South African Trade and Industry Minister Rob Davies speaking at the World Economic Forum. Credit: World Economic Forum/CC-BY-SA-2.0

By John Fraser
JOHANNESBURG, Jan 12 2013 (IPS)

As the five members of the BRICS group of emerging economies – Brazil, Russia, India, China and South Africa – tighten ranks and seek to expand their global influence, the inevitable trade spats have begun.

A decision last month by South African Trade and Industry Minister Rob Davies to pursue a general tariff increase on chicken imports in response to concerns that Brazil is “dumping” the product could also hit Argentina, a leading trade expert here has warned.

Duane Newman, director of the Johannesburg-based Cova Advisory, explained that Argentina and Brazil, both of which export significant quantities of chicken to South Africa, are the main countries without free trade agreements with Pretoria to protect them from the planned tariff hike.

“There could be some unintended consequences from Minister Davies’ decision not to target just Brazil with anti-dumping duties, but to raise the tariffs,” explained Newman.

Report reveals systematic ‘dumping’

An investigation of the chicken trade between the two countries from 2008 to 2010, conducted by the International Trade Administration Commission (ITAC), confirmed allegations that Brazil was dumping whole chickens and boneless cuts of chicken on the South African market.

The ITAC’s findings made a strong case for Pretoria to slap ‘anti-dumping’ duties on the South American nation.

According to the ITAC’s report, anti-dumping duties can be imposed when there is a price difference between sales in a producer’s own market and prices charged on exports, when there is material injury to producers in the importing country and when there is a causal link between the imports and the damage.

Duane Newman, director of the Johannesburg-based Cova Advisory. Credit: John Fraser/IPS

The report found that with regard to whole chickens, price undercutting by Brazil caused material injury to South African producers, a loss of market share and a loss of potential growth.

Similarly for boneless chicken cuts, the report found evidence of price undercutting, suppression of South African producers’ ability to increase their prices, and a drop in sales volume, output, market share and growth.

The investigtion found that between 2008 and 2010 whole chickens from Brazil accounted for 36 percent to 44 percent of South African imports, while boneless cuts took between 94 percent and 97 percent of the South African import market.

According to Francois Dubbelman of the specialist trade consultancy F.C Dubbelman & Associates, who acts as advisor to the South African Poultry Association, “At that stage Brazil was the largest exporter to the Southern African Customs Union (SACU) of these chicken products, causing SACU producers injury.”

“Thus the industry received no relief against the unfair trade from Brazil for at least five years – although ITAC found there had been dumping and material injury,” he added.

South Africa’s response

In January 2012, South Africa slapped provisional payments of between six and 62 percent on chicken imports from Brazil but failed to take the next step of imposing targeted anti-dumping duties on Brazil, shifting instead to a general imposition of higher tariffs on all chicken imports.

Newman called the decision a “rare” one, adding, “It will be interesting to understand the detailed reasons for the minister’s decision as it seems as if he is disagreeing with ITAC.”

Newman noted that the increase in general duties on chicken to up to 82 percent from the current 27 percent “will impact all imports of chicken, apart from (trading partners) with which South Africa has a preferential trade agreement like the European Union (EU), the European Free Trade Association (EFTA) and the Southern African Development Community (SADC).”

He said the countries that would be caught by the tariff increases include Brazil, Argentina and some Asian nations. There are existing anti-dumping duties against chicken imports from the United States into South Africa.

Some experts believe that Davies’ decision came in response to Brazil’s June 2012 complaint to the World Trade Organisation (WTO) about the provisional payments imposed by South Africa.

Had Davies opted to convert those provisional payments into anti-dumping duties, experts say, Brazil would have pursued its challenge through the WTO.

But Dubbelman dismissed this theory, arguing, “Countries go on a regular basis to the WTO with disputes. Brazil is known to follow that avenue on a regular basis, whether it has a foot to stand on or not.”

