The 8th annual summit of the BRICS grouping of major emerging economies (Brazil, Russia, India, China, and South Africa) recently concluded at Goa, India. The leaders of the BRICS nations, who had met the month before on the sidelines of the G20 Summit in Hangzhou, China, used the opportunity of the Goa Summit to highlight their shared economic and security concerns, and to reaffirm their bilateral relations within the group. The Goa Declaration that was issued at the conclusion of the summit “strongly condemned terrorism in all its forms and manifestations” — including the “recent attacks against some BRICS countries” — and also included pledges from the BRICS nations that they would work with the G20 to promote “robust and sustainable trade and investment to propel global growth,” and also that they would work to “support industrialization in Africa and least developed countries” (Lim, 2016b; “BRICS issues,” 2016).
The BRICS nations have suffered recent economic headwinds stemming from “falling global demand and lower commodity prices.” While Russia and Brazil have entered into economic recession, “South Africa only just managed to avoid the same fate last month and China’s economy has slowed sharply.” In addition, the governments of Brazil and South Africa are “mired in corruption scandals” (“Xi warns,” 2016). However, K.V. Kamath, the President of the BRICS-initiated New Development Bank (NDB), reminds us that despite the negative political and economic news about the BRICS nations, they still remain important for global economic growth, as their economies “have for the last few years contributed to more than 50 percent of incremental economic wealth that has been generated globally” (Busvine, 2016).
Indeed, the BRICS nations have a combined GDP estimated at USD 16 trillion, and their populations comprise 53 percent of the global population (“Xi warns,” 2016). Lord Jim O’Neill, the former chief economist of Goldman Sachs who had identified the BRICS concept in 2001, recently stated that the BRICS nations “collectively are bigger today even in the most optimistic scenario I thought 15 years ago, and it’s primarily because of China … Despite the problems Brazil and Russia face — and they’re big — in the first decade of BRICS they all grew way more strongly than I thought” (“Brics grew more,” 2016). In terms of global economic growth, India is the world’s “fastest-growing major economy and its GDP is expected to increase 7.6 per cent in 2016-17,” while China, despite its economic slowdown, remains “the world’s second largest.” To facilitate greater investment in the BRICS economies, the BRICS governments have agreed to fast-track the establishment of the BRICS Credit Rating Agency, as “the three traditional agencies — Moody’s, Standard & Poor’s and Fitch Ratings — are all Western-based” (“Xi warns,” 2016).
Chinese President Xi Jinping warned in his address at the Goa Summit that “the deep-seated impact of the international financial crisis is still unfolding. The global economy is still going through a treacherous recovery and deep adjustments.” In addition, he observed that “some countries are getting more inward-looking in their policies. Protectionism is rising and forces against globalisation are posing an emerging risk” (“Xi warns,” 2016). This threat is serious as it will directly impact countries like China and India whose economic growth depends on globalization. In India, for example, the latest Employment and Unemployment Survey from the government’s Labor Bureau has indicated that the Indian economy will need to create one million jobs each month in order to “meet the needs of its young people,” however India was only able to create 5 million jobs “between 2012 and the financial year that ended in March.” Without this increased job creation, India “will lack the rising income needed for domestic consumption to serve as the engine of growth.” Greater global investment in the Indian economy is hence needed for this significantly higher level of job creation to be achieved (Sender, 2016).
Relations between China and India were tense at the Goa Summit due to China’s continued refusal to “change its stance on Masood Azhar, leader of the Pakistan-based militant group Jaish-e-Mohammed,” whom India has identified as being responsible for a series of terrorist attacks “including the 13 December 2001 attack on India’s parliament as well the 2 January 2016 attack on the Pathankot airbase.” Even though the UN has designated Jaish-e-Mohammed as a terrorist organization, China has twice in 2016 used its veto in the UN Security Council to block India’s request to have Masood designated by the UN as a global terrorist. Observers have offered a range of possible reasons for China’s position, including China’s support for Pakistan, as well as China’s unhappiness that India continues to offer shelter to the Dalai Lama, the exiled Tibetan Buddhist leader whom “Beijing considers a ‘subversive’ and a ‘splittist’” (Roche, 2016). While Indian Prime Minister Narendra Modi used the occasion of the Goa Summit to denounce Pakistan as the “mother-ship of terrorism” to his global audience, criticism of Pakistan did not appear in the Goa Declaration, likely due to opposition from China. Nonetheless the Goa Declaration included a call for all nations to combat terrorism and to support the proposed Comprehensive Convention on International Terrorism at the United Nations (Busvine & Pinchuk, 2016; “BRICS Summit,” 2016).
The Indian economy will need to create one million jobs each month in order to “meet the needs of its young people.”
