BackThe next step for BRICS
The next step for BRICS
PremiumHwee Young How/Bloomberg
In two weeks from now, leaders of BRICS (Brazil, Russia, India, China and South Africa) countries will meet in New Delhi for the fourth summit meeting of the group. Summit meetings of BRICS (South Africa joined the forum last year) have been seen with considerable interest since the first one held in Yekaterinburg in Russia in 2009. This is because the outcomes of the summit meetings are seen as statements of collective intent by some of the more influential countries in today’s geo-politico-economic context.
The confabulations in the first summit clearly indicated that leaders of the BRIC countries were keen to intervene in multilateral fora to not only address the economic crisis, but also to ensure that decisions taken at these fora resulted in a structural transformation of the global economy. More importantly, these countries made an unequivocal statement that the “dialogue and cooperation of the BRIC countries would (be) conducive not only to serving common interests of emerging market economies and developing countries, but also to building a harmonious world of lasting peace and common prosperity".
This intent of the BRICS countries will be tested fully at the forthcoming New Delhi summit for the global economy and polity faces a number of critical challenges. Addressing these challenges is important as most predictions point to a slowdown in the global economy in 2012 coming on the back of the uncertainties facing the euro zone.
At this stage, the first order of business for BRICS as a collective should be to make a decisive intervention to help stave off yet another economic slump. There are ample signs that influential countries are refusing to learn lessons from the immediate past and are not putting in place the systems that can prevent another crisis. Yet again, the most worrying signals are coming from the financial sector—the banking sector is on a tightrope walk. At the height of the pervious financial crisis, banking regulators had taken decisions to introduce stricter capital adequacy norms of the banks and to put in place mechanisms to improve the transparency and disclosures relating to their activities by 2013. There are, however, several roadblocks that would have to be overcome if the new norms are to become effective by the due date, including the tardy progress made by most of the major banking centres towards implementing them.
Strengthening of the regulatory frameworks is but one pillar of a comprehensive reform of the financial sector that BRICS have been arguing for: change in the management of the international financial institutions and allowing emerging economies to have a greater say in the running of these institutions was the other. Although recent reports have indicated that the executive board of International Monetary Fund has informally agreed to a restructuring of the organization’s voting rights, giving the emerging economies a better chance to influence its decisions, BRICS would have to ensure through collective action that this change is formalized.
Interlocking of financial and commodity markets leading to a steep rise in commodity speculation has come to be recognized as one of the more undesirable fall-outs of the booming derivatives business. Commodity speculation has had severe impact on the prices of foodgrains: prices of these commodities have touched historically high levels in recent years. As a consequence, the spectre of food insecurity has loomed large. In their first summit, BRIC leaders had taken a grim view of this problem and had agreed to “support the adoption of a wide range of mid- to long-term measures…to provide for a solution to the issue of food security". In order to implement their commitment, these countries should develop a framework of cooperation for reaching out to the countries in distress.
Another equally important issue, one that has not yet found substantial mention in the BRICS summit meetings thus far is public health. Besides growing concerns in a large number of developing countries regarding pandemics such as HIV/AIDS, malaria and tuberculosis, access to affordable medicines and health services are problems that afflict almost every developing country. BRICS health ministers had met after last year’s summit to reflect on the most compelling problems and to identify the global forums in which BRICS should intervene. In New Delhi, the leaders must lend their political endorsement to such interventions in order to ensure that the BRICS countries are able to make a change for the better.
Biswajit Dhar is director general at Research and Information System for Developing Countries, New Delhi
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