A more likley explanation, he said, is that Davies’ decision to spare Brazil from individual anti-dumping duties – announced in a letter to the ITAC on Dec. 21 –  was a strategic one, in keeping with the two countries’ joint membership in BRICS.

According to Dubbelman, Davies justified his actions on the basis of increased chicken imports from several countries, claiming that South African producers require a comprehensive response to deal with the intensified competition.

But South Africa’s shadow Trade and Industry Minister Wilmot James told the Business Day newspaper of Johannesburg that Minister Davies’ chosen strategy will not do enough to support South African chicken farmers.

“Instead of fighting the Brazilians for dumping chicken in our local and highly competitive market, Mr. Davies chose the soft and blunt option of hiding behind general tariffs without providing compelling factual reasons for his actions,” according to James.

Dubbelman warned that the real challenges facing South African poultry producers will remain unless some action can be taken against the EU.

He predicted that Davies will not impose as high a duty as the 82 percent that is currently allowed under international trade rules.

While some options cannot be pursued because of the trade agreement between Brussels and Pretoria, he added, there are provisions for so-called safeguard measures to be imposed on chicken imports from Europe, and he urged the minister to explore this possibility.

(END)

Smoke billowing out from a nuclear testing facility. Credit: National Nuclear Security Administration/CC-BY-ND-2.0

By John Fraser
JOHANNESBURG, Jan 8 2013 (IPS)

Not many nice things can be said about the apartheid regime in South Africa. It was racist, violent in the brutal oppression of many of its own citizens, and was despised around the world.

However, in the dying days of apartheid, the South African authorities took a step that has had major implications for the country and for the African continent: it scrapped its nuclear weapons programme.

“The first stage involved the dismantling of South Africa’s six complete (and one partially assembled) nuclear devices,” reported Greg Mills, who heads the Johannesburg-based Brenthurst Foundation, a research body that acts as an advisor to African governments.

“A decision to this effect was taken by then President F.W. de Klerk in February 1990, shortly after the release of Nelson Mandela from prison and the unbanning of the African National Congress, the Pan Africanist Congress and the South African Communist Party.”

South Africa acceded to the Non-Proliferation Treaty (NPT) on Jul. 10, 1991.  Seven weeks later, on Sep. 16, the country signed a Comprehensive Safeguards Agreement with the International Atomic Energy Agency (IAEA), allowing for frequent IAEA inspections of its facilities.

“South African authorities co-operated fully with the IAEA during the whole verification process, and were commended by the then director-general of the Agency in 1992, Dr. Hans Blix, for providing inspectors with unlimited access and data beyond those required by the Safeguards Agreement,” added Mills.

“The second step involved the scrapping of South Africa’s ballistic missile programme, which commenced in 1992, and took around 18 months.

“This process culminated in its admission to the Missile Technology Control Regime (MTCR) in September 1995, after the destruction of the last of its missile engines had been verified.

“The third stage involved the conclusion of SA’s biological and chemical warfare programme.”

Mills concluded that South Africa “thus occupies a unique position in the world as being the first country to have voluntarily dismantled its nuclear weapons capability.

“The (South African) experience does point to the importance of creating the right environment in which regimes can be made to feel confident enough to disarm and stay that way.”

While South African apartheid leaders’ actions were certainly worthy of praise – for once – there is some suspicion surrounding their motives.

Did they dismantle the country’s nuclear weapons because they believed in a vision of an Africa free of nuclear weapons?

Or was their motive more cynical? Realising that black rule was inevitable, did they dismantle South Africa’s nuclear weapons to keep them out of the hands of Nelson Mandela and his looming ANC administration?

Mills’ colleague Terence McNamee, deputy-director of the Brenthurst Foundation, wrote in the Johannesburg Star newspaper that the country that dismantled nuclear weapons “was not (current President Jacob) Zuma’s South Africa, but another country, an international pariah, mercifully now extinct.

