BRICS vows to speed up global recovery
Xi warns of globalization backlash as Modi urges deeper bonds
The leaders of five of the world’s rising powers ended a two-day summit yesterday with a pledge to speed global economic recovery as well as fight terrorism and extremism, forces that they said pose a threat to regional and international peace and stability. Meeting in the beach resort state of Goa in southwestern India, the five countries known collectively as BRICS - Brazil, Russia, India, China and South Africa - adopted a final declaration endorsing their commitment to act against the financing of terror groups and their supplies of weapons and other equipment. Presidents Xi Jinping of China, Vladimir Putin of Russia, Michel Temer of Brazil and Jacob Zuma of South Africa, and their host, Indian Prime Minister Narendra Modi, also vowed in the declaration to tackle the global economic slowdown and reform the world’s financial architecture.
The group, which represents nearly half of the world’s population and a quarter of its economy, with a combined annual GDP of $16.6 trillion, renewed its commitment to speed global recovery by investing in infrastructure projects and the manufacturing sector. The BRICS leaders adopted three agreements, including two to set up separate research networks for developing agriculture and railways. They agreed to crack down on economic crime by fighting tax evasion, money laundering and corruption.
“We have agreed to make the BRICS a strong voice on emerging regional and global issues,” Modi told reporters.
The BRICs leaders stressed the need to strike a balance between economic development and environmental protection, and hailed the early entry into force of the Paris climate agreement.
Credit rating agency
The BRICS nations agreed to fast-track the setting up of their own credit-rating agency to better cater to developing economies, rivalling existing ones based in Western countries. Prime Minister Narendra Modi said they agreed to move ahead on the ratings agency, although there was no timetable announced for its formation.
“To further bridge the gap in the global financial architecture, we agreed to fast-track the setting up of the BRICS credit rating agency,” Modi said. “In the past year, BRICS have played an active role in shaping the global agenda for change and development,” he said. The agency comes amid accusations from within the bloc that the three traditional ones Moody’s, Standard & Poor’s and Fitch Ratings are all Western-based and favor those economies. Plans for the agency follow the establishment of a BRICS bank 12 months ago with an initial capital of $100 billion, which has been seen as a challenge to Western-based institutions.
The “New Development Bank” has so far granted total loans of $900 million focused on renewable energy projects to the BRICS member nations of Brazil, Russia, India, China and South Africa. “NDB has kept clean energy and green and sustainable infrastructure as its priority,” Modi said. Bank president KV Kamath, a former Indian private banker, has said in recent days that a new ratings agency would be able to help developing nations, according to the Press Trust of India news agency.
BRICS was formed in 2011 with the aim of using members’ growing economic and political influence to challenge Western hegemony. The nations, with a joint estimated GDP of $16 trillion, set up their own bank in parallel to the Washington-based International Monetary Fund and World Bank and hold summits rivalling the G7 forum. But the countries, accounting for 53 percent of world population, have been hit by falling global demand and lower commodity prices, while several have also been mired in corruption scandals.
“In a world of new security challenges and continuing economic uncertainties, BRICS stands as a beacon of peace, potential and promise,” Modi said. The thrust of the declaration reflected the flagging economic fortunes of the BRICS countries in recent years due to the global slowdown.
In Russia, the decline in global oil and commodity prices coupled with biting Western sanctions have dealt a blow to the economy. The Chinese economy has slowed to its slowest pace in 25 years, although its 7 percent growth rate still places it among the fastest-growing global economies.
South Africa remains caught in severe economic turmoil, with the country’s credit rating at risk of being downgraded to junk by the end of the year. Brazil is only just emerging from months of the worst economic recession it has seen since the 1930s, a situation that was further worsened by recent political turmoil.
India, although the fastest-growing country in the world at 7.5 percent annually, is grappling with widespread poverty and the challenge of strikes against militants in Kashmir.
Xi warning
Chinese President Xi Jinping said yesterday a rising tide of protectionism and anti-globalization was endangering the world economy’s still fragile recovery as BRICS leaders vowed to forge closer business and trade ties.
Both Xi and Modi said the group must stick together, insisting there was much to remain positive about even though its members have been beset by domestic woes and problems sparked by the 2008 financial crisis.
“At present 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,” Xi said. The Chinese president said “deep-seated imbalances that triggered the financial crisis” were far from being resolved. “Some countries are getting more inward-looking in their policies. Protectionism is rising and forces against globalization are posing an emerging risk,” he added.
While Xi did not single anyone out, Republican candidate Donald Trump has threatened to erect trade barriers to Chinese products if elected US president. Britain’s vote to leave the European Union has been interpreted partly as a backlash against globalization. While China’s economy has been running out of steam of late-although it is still the world’s second largest-India is now the fastestgrowing major economy and its GDP is expected to increase 7.6 percent in 2016-17.
Deeper bonds’
Modi said it was vital the BRICS nations increased cooperation by dismantling trade barriers and developing infrastructure. “I think I speak for all when I say that through a common vision and collective action, we will create and sustain deeper bonds among BRICS nations, develop our economies and secure our societies,” he said. “While our achievements have been substantial, we need to sustain the positive direction and strong momentum of intra-BRICS engagement.”
Xi said BRICS countries had much to be proud of and had contributed to more than 50 percent of global growth in the last decade. “The past decade has seen BRICS partnership expanding with win-win results,” he said. “We need to deepen our partnership: we BRICS countries are good friends, brothers and partners that treat each other with sincerity.”
Russian President Vladimir Putin meanwhile called for closer cooperation in areas such as ecommerce and space exploration. “We look forward to translating into reality the idea of a BRICS Credit Rating Agency,” he said, without giving details of the much-trailed agency or timeline for its establishment.