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Can BRICS Make a Difference at Busan? – Part 2

Analysis by Kanya D'Almeida

WASHINGTON, Nov 12 2011 (IPS) - While experts are hopeful that blocs of emerging market economies like BRICS – Brazil, Russia, India, China and South Africa – will play a major role in the upcoming aid effectiveness conference in Busan, South Korea, others fear that the new players do not yet have the fiscal power to make a serious intervention in fora generally dominated by rich donor states.

For instance, while the BRICS pledged just 26 billion dollars in loans to low-income countries over the last decade, traditional donors from the Organisation for Economic Cooperation And Development (OECD) committed 269 billion dollars in the same timeframe.

Moreover, many observers fear that rising South-South partnerships are merely a slightly distorted mirror image of the old exploitative relationships between the developed and developing worlds.

According to Jayati Ghosh, a leading international development economist, “Groupings (like BRICS) do not so much change patterns of trade and investment as reflect them. We have seen the emergence of multinational corporations from the South, which have affirmed the universal tendencies of capital rather than (produce) any massive difference based on location.”

“On the other hand, it is also true that, while capital is increasingly footloose and transnational in its orientation, it is also still relies heavily upon state support and therefore nation- states (including in the South) continue to make efforts on behalf of capital originating in their own countries,” she told IPS.

“Ironically, despite this interdependence, states are increasingly subservient to capital (especially finance capital) than the other way around. This is as true of capital from Northern countries as from Southern ones.”

This prognosis raises serious questions about both the capacities and desires of BRICS countries to significantly alter development assistance, or trade, in ways that benefit the global South.

A recent working paper put forward by Nkunde Mwase, an economist at the strategy, policy and review department of the International Monetary Fund (IMF), examined the BRICS’ increased development financing flows to low income countries (LICs) and found that “BRICs lend more to LICs with weaker institutions. Land-locked, resource- scarce LICs receive significantly less financing than other resource- rich LICs.”

Most of this development lending over the past few years has been driven by China, Mwase told IPS.

“We do not find any evidence suggesting that LICs with good governance are rewarded with more financing. While these findings are not unique to BRIC financing, the rapidly growing BRIC-LIC ties have ‘raised the stakes’ and underscore the need to ensure that the financing does not undermine efforts to improve governance in LICs,” she stressed.

“Such loans could lead countries into debt traps if the risks are not fully taken into account,” Mwase added. “LICs need to ensure that the financing is allocated to projects with high returns and does not lead them (down) unsustainable debt paths.”

This trend is compounded by a pronounced lack of transparency in transactions – be they aid, development assistance, loans or even corporate contracts – between BRICS and poorer countries.

“Countries like China and India do not yet publish any country- specific data on their concessional and non-concessional loans,” according to a paper from the Centre for Chinese Studies at the Stellenbosch University in South Africa.

“This makes it difficult for partner countries’ parliaments and civil-society actors to assess the impact that money has on their development. Greater transparency is needed if we are to make a general assessment of the effect of (BRICS’) development ‘packages’.”

Susan Thomson, a postdoctoral fellow in contemporary politics at Hampshire College, is one of many observers concerned about the negative impacts of development aid in the hands of BRICS countries.

“BRICS as a donor begs the question of what conditionalities, if any, will be placed on recipient countries,” she told IPS. “The U.S., Canada and the EU traditionally make human rights requirements and human security requirements part of their aid package, but it is unlikely that the BRICS will do the same.”

“China provides a particularly pernicious example of direct aid, particularly to Africa, with no strings attached and through this we see systemic human rights abuses by governments across the continent,” she added.

She pointed to the example of Zambia, where Chinese development projects force local workers to labour seven days a week, with scant regard for international or domestic labour, human and social rights.

“The fact that African governments are actively seeking additional channels of aid is going to lead to an increasing economic gap, where the winners are the BRICS and the losers are the subsistence farmers, women, people living with HIV/AIDS and all the traditional ‘losers’ of this system,” Thomson said.

A 2011 study by GRAIN and the Economic Research Foundation unearthed a recent trend of Indian corporations buying up vast tracts of land in Africa, essentially “outsourcing” its food production into low- income countries across the continent.

In the year 2010, “more than 80 Indian companies have invested about 2.4 billion dollars in buying or leasing huge plantations in countries such as Ethiopia, Kenya, Madagascar, Senegal and Mozambique that will be used to grow foodgrains and other cash crops for the Indian market.”

This practice, which many in the agricultural and food justice movement refer to as “land grabbing”, has hitherto been decried as a neocolonial tool of the West to exert corporate control over the global South.

India’s new venture thus highlights the limits of South-South cooperation as a way out of systemic inequality and exploitation for many countries.

According to Ghosh, “South-South partnerships do have the potential to change the current exploitative and inefficient global economic order, but only if they are based on very different premises of co- operation – currently, they (like North-South economic relations) are also driven by corporate needs and operate very much within a broadly market-driven system that privileges the interests of large companies over citizens.”

“What is surprising is that in this moment of global crisis there is still no serious attempt in any of the global economic groupings (including BRICS) to consider alternatives that would lead to sustainable resolutions – for example, the need to move from credit bubble-led growth or export-led growth to more sustainable forms of growth based on expansion of domestic wages and employment are simply not considered seriously,” she stressed.

“Most significant of all, the need to identify alternative forms of production and consumption that will involve a more sustainable and less damaging approach to nature is still not at the top of national or international policy agendas,” Ghosh added.

*This is the second of a two-part series on the BRICS countries and how their development and political agendas will influence the future of aid.

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