“Zuma doubtless believes, like most of his senior colleagues who were active during the transition to democracy, that the people who built South Africa’s nuclear arsenal – the apartheid regime – destroyed it because they didn’t want the ANC to get their hands on it.”

He noted that de Klerk waited until March 1993 to tell the world of the dismantlement of South Africa’s nuclear weapons, and until that time “no one, not even Nelson Mandela, had been informed that the programme had been abolished (let alone that it even existed).”

While nuclear weapons no longer have a place in South Africa, or on the African continent, there is a growing expectation that nuclear energy will be required to help provide a growing part of the energy mix on the Continent.

“Nuclear power could help to answer the extraordinary energy backlog of African countries, where the continent produces about the levels of Spain, though with 20 times as many people,” Mills told IPS.

“But the concerns about the use of nuclear power in Africa go to the heart of the very reason why there is this backlog in the first instance: governance.”

Branding expert Jeremy Sampson believes the South African government received rewards for its decision to dismantle its nuclear arsenal. Credit: John Fraser/IPS

Branding expert Jeremy Sampson, executive chairman of the Johannesburg-based branding consultancy Interbrand Sampson, notes that in image terms the South African decision to scrap its nuclear weapons programme has boosted its moral authority on the issue of non-proliferation.

“The last couple of decades have seen a dramatic rise in the importance of brand and reputational issues,” he told IPS.

“This no longer applies simply to companies, products and services, but today embraces people, even countries.”

Questioning the real reason for scrapping South Africa’s nuclear weapons programme, Sampson speculates that the regime may have received rewards for this decision, which have not yet come to light.

“Did South Africa really develop a nuclear device, who helped them, was there a dummy run in the deep South Atlantic, and how would they have used it?” he wonders.

Sampson also suggests that South Africa’s decision to voluntarily given up its nuclear option raises many questions.

“Was the apartheid regime really desperate? Were sanctions biting? What was bartered, what guarantees were given, were slush funds really set up around the world for escaping members of the regime, as happened in Germany at the end of the Second World War?

“Has any other country voluntarily given up its nuclear option, which would have taken years and billions to develop?”

Sampson argues that whatever the rewards, they must have been “very, very significant. Military activity in Angola and the propping up of (Angolan rebel leader) Jonas Savimbi must have been high on the agenda.”

Frans Cronje, deputy CEO of the South African Institute of Race Relations, another Johannesburg-based think tank, suggests that the apartheid regime came under strong pressure from the West, and possibly from Russia as well, to renounce its nuclear weapons programme.

“The whole thing was dressed up as an honourable retreat from a nuclear Africa,” he told IPS.

“It is likely that Western countries and Russia as well had concerns about an independent African state having nuclear weapons.”

He also believes South Africa would today be stronger on the international stage if it had retained a nuclear arsenal.

“A nuclear African state would be taken more seriously and would have a stronger leadership role – it forces people to take you seriously,” he said.

“In leadership terms, renouncing nuclear weapons does the opposite – it reduces your influence in foreign affairs and international politics.

“If renouncing nuclear weapons grows your influence, others would be falling over themselves to surrender their nuclear arsenals.”

We may never know all the reasons why, but South Africa’s scrapping of its nuclear weapons did win moral benefits that have endured today.

It gave the country a voice globally on non-proliferation issues and the moral authority to develop its own nuclear electricity industry without attracting international suspicion, as has most recently been the case with Iran.

(END)

The port of Pecém in Brazil's impoverished Northeast region received a large order to unload and store cement factory equipment imported from China. Credit: Mario Osava/IPS

By John Fraser
JOHANNESBURG, Dec 19 2012 (IPS)

The five leading developing nations grouped in the BRICS alliance – Brazil, Russia, India, China and South Africa – are planning to intensify efforts to collect accurate trade data, so they can get a better picture of trade flows.

The exercise will help with economic planning, and will give improved insight into the economic links between the five members of the club.

“We can never agree on what our trade is,” Xavier Carim, deputy director general in South Africa’s Department of Trade and Industry, told IPS.

