline the invitation because that would have meant a five-day absence from Parliament in the week after the budget is presented.

Modi’s presence at the BRICS summit, his first international meet, would emphasis India’s commitment to the grouping. It would provide him the opportunity to meet Chinese president Xi Jinping and Russian president Vladimir Putin as also a number of South American leaders. As part of a BRICS outreach strategy to emerging economies, president Rousseff has invited other South American leaders for an interaction with the other leaders. At the last summit, South Africa had invited African Union leaders to meet the BRICS leaders. Argentina has expressed interest in joining the five-member grouping but the BRICS leaders do not favour any expansion at this time.

The idea of a BRICS development bank that was floated at the Delhi summit in 2012 evoked great interest but had a number of issues to be resolved. Asian countries have for long been calling for reform of the International Monetary Fund and the World Bank. US president Barack Obama had made some moves to increase the say of emerging economies in these institutions, but the US Congress has blocked the reforms. China is planning to set up an Asian infrastructure investment bank with a registered capital of $ 100 billion on the lines of the Asian Development Bank (ADB) which Beijing believes is too heavily dominated by the US and Japan.

The development bank idea is expected to be finalised at the forthcoming summit. Though each of the member countries sees the benefits of a development bank, there are issues to be resolved. There has been some apprehension that China’s economic prowess would ensure its dominance in the development bank. Each of the members wants to host the bank. China wants it to be located at Shanghai, Delhi is a contender while South Africa would like it to boost its own standing as a financial centre. Beijing had also offered to put in more capital in the bank; it did not find favour among the other members for it would have led to Chinese dominating influence in the bank, and the majority of members pressed for an equal share for each in the bank’s capital.

Despite political rivalries and other constraints, the BRICS bank and the contingent reserve arrangement would be a positive development providing an alternative financial mechanism for the emerging and developing economies.

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