BRICS meet in India, touting potential of New Development Bank
The eighth annual BRICS Summit took place over the weekend, convening the leaders of Brazil, Russia, India, China, and South Africa in Goa under India’s chairmanship for discussions touching upon a range of issues, including trade cooperation and the latest progress in the group’s New Development Bank.
These annual BRICS meetings serve as forum to collectively address emerging global issues and advance interests common to the bloc, which together makes up 43 percent of the global population with a total GDP at upwards of US$16 trillion. This year’s summit, hosted by Indian Prime Minister Narendra Modi, concluded with the release of the 110-point Goa Declaration, complemented by an Action Plan outlining activities and events carried out under India’s chairmanship.
Focus on development
The New Development Bank (NDB), headquartered in Shanghai, was praised by leaders as a key forum for BRICS cooperation. Brazilian President Michel Temer, speaking at the summit, suggested that the fates of the bloc and the bank, “the BRICS’ most visible facet,” are closely tied.
“Our performance as a group – and our capacity to innovate in the international system – will be assessed based on how well this institution works,” Temer stated.
The multilateral development bank, established in 2014 and made operational the following year, aims to strengthen the international financial architecture, while also supporting sustainable development in its member countries and harnessing technology for development. (See Bridges Weekly, 17 July 2014)
Narendra Modi, in his remarks at the BRICS leaders’ plenary session, credited the NDB with having the potential to “transform the quantum and quality of trade and investment linkages among BRICS,” proposing the ambitious target of doubling the 2015 figure of intra-BRICS trade at US$250 billion by 2020 with the support of the Bank.
The Goa Declaration reaffirmed the BRICS’ approval of the first set of five loans issued by the NDB, representing a total commitment of over US$811 million in renewable energy projects in BRICS countries. Speaking at the first Annual Meeting of the New Development Bank Board of Governors on 20 July 2016, President K. V. Kamath said that these investments have commenced “the process of establishing its credentials as an institution that supports green and sustainable infrastructure.”
In addition, the declaration welcomed progress towards mobilising the Africa Regional Centre (ARC) of the NDB, expected to open later this year in Johannesburg, South Africa. Jacob Zuma, President of the host nation, expressed that the move “is welcomed and timely as it will pay particular attention to Africa’s needs in respect of industrialisation and infrastructure as well as sustainable development,” in a speech delivered at the summit.
Meanwhile, the Asian Investment Infrastructure Bank (AIIB) has emerged as a parallel multilateral development bank headquartered just north of the NDB in Beijing, formally launched in January 2016. The AIIB seeks to bolster the development of infrastructure across Asia, directing resources to the financing of energy, transportation, agriculture, urban development, sanitation, and environmental protection. (See Bridges Weekly, 2 April 2015)
In his mid-term report to the Board of Governors on 24 June 2016, AIIB President Jin Liqun highlighted the advances made over just six months, in which “we have together put the fundamentals of a large, modern multilateral financial institution in place.”
The AIIB’s 2016 Business Plan and Budget sought to lend in the bracket of US$0.5 billion to US$1.2 billion, a target that was comfortably reached. Four project loans amounting to US$509 million have already been approved, providing funding for power distribution and expansion in Bangladesh, road construction to be carried out in Tajikistan and Pakistan, and slum upgrading in Indonesia. Several of the projects are co-financed with partner development banks, including the Asian Development Bank, the European Bank for Reconstruction and Development, and the World Bank.
The AIIB has said that it is working toward approving new projects in the latter half of this year, along with laying the groundwork for others in 2017.
Climate and energy aspects
The Goa Declaration welcomed the approaching entry into force of the Paris climate accord in November, reminding advanced economies to uphold commitments to assist developing countries with capacity building and financial support in the implementation process. (See Bridges Weekly, 7 October 2016)
The declaration acknowledged the important role of nuclear energy in the Nationally Determined Contributions (NDCs) of certain BRICS, calling for greater predictability in access to financing for nuclear as well as additional types of renewable energy and natural gas as other clean energy alternatives. These NDCs are the building blocks of the Paris climate deal.
Trade: WTO centrality, MSME cooperation
The sixth meeting of BRICS trade ministers immediately preceded the summit, taking place two days prior on 13 October 2016 in New Delhi. Ministers prioritised the implementation of the outcomes from the WTO’s last two ministerial conferences, held in Bali in 2013 and Nairobi last year.
They also called for advancing negotiations on the pending issues under the Doha Development Agenda (DDA), sentiments that were later echoed in the Goa Declaration. Looking ahead, ministers placed development at the centre of an outcome for next year’s ministerial conference in Buenos Aires, Argentina.
Some BRICS members have previously questioned the role of bilateral, regional, and plurilateral trade agreements as potential alternatives to multilateral approaches, expressing concerns that these mechanisms for cooperation could undermine the DDA and compromise the multilateral system. The Goa Declaration states that BRICS members “note the increasing number of bilateral, regional, and plurilateral trade agreements, and reiterate that these should be complementary to the multilateral trading system.”
At last year’s summit in Ufa, Russia, the BRICS economies also “reaffirm[ed] the value, centrality, and primacy of the multilateral trading system.” (See Bridges Weekly, 16 July 2015)
Among the other outcomes of the trade ministers’ meet last week were calls to boost BRICS’ efforts on e-commerce cooperation; developing national “single windows” for customs clearance in line with the WTO’s Trade Facilitation Agreement; developing a shared BRICS “perspective” on intellectual property rights; and addressing the barriers that micro, small, and medium-sized enterprises (MSMEs) face in playing a greater role in international trade and investment.
With MSMEs, the BRICS leaders specifically noted the role these play “as the engines of export-led growth and employment,” particularly in light of the fact that these help support nearly half of national exports and gross domestic product for some member countries.
Finally, the declaration addressed the issue of representation of developing and emerging economies on the global stage, backing efforts to continue the reform of governance structures in the International Monetary Fund (IMF).
For example, the BRICS called for a greater attribution of shares in the Fifteenth General Review of Quotas, and for developed economies to yield two chairs on the Executive Board to ensure broader inclusion. The share of quotas allocated to different IMF member countries determines, among other things, that country’s voting power and the amount of financing they can borrow from the Fund.
The previous IMF quota reform boosted the Fund’s overall quotas, while redistributing quota shares in an effort to recognise the larger role that emerging market economies have played in recent years. Adopted by the IMF’s Board of Governors in 2010, those reforms were delayed until the US Congress formally signed off on them in late 2015.
Under the most recently revised quotas, all BRICS members minus South Africa are now among the IMF’s ten largest members.
China will take over the rotating BRICS chairmanship from 1 January and will host the Ninth BRICS Summit in 2017.
ICTSD reporting; “Are the BRICS Nations Too Splintered to Be a Bloc,” BLOOMBERG, 15 July 2014; “China to host 2017 BRICS summit in Xiamen,” GBTIMES, 17 October 2016. This article first appeared in Bridges Weekly, 20 October 2016.