“We collect statistics differently, and we will seek to see why they don’t match. It’s a technical exercise.”

The statistical review is expected to be given a boost at the BRICS summit in Durban in March 2013, which will be attended by heads of government and economy ministers from the five member nations.

“Obviously it is always good to have better data,” Pretoria-based economist Dawie Roodt of the Efficient Group told IPS.

“The better the data, the more efficiently economists can identify trends – and the better they can advise on policy.”

Another leading South African economist, Mike Schussler of economists.co.za, agreed on the need for accurate data.

Leading South African economist, Mike Schussler of economists.co.za, agreed on the need for accurate data in the BRICS alliance. Credit: John Fraser/IPS

“You must have proper data,” he told IPS. “If you give advice based on data which is wrong, this will have led you to the wrong conclusions.”

He gave the example of South Africa’s trade deficit with China, which appears larger if Beijing’s data is used, and smaller if based on South African numbers.

“Meanwhile, our surplus with some African trade partners may be bigger than the records show,” Schussler suggested.

“The South African Reserve Bank needs accurate data when it is deciding what to do about interest rates.

“It is only fair that we look at data from both sides.”

A South African trade expert, who asked not to be identified because he is not authorised to speak to the media, told IPS that one reason for differences in the numbers may be because there is an incentive to undervalue imports, and to boost the value of exports.

“The customs value of a shipment being imported is the trigger for the import duties which you pay,” he said.

“Therefore there is a strong incentive to under-declare the value of your goods, because you will then pay less duty. Say the goods are worth 100,000 dollars and you declare their value at 50,000 dollars. You pay only half the duty.”

He noted that while most countries have import duties on goods which arrive at their borders, there are far fewer export duties on goods leaving a country.

“As a result, customs authorities pay less attention to exports, and indeed some countries may wish to inflate the value of their exports, as this gives them the appearance of a better trade balance.

“And some countries pay export incentives, which are based on the value of the goods, and this means there is every incentive for the exporter to make that value as high as possible, to maximise the incentive. There tend to be very few checks.”

The trade expert said that when government officials are looking at trade data, there is a standing joke that if the numbers tally exactly, something must be wrong.

“But there are ways of getting a more rounded view of what is going on,” he argued. “What you can do is look not just at the trade statistics but at the flows of money as well.

“It is the job of a Central Bank to look at money flows, while the country’s statistics department will look at the trade flows.”

He said that even if all trade data is collected rigorously, there is still scope for legitimate differences between the data in two trade partners.

“In South Africa we value goods based on a shipping term Free On Board (FOB),” he noted.

“We are one of only a handful of countries to do this. In most countries around the world, the value is calculated on the term Customs, Insurance, Freight (CIF). You can’t assume you will get the same result from these two different methods, as CIF will invariably be larger than FOB.”

Carim said that as well as looking at better coordination of trade data, BRICS governments are working on other initiatives. These will be discussed at a meeting of trade and economy ministers, which will take place alongside the main BRICS summit in Durban.

He said there will be a discussion of areas of “inter-BRICS collaboration, with coordination in multilateral fora such as the G20 and the WTO.”

There will be a discussion on how to promote trade.

“Our trade with all the BRICS is growing, especially with China and India,” said Carim. “Trade with Brazil and Russia is off a lower base.”

He said South Africa tends to export minerals and commodities to its BRICS partners, and would like to diversify this profile “with higher-value manufactured goods.”

Discussions at the summit are also expected on customs cooperation, support for small business, and boosting investment.

While the BRICS grouping has no secretariat or formal structures, it is clear that efforts are underway to give an economic and trade backbone to the club, and one test of the success of the Durban summit will be the extent to which concrete measures on all this can be put in place.

Though the World Trade Organisation (WTO) has long held that trade between African countries is too low, experts at the South Centre, an inter-governmental think tank of developing countries, say intra-continental trade is already significant in manufactured goods and promises a new path to industrialisation.

