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BRICS continues to play an effective role in global economy

| Updated: October 18, 2017 10:58:41


BRICS continues to play an effective role in global economy

The member  countries of BRICS- Brazil, Russia, India, China and South Africa -   representing nearly half of the world's population were looking for ways to boost trade among  their developing economies at a summit on October 15-16, 2016 in the Indian beach resort state of Goa. But their economies have been slowing while they face similar challenges in lifting large populations out of poverty and protecting their environments.
Brazil, Latin America's largest economy at US $1.35 trillion Gross Domestic Product (GDP) is forecast to contract by about 3 per cent in 2016 after an equally dismal scenario in 2015. Inflation and unemployment are both hovering around 10 per cent. Some areas of that country including Rio de Janeiro are so broke that they have not paid public workers for months. The recovery of the Brazilian economy is crucial to South America's economic future. The country with a population of 206 million relies heavily on prices of oil, soy and other commodities but the prices of those have plunged.
Brazilian President Michel Temer has made changes in the economy that already sees cheering markets since taking over the political leadership from Dilma Rousseff after she was removed amid allegations of misusing funds. After plunging in recent years, the Brazilian currency Real (BRL) has started strengthening against the American (US) Dollar. But especially among those who have lost their jobs, Temer's economic reforms are deeply unpopular. Brazil in the Goa BRICS summit was up for looking to boost business for its pharmaceutical industries and IT and to help its sanitation, energy, and all-important farming sectors.
Russia has wooed China as its tensions with the US have escalated. After an arbitration panel in The Hague ruled against Chinese claims to nearly all disputed South China Sea territories, Moscow was the only government to speak on behalf of China. Russia's courtship of China follows Western sanctions and an oil price slump that hit hard its US $1.13 trillion economy. In 2015, Russia's GDP shrank 3.7 per cent before stabilising as energy markets rebounded. However, it remains still weak with the International Monetary Fund (IMF) predicting a further contraction of 0.8 per cent in 2016 and modest growth in 2017.
Prime Minister Narendra Modi's India and President Vladimir Putin's Russia aim to expand nuclear ties with Russia building several reactors in India. After decades of close Cold War-era relations between New Delhi and Moscow, Russia has been unnerved by Modi's effort to build closer economic and defence ties with Washington. Bilateral trade fell more than 14 per cent from US $10 billion in 2014, a decline Russia has blamed on the global oil market turmoil. India also expressed annoyance with Russia's recent joint military exercises with Pakistan, which India says 'sponsors and practices terrorism as a matter of state policy'. However, the two countries have agreed to explore building the world's most expensive pipeline costing close to US $25 billion to ferry natural gas from Siberia to the world's third biggest energy consuming country - India. The pipeline is to connect Russian gas grid to India through a 4,500 kilometre to 6,000 kilometre pipeline.   
Modi chose sustainable development, climate change and infrastructure as the Goa BRICS summit's main goals. India's US $2.38 trillion economy is annually growing by 7.5 per cent, the fastest of the five countries' club. But India also has the highest number of people in poverty in the world, with more than 50 per cent of its 1.30 billion population living on less than US $3.10 a day. The Indian Foreign Ministry said the government advisers had set up three working groups at the summit to focus on counter-terrorism, cyber-security and energy security. India also wanted to launch a BRICS financial services framework, social services agreement and possibly a think-tank. Modi also sought support for India against Pakistan's alleged backing of separatist rebels in the conflict-ridden Himalayan region of Kashmir. Daily protests and rebel attacks have dominated Indian news in recent months, and at least 80 civilians have been killed in clashes with law enforcement. 
But China defends Pakistan after Modi's remark on terror. A day after Modi called Pakistan a 'mother of terrorism', China strongly defended its all-weather ally, saying it is against linking any country or religion with terror and asked the world community to acknowledge Pakistan's 'great sacrifices'. China said it opposes terrorism in all forms and believe that international concerted efforts are needed to ensure stability and security of all countries. Noting that India and Pakistan are all victims of terrorism, China said Islamabad has made 'great sacrifice to combat terrorism and this needs to be recognised by the international community'. 
Modi's criticism is that Pakistan continues to support anti-India terrorist groups giving those arms, financial support and helping them to cross the border to carry out attacks in India. China's view in this regard is that the international community should not take a stand on Islamabad's support to terrorists. China said that it well understands India's concern; but on counter-terrorism China's position is consistent - China opposes linking terrorism with specific country or religion. As per the problem between India and Pakistan, both the two countries are close neighbours of China. China truly hopes that they can resolve these differences in a peaceful way through dialogue and consultation. Thus India and Pakistan relations can develop to serve the interest of the two countries and the region. 
After the US, China is the world's second largest economy at US $11.4 trillion. But its economy is growing at its slowest pace in 25 years. Speaking at the annual Goa BRICS summit, President Xi Jinping of China, a country of 1.38 billion people, called for building up an open economy while warning against all forms of protectionism. He asked the BRICS countries to implement the outcomes of the 11th summit of the Group of 20 (G20) major economies held in the eastern Chinese city of Hangzhou in September 2016, and to strive for a strong, sustainable, balanced and inclusive global growth. The Chinese leader also made a five-point proposal for the BRICS nations to join hands in tough times, including building an open world, mapping out a shared development vision, coping with the most pressing global challenges, safeguarding fairness and justice in the international community, and deepening partnerships within the bloc. 
To address economic challenges, Xi proposed that the BRICS countries should advance structural reforms together with innovating growth patterns, and build up an open economy. He warned against protectionism, saying the BRICS countries should take the lead in opening-up and international cooperation by prioritizing such sectors as economy and trade, financial circulation, infrastructure connectivity and people-to-people exchanges. But other BRICS member-states, already burdened by cheap Chinese imports and huge trade deficits with Beijing are likely to baulk. Xi further called for enhancing the representation and voice of emerging-market economies and developing countries in the process of global governance reforms, thus helping build new-type of international relations of cooperation and mutual benefits as well as safeguarding fairness and justice. The Chinese leader urged the five countries to strengthen coordination and communication in major international issues and regional hot issues, in a bid to jointly tackle global challenges such as natural disasters, climate change, infectious diseases and terrorism. 
Among the BRICS, South Africa's economy by far the smallest was estimated at US $327 billion in 2015. And unemployment among its 55 million of population is at a daunting rate of about 23 percent. Yet, South Africa's vast mineral resources make it a valuable ally to the other major developing nations of the world. President Xi and his South African counterpart, Jacob Zuma, vowed on the sidelines of the eighth Goa BRICS summit to boost bilateral cooperation within the framework of the BRICS mechanism and the Forum on China-Africa Cooperation (FOCAC). However, South Africa's credit rating is hovering near junk status in recent months. Moreover, South Africa's stumbling economy is headed for more trouble as the country's finance minister answers charges of fraud and its currency remains unstable. The country's finance ministry has said the legal proceedings will damage "the economic well-being of South Africans and essential processes of government".
Despite all these internal problems the BRICS nations have developed significantly over the years and are playing a far more effective role in the global economy today. While some of the constituent members may be undergoing a phase of weak economic performance, the long term growth potential of the BRICS grouping remains intact. Today, BRICS economies account for more than one-fifth of global economic activity. With a combined nominal GDP of US $16 trillion, which is equivalent to about 22 percent of the gross world product, these five BRICS economies are well poised to provide the much needed growth momentum to the world. The BRICS has also boosted South-South cooperation. It is here that Bangladesh can seize a unique opportunity to explore potential of close cooperation with BRICS.
The writer is a retired Professor of Economics, BCS General Education Cadre.
[email protected]
 

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