SCN 38-598
Suggested by Clive Tasker
SA-BRIC SEEK SHARED STANCE IN SANYA by Simon Freemantle and Jeremy Stevens
From: “Economic Strategy - BRIC and Africa”, Standard Bank, April 13, 2011. http://ws9.standardbank.co.za/sbrp Reproduced by The European House-Ambrosetti for the Forum “Developing the Regions of Africa and Europe”, Taormina, October 6 and 7, 2011.
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system; 1)
Reform of the international financial system
Climate change; and
The shift in emphasis from the G8 to the G20 has been unavoidable; global institutions hoping to retain legitimacy in an 2) Structures and mechanisms for BRICS coopera of multilateral stasis have had to reform. Herein, the eration. world‟s new players must maintain an effective force, above At the conclusion of the summit a joint communiqué will be parochial concerns, calling for reform. The BRICS summit issued outlining areas in which agreement has been attained. provides ample opportunity for BRICS to carve out common positions. 4. BOAO Forum for Asia Perhaps the most important discussion in this regard Dates: 13 — 16 April. will centre on the internationalisation of BRICS currenEstablished in 2001, the BOAO forum aims to foster deeper cies. Settling cross border trade in their own currencies regional economic integration in Asia, while simultaneously is on each of the BRICS‟ agenda. Each economy dedrawing countries nearer to their development goals. Presisires to serve as at least a regional financial power. dent Hu Jintao will present the keynote address at the opening Recall that on a variety of occasions in the past two ceremony of the forum on April 15. years, for instance, Russia‟s leaders have articulated that a cornerstone of modern Russia is to build MosIn addition to the BRICS heads of state, the Chinese governcow into a major global financial centre. We know ment has confirmed that Korean Prime Minister Kim HwangShanghai aims to compete, first with Hong Kong and Sik, Spanish Prime Minister José Luis Rodriguez Zapatero, then Singapore as Asia‟s financial hub. Johannesburg Ukrainian Prime Minister Mikola Azarov and New Zealand and Sao Paulo already dominate their own geograDeputy Prime Minister and Minister of Finance Bill English phies, but more ambitious neighbours eye their spot, have been invited to the forum‟s opening ceremony. and each aims to be globally more competitive. The Issues to be discussed at the BRICS Summit internationalisation of their currencies will prove to be the crucial ingredient. While a great deal of hype has occurred in the build up to the event, the preliminary inclusion of South Africa, into an already diverse group, will make the finding of a lowest common denominator even more challenging. Thus, expectations must remain anchored in realism. Nevertheless, not only is the summit an important starting point for future progress, some important outcomes relevant for South Africa may occur. The current state of the world Broadly, the summit will reaffirm the BRICS commitment to the promotion of the south-south agenda, largely seen as a counterweight to the residual domination of advanced world economies. It is speculated that the political and civil unrest in the Middle East and North Africa will be discussed. Recall, that of the five BRICS nations, all abstained from the United Nations vote on enforcing a no fly zone in Libya, with the notable exception of South Africa, which supported the action. However, it is unlikely that these matters will be officially communicated in the summit‟s communiqué. At present, all five BRICS nations have permanent (China, Russia) or non-permanent (Brazil, India, South Africa) seats on the United Nations Security Council (UNSC). It is well known that Brazil and India have actively lobbied for a permanent seat in the body, and that their respective bids have been supported rhetorically by all permanent UNSC members except China, which remains opposed to the broadening of the group. While the issue may be robustly discussed, no agreement will be reached and it will therefore also remain absent from the summit‟s outcomes.
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Questions over the likely arc of the US dollar have encouraged (at least a) passive diversification. Emerging markets are even exerting considered pressure on key agencies to adopt a new global currency and internationalise their own currencies. Brazil will undoubtedly raise the issue of the renminbi‟s exchange rate and will find support from South Africa which is equally keen to push to have the trade imbalance with China addressed. Given that the scope of this matter extends well beyond the BRICS, robust discussion will not manifest into concrete outcomes. Currently the financial system is awash with liquidity. Superior cyclical economic growth and structural propellants, coupled with higher (and rising) interest rates, has encouraged “hot money” to flow to emerging markets. As yet, a variety of strategies have been used by emerging markets to deal with the challenge. A common point of departure amongst the BRICS in this regard is inevitable. Furthermore, while the management of asset price bubbles will remain a domestic endeavour, a shared position on commodity price fluctuations is feasible. Granted, even though each BRIC has successfully attached itself to global supply chains, meaningful variations exist within the group: Russia and Brazil are net exporters of commodities and China and India are net importers. Hence, the direction of commodity prices can have contradictory impacts on the individual
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BRICS terms of trade. However, destabilising boom and bust cycles serve none of the BRICS economiesâ€&#x; interests. On trade, South African Minister of Trade and Industry Rob Davies has confirmed that all five BRICS trade ministers will gather at the summit, principally to forge a common position on the ongoing Doha round of World Trade Organisation (WTO) negotiations. On this matter consensus is likely to be reached, and a position declared at the conclusion of the summit. Climate change The same configuration of states that constitute the BRICS forms the BASIC alliance, which originated at the Copenhagen climate change summit in December 2009, as a means of giving deeper voice to emerging and developing countries. BASIC has proved to be formidable in shifting the dial in discussions around globally-binding climate regulations. As a result, discussions centring on this topic at the BRICS summit are likely to be cohesive and eagerly awaited. Conclusion For South Africa, the summit brings a host of challenges and opportunities.1 Bolstering a pragmatic approach on each of the broader issues tabled for discussion, South Africa must channel discussions towards its domestic economic objectives. In this regard, the BRICS summit is a potentially opportune moment to discuss mineral beneficiation, infrastructure development, stimulating foreign investment as a means for supporting job creation, and enhancing cooperation on green technology. Beyond the diplomatic agenda, inter-business linkages forged prior to the political summit, while seldom immediately tangible, could prove potent in terms of deepening the sustainability of BRIC-SA and even BRIC-Africa commercial ties. It is not unlikely that this will be the first and last exclusively BRICS summit; the forum, as loosely arranged as it already is, will likely take on new members within the coming months and years. Already, the Chinese government has openly supported the enlargement of the grouping, which will increasingly come to represent a more inclusive south-south bloc. While there are merits to this expansion, South Africa must capitalise on its current exclusivity, and ensure that the virtually unprecedented hype which has characterised its unlikely BRIC accession finds commercial expression.
1. See BRIC and Africa: Beyond the diplomatic applause: threats and opportunities underlying South Africa’s BRIC invitation. 26 January 2011
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