Valentine Rugwabiza, deputy director-general of the WTO, says Africa needs to strengthen domestic markets and integrate into the world market Credit: World Trade Organisation

“Trade among African countries is very low. Last year, it stood at 10 percent of the continent’s overall trade,” Valentine Rugwabiza, deputy director general of the WTO, which seeks to reduce barriers and promote aid for trade, told IPS.

“Though Africa’s share in world trade is also very small – less than three percent in 2011 – it is growing very rapidly, particularly with emerging economies; while trade amongst African countries is stagnant.”

With a rigid division of labour inherited from the colonial era, Africa relies on a narrow range of exports and is over-dependent on primary products: in 2010, fuel extraction and mining represented 66 percent of its total merchandise exports.

According to Rugwabiza, lack of investment in infrastructure and non-tariff barriers of all kinds make trade between the 54 countries cumbersome.

“Whereas it takes 18 days to export products from Latin America and the Caribbean, it takes almost 33 days to do so from Africa,” she added, noting that it is also more expensive to ship a container from Africa than from any other part of the developing world.

For instance, shipping a container from South-east Asia costs 900 dollars, compared to 2,000 dollars from Africa; likewise, it costs 935 dollars to import a container from South-East Asia, and almost 2,500 dollars to do so from Africa. The Geneva-based South Centre, however, has a more optimistic view.

“In absolute terms, intra-African trade is low,” Aileen Kwa, trade policy officer with the South Centre, told IPS. “In terms of non-oil exports Africa’s internal trade is almost on par with its exports to the EU. Furthermore, the trade growth rate within Africa is the second highest after China and before the United States and the EU. Therefore, it is very promising, also in terms of the quality of exports.”

She explains that, with the exclusion of South Africa, only 10 percent of sub-Saharan Africa’s exports to the EU are in manufactured goods, a figure that rises to 27 percent for intra-regional trade.

“Most of Africa’s manufactured goods go to Africa. So if the continent wants to industrialise, the market that provides the best opportunities is Africa, not China, the U.S., or the EU.”

For Rugwabiza, however, the industrialisation of Africa will require not only strengthening of the domestic market, but also integration into the world market.

“Today, components of the same piece are produced in different countries all over the world. This is a huge chance for Africa to specialise in single tasks and insert itself into global value chains,” she told IPS.

“Some countries already do so, but they are still an exception. Mauritius, for example, produces pieces for H&M, (a major global clothing store). Since it has a reliable logistics and service sector, the multinational knows that it will receive the orders on time and, thanks to a stable and predictable legal environment, that there will be no unexpected regulations coming up,” she said.

Kwa notes that the picture is uneven: in some parts of Africa, intra-regional trade is larger than in others. The total exports of the East African Community (EAC) to sub-Saharan Africa already surpassed their total exports to the EU in 2000. Other countries like Zambia and Senegal also export more to Africa than to Europe.

Still, other regions display a bleaker outlook.

Rugwabiza belives that Africa, with its high dependence on trade with the outside world, is highly vulnerable to external shocks. This is particularly true of the agricultural sector, as the food crisis has shown.

“In 2008, Africa imported cereals for 15 billion dollars, with only five percent coming from the continent. Agricultural subsidies in developed countries, insufficient investment and low productivity in (domestic) agriculture and non-trade barriers (between African countries) are still a huge obstacle,” she added.

Shoprite (Pty) Ltd, for example, a South African multinational, spends 20,000 a week on securing import permits to distribute meat, milk and plant-based goods to its stores in Zambia alone. For all the countries it operates in, about 100 ‘single entry’ import permits are required each week, but this can increase to 300 per week during busy periods.

As a result of this legal red tape, there could be up to 1,600 documents accompanying each loaded Shoprite truck that crosses a Southern African Development Community (SADC) border.

But things can change. For example, the EAC has managed to substantially reduce the number of control points, while Uganda and Rwanda have set up a common border post that is now open 24 hours a day.