While relations between Russia and India have also been tense due to Russia’s recent military and economic cooperation with Pakistan — including the inaugural Russo-Pakistani joint military exercise, Russia’s sale of Mi-35 attack helicopters to Pakistan, and Russia’s decision to construct a USD 2 billion natural gas pipeline in Pakistan — Russia and India expanded their bilateral relations during the Goa Summit, signing military agreements including “a multi-billion dollar agreement for the delivery of a long range advanced air defence system to Delhi,” as well as energy cooperation including the Russian purchase worth USD 13 billion “for a controlling stake in both India’s Essar Oil and the port facilities that it owns” (Pant, 2016).
Brazilian President Michel Temer, who recently noted that his recession-hit country “is seeking to return to the paths of sustainable development and job creation,” used the opportunity of the Goa Summit to sign bilateral agreements with India on agriculture, pharmaceuticals, trade, investment, and cybersecurity (Kamat, 2016; “BRICS an opportunity,” 2016; “PM Modi,” 2016). South African President Jacob Zuma likewise called on the BRICS nations to draw on their “collective strength” to empower their people. In particular, he highlighted that African countries have not been able to fulfill their economic potential due to “inadequate infrastructure, small and fragmented markets, under-developed production structures, and inadequate economic diversification,” and noted that the intervention of BRICS mechanisms like the NDB can help address these issues (“BRICS must use,” 2016). President Zuma also used the opportunity of the Goa Summit to meet with President Xi, and both leaders called for Sino-South African relations to be strengthened “within the framework of the BRICS mechanism and the Forum on China-Africa Cooperation (FOCAC).” They also called for the development of Chinese projects in South Africa — including “a railway corridor, a science and technology park, vocational training and local cooperation” — to be accelerated (“China, S. Africa,” 2016).
President Xi used the occasion of the Goa Summit to develop China’s South Asian relations. Before his arrival at Goa, and just after his visit to Cambodia where he signed 31 cooperation agreements and announced USD 14 million in military aid as well as USD 89 million in debt cancellation, President Xi visited Bangladesh, where he signed 27 cooperation agreements, including “power plants, ports and railroads,” and announced USD 20 billion in aid, an amount 10 times greater than the USD 2 billion aid package offered by Indian Prime Minister Modi during his 2015 state visit to Bangladesh (Lim, 2016a; Kuronuma, 2016). In addition, President Xi met Sri Lankan President Maithripala Sirisena on the sidelines of the Goa Summit, and discussed increasing Sino-Sri Lankan economic cooperation in key sectors including “trade, port operation, infrastructure construction, port-vicinity industrial parks, production capacity and people’s livelihood,” as well as accelerating the development of Chinese projects in Sri Lanka — Colombo Port City and Hambantota Port (“China, Sri Lanka,” 2016). President Xi also attended a dialogue session between the leaders of the BRICS and the BIMSTEC (Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation) nations — Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka, and Thailand — during which he called for BIMSTEC’s development programs to be aligned with China’s “Belt and Road” development initiative, “so as to advance infrastructure construction and connectivity” (“President Xi attends,” 2016).
NDB President K.V. Kamath announced during the Goa Summit that the NDB will increase its lending to USD 2.5 billion by 2017, up from its inaugural offering of loans worth USD 911 million. To raise funds to finance these loans, the NDB has begun issuing local-currency bonds. Its first bond issue took place in July 2016 with the issue of renminbi-denominated bonds in China. The bank plans to issue rupee-denominated “masala bonds” worth USD 250-500 million in India in the first quarter of 2017, with bond issues in Russia and South Africa scheduled next in the pipeline. The NDB will remain focused on green projects. Its initial loans were for clean-energy projects, and it plans to offer loans for “sustainable development initiatives, including energy efficiency, water and waste management and sewage projects” (Inamdar, 2016; Abrams & Mandhana, 2016; “BRICS NDB to Issue,” 2016). Kamath also reiterated that the NDB positions itself as being complementary rather than in competition with the world’s existing constellation of international financial institutions (IFIs):
“Infrastructure alone has needs globally of $1-1.5 trillion a year — all the multilateral banks put together can do maybe 15 percent of this … The phrase I would like to use is cooperate and work together, rather than compete. I don't see competition as a key challenge in this context.” (Busvine, 2016)
In the longer term, the NDB does not have plans for rapid expansion. This stands in contrast to the China-led Asian Infrastructure Investment Bank which has undergone rapid expansion. As NDB Vice President and Chief Risk Officer Paulo Nogueira Batista explained, the NDB has chosen a cautious approach towards its expansion plans, as over-rapid expansion may “overwhelm the bank and … disappoint the expectations of new members” (Abrams & Mandhana, 2016).
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