Mumbai: Trade between the fast-growing BRIC nations—Brazil, Russia, India and China—and other developing economies in Asia, South America and Africa is set to accelerate in the next few years, while advanced economies focus on recovering from the slowdown, a panel of the World Economic Forum’s India Economic Summit concluded on Sunday.
“In terms of South-South trade, the story is very clear. In 2000, 14% of world trade was between developing economies; today that number is 25% and over the next 15 years, it will be over half of global trade,” Anil Gupta, Michael Dingman chair in global strategy and entrepreneurship at the University of Maryland, said at the summit in Mumbai.
Realigning priorities: Containers being offloaded from a ship at the Jawaharlal Nehru port in Mumbai. India’s trade with emerging economies accounts for about half of its total trade, compared with 30% a decade?earlier. Photo: Ashesh Shah/Mint
South-South or South-South co-operation is a term policymakers and academicians use to describe the exchange of resources and technology among developing countries, also known as countries of the global south.
B. Muthuraman, president of lobby group Confederation of Indian Industry, echoed Gupta’s view, pointing to the fact that India’s trade with emerging economies accounts for about half of its total trade, compared with 30% a decade earlier. Imports have risen to more than 60% from 48%.
“While this growth will continue, I’m not so sure it will immediately make up for the lack of growth in developed economies. But after 10-12 years, it is possible,” said Muthuraman, also the vice-chairman of Tata Steel Ltd.
Anoop Singh, director (Asia-Pacific), International Monetary Fund, said that given the state of advanced economies, which are grappling with the slowdown and sovereign debt issues, emerging economies will not be able to rely on demand in these nations.
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“Trade in South-South is going to be crucial not just for us but for the global economy as a whole,” Singh said.
He said that because of the phenomenal demographic change in India, over a quarter of the working population that will be added to the global economy over the next 30 years will be from the world’s largest democracy.
“China fundamentally increased its trade integration around the world. It boosted export-oriented industries that had the jobs. It is trade integration that really gives you the productivity increases to create jobs and markets... nothing is as important as trade integration,” he said.
India’s minister for commerce and industry Anand Sharma was bullish on the future of emerging economies, reminding the panel that while BRIC countries account for 48% of global GDP growth today, the combined economies of North America, Europe and Asia is projected to be on an equal footing in two years.
His ministerial counterparts from Africa stressed on that fact that while BRIC nations did trade with Africa, it was mostly for raw materials and commodities they imported.
“We’re learning to be competitive... South-South co-operation is important for us and we have to operate as a team with other emerging nations, so it’s a win-win situation for both and we can overcome our problems and compete as one in the international markets,” said Jose Pacheco, minister for agriculture, Mozambique.
Pacheco and Mary Nagu, minister for investment and facilitation, Tanzania, reiterated the potential of Africa in the agriculture sector, inviting investments. Only 30% of arable land in Africa is being cultivated, they said. “The only thing Africa is looking for is win-win partnerships. We cannot grow if others win and we lose in the bargain,” Nagu said.
China has tapped Africa for its rich natural resources—oil and gas, minerals and precious metals. Trade between the two regions was valued at almost $115 billion last year and is growing at nearly 44% every year, with China having signed bilateral trade deals with 45 African nations, according to a report by the UK’s Telegraph newspaper.
Still, there have been accusations that China’s charm offensive in Africa reeks of imperialism as the country has courted several dictators, ignored human rights violations and not left behind any technology or development in exchange for the resources.
Defending India’s relatively laid-back approach in Africa vis-a-vis China, Sharma said India’s philosophy is to be a friend and partner to the continent. He said that in the past few years, India has invested close to $40 billion in Africa and more was in the pipeline.
“The relationship we share with Africa is different from the one they share with America or China,” he said. “It is unique and has its own philosophy.”