Kwa says that African countries’ over-dependence on imports from world markets, particularly in food, is mainly due to their loss of productive capacities.

She believes there needs to be some balancing between short-term and long-term goals. While in the short run countries must be able to import food quickly and as cheaply as possible to meet their immediate needs, they must, in the long term, produce their own food without relying on imports from developed countries that have an extremely unfair competitive advantage due to the latter’s massive government subsidies.

Relying on imports undercuts domestic producers and undermines their future capacity to produce. Therefore, countries may need to use tariffs and other trade policy tools to stop some of the imports, even from their neighbours, at least for some time.

“First countries have to increase their productive capacities and then trade will follow. The WTO always thinks about increasing trade, but the main question for Africa is how to increase its productive capacities. Then trade will naturally follow,” Kwa told IPS.

Indonesia’s keen interest in becoming the newest member of BRICS – a bloc of emerging-market nations comprised of Brazil, Russia, India, China and South Africa – has sparked off a round of debate on the future and efficacy of South-South groupings.

István Tarrósy, assistant professor of political science at the Department of Political Studies at the University of Pécs and managing director of the Africa Research Centre in Pécs, Hungary, said that Indonesia’s development statistics make the country a shoe-in for membership: it is the largest economy in southeast Asia and is a demographic giant with a population of 248 million people, making it the fourth most populous country in the world, ahead of even Brazil and Russia.

It also has an active labour force of 117 million people, as of 2011.

Indonesia has long been recognised as a leading actor in the developing world, most notably for its active role within the Non-Aligned Movement (NAM) ever since it hosted the Bandung Conference in 1955.

“Its voice has always been decisive in any issue connected with the then Third World, today, the Global South. In terms of South-South cooperation, and in light of a redefined system of North-South dialogue within a gradually more multi-polar world, Indonesia has its place among the top categories of states influencing how our transnational global world develops,” Tarrósy told IPS.

Furthermore, given the country’s “pragmatic foreign policy practices and long-term cooperation with countries of the region and beyond, Indonesia could strengthen the common voice of emerging economies via BRICS. With the potential entrance of Indonesia, BRICS would then need to redefine, or rather refine its status as (possibly) one of the most important inter-regional groupings of countries of the global South,” he added.

Another significant issue is the investment sector, on which developing or emerging economies rely heavily. Foreign direct investment (FDI) into Indonesia, and Indonesian FDI flown into other, less strong economies across southeast Asia and beyond, could be further encouraged by BRICS membership, which would facilitate better trans-regional cooperation.

For instance, it could pave the way for increased “South-South cooperation in Africa, with a more substantial Indonesian role in project generation and financing. In addition to China’s and India’s growing presence and involvement in the African continent, Indonesia could play (a bigger role), particularly if we (acknowledge) the growing amount of official development assistance (ODA) emerging economies have granted Africa,” according to Tarrósy.

Indonesia is one of Asia’s leading economic powerhouses; with last year’s economic growth recorded at 6.5 percent, the country is poised to overtake Russia in the regional economic race, said John Mashaka, financial analyst at Wells Fargo Capital Markets.

He told IPS that Indonesia recorded exports worth 204 billion dollars in 2011. Compared to its European counterparts like Greece, Italy and Spain, which are still floundering in the economic slush of the 2008 crash, Indonesia’s credit ratings shot up and the country’s economic outlook remains favorable.

Its domestic market is huge and the current economic boom can be attributed to its political stability and sound economic and monetary policies, which have attracted consistent FDI.

“In short, Indonesia is an economic power to be (reckoned) with and its decision to join the BRICS could have a huge impact in terms of the body’s credibility. Indonesian membership will definitely solidify BRICS’ capital composition, and also bring on board extraordinary fiscal capability,” Mashaka told IPS.

BRICS versus IBSA?

Thomas Lawo, executive director of the European Association of Development Research and Training Institutes (EADI) in Bonn, Germany, doubts that BRICS will be a major game-changer in global geopolitics in an increasingly multi-polar world, mostly because of its members’ divergent economic trends and political interests.

On the one hand, Russia is set to re-emerge as a strong global power with a dominant role in central and western Asia, along with India and China.

“But India needs to sort out its internal rifts and neighbourhood problems first, while China is becoming a strong force to reckon with in Asia, Africa and Europe. China is definitely the (primary) growth-engine of Asia and is stepping up its influence in the global economy (armed) with military strength to match its ambitions,” Lawo said.

Indonesia, on the other hand, is more comfortably clustered with South Africa and Brazil as a regional power and an economic anchor-country for the southeast Asian region, but lesser on a wider global scale.

Another possibility is the re-emergence of a politically stronger ASEAN, now that Burma (Myanmar) is opening up to its neighbours. In this context, the MIST countries – Malaysia, Indonesia, Singapore and Thailand – will become more relevant, if they can overcome their internal problems and play the regional integration card.

Alexandra A. Arkhangelskaya, head of the Centre for Information and International Relations at the Institute for African Studies at the Russian Academy of Sciences, explained to IPS that after the admission of South Africa, BRICS will likely be expanded to include Indonesia, Turkey, Australia, Nigeria and Mexico.

If this happens, she stressed, BRICS will be pushed to clearly articulate its specific identity in the international arena.

The rise of BRICS as regional bloc also raises the question of whether its role is very different from that of IBSA, the same group minus China and Russia.

BRICS has certainly attracted a lot of attention and it is widely accepted that the bloc will try to achieve certain broad economic reforms as well as attempt to restructure the Western-dominated global financial architecture.

Still, Arkhangelskaya believes that the extent to which IBSA will be forced to live in the former’s shadow will very much depend on South Africa, which is currently “sitting on two chairs”, as well as China’s role in BRICS and the world economy.

Experts fear that IBSA will be forced to dissolve in the light of BRICS’ expansion.

Some analysts still argue that IBSA and BRICS represent the old clash of India versus China; others believe it is more likely that the groups will find themselves on very different tiers of the South-South multilateral cake.

Although there is some overlap in core issues, the fact remains that the BRICS countries are more focused on economy, while IBSA is concerned with promoting democratic values and other causes common to the three countries, and has a distinct personality of its own.

Thus, IBSA can remain an instrumental and practical mechanism of the three countries representing three different continents, sharing their interests and strengthening their economic cooperation to further the interests of the South.

South Africa needs to stop agonising over whether it deserves to be in BRICS and start focusing on making the most of its membership to leverage better trade deals.

That is the message from business leaders and academics following last week’s BRICS summit in New Delhi, which brought together the heads of state and government of Brazil, Russia, India, China and South Africa.

From the moment South Africa was asked to join the group there has been much discussion on whether the country really qualifies, and even the inventor of the BRIC acronym, Jim O’Neill, has made no secret of his doubts around the African country’s membership.

In a recent interview with South Africa’s Mail & Guardian newspaper, the global chairman of Goldman Sachs Asset Management said: “It’s just wrong. South Africa doesn’t belong in BRICS. South Africa has too small an economy… and in fact, South Africa’s inclusion has somewhat weakened the group’s power.”

But Gus Mandigora, executive director for Trade Policy at Business Unity South Africa (BUSA), said the question over whether South Africa merited membership of BRICS was getting old, and what was important now was making the most of that membership.

“Our view is that we are members, so let’s get over that question of whether we deserve to be there or not,” he said.

“Yes, BRICS is still in its infancy and yes, it is still a work in progress, but I think the question we should be focusing on is, not should we be there, but how can we use this platform and its opportunities to our advantage.”

Mandigora, whose organisation led a delegation of more than 50 South African businesses to New Delhi – among them Africa Rainbow Minerals, the Development Bank South Africa and Standard Chartered – said he agreed that more needed to be done to “institutionalise” the role of business within BRICS.

“One criticism that is often made is that between summits nothing happens, so we need to ensure more work is done in between the summits to follow up on discussions,” he said.

“These are still early days and we are still refining how we do things, but we are confident that we can get advantage for South African businesses out of the country being in BRICS.”

Abdullah Verachia, a partner at South African emerging markets consultancy Frontier Advisory and the head of the India-Africa Business Network at the Gordon Institute of Business Science (GIBS) in Johannesburg, agrees the question of South Africa’s eligibility is no longer relevant.

He told IPS: “We cannot keep lamenting whether we should be there or not, we know our economic profile pales in comparison with the other members and even with countries outside like Turkey and Mexico.

“I think we should focus more on how we can benefit by being at the table and engaging within this dynamic economic grouping, which by 2015 will make up 50 percent of global market capitalisation.”

Verachia said more engagement between business and government was crucial, in order to capitalise on South Africa’s membership of BRICS. He welcomed the announcement of a plan to create a BRICS development bank, which could open the door for more engagement among the five countries and reduce dependency on the dollar.

The idea for the bank, which would offer an alternative to the World Bank and the Asian Development Bank, has been largely supported by global analysts, although some say there is not enough political cohesion and there are too many conflicting interests among the member countries to make it work.

On a South African level Verachia said: “There may only be 56 kilometres between Johannesburg and Pretoria, but you’d think it was several thousand, seeing how little business and government seem to talk.”

South Africa’s parliament is located in Pretoria and its unofficial financial capital is Johannesburg.

“In India, there is a much closer engagement between government and private sector and I think that is something we can learn from. But I do feel this needs to come from business, it can’t be government that drives that side of the process,” he said.

Some sort of BRICS-CEO grouping, like the one India and South African already share, could, Verachia said, be a way of creating more tangible and measurable benefits for business within BRICS countries, which he felt were lacking now.

Lyal White, director of the Centre for Dynamic Markets at GIBS, agreed BRICS still lacked firm direction and targets and said more needed to be done to take the discussions out of the summit and turn them into relevant policy.

“I think the development bank is a good idea and there is a lot of potential for this,” he said. “But the idea needs to be backed up with functioning institutions like a secretariat at least to support it going forward.”

White believes that with South Africa due to host next year’s summit, the ball is in their court, to take the initiative and establish the working groups immediately in preparation for 2013.

He said: “If we get the ball rolling now it will make for a stronger summit next year, and it should prevent the agenda being hijacked by either the larger members or geopolitical developments, which to some extent it was this year.”

And he added: “BRICS was created on economic lines, not political, but since South Africa has joined, and perhaps it is just coincidence due to the changes in the global context, it seems the last few summits have been dominated by politics.

“I think we need to get the focus back to the economics and to go beyond the talk about united economic fronts and really start making it easier for businesses and companies in the member countries to engage.”

The BRIC bloc was formed in 2009 and last week’s summit was its fourth. The group became BRICS when South Africa joined in 2010.

The five members account for roughly 18 percent of the world’s GDP, 43 percent of its population and 15 percent of global trade, and hold 40 percent of global currency reserves.

Trade ministers of the BRICS countries – Brazil, Russia, China, India and South Africa – say that at the G20 trade ministerial summit later this month in Mexico they will try to ensure that attempts by industrialised countries to frame a new trade agenda do not drown development-led trade liberalisation and the World Trade Organization talks.

The G20 is not representative of the WTO because the poorest countries have no say in setting the trade agenda. Credit: Kim Cloete/IPS

The Doha Development Agenda (DDA) was launched by the WTO almost 11 years ago to correct the historical imbalances and asymmetries in the global trading system. It was designed to enable poorer countries to integrate into the system.

“This is a most dangerous move by the industrialised countries which are determined to undermine the independence and multilateral character of the WTO, where a large majority of countries are asking for developmental flexibilities for implementing liberal trade commitments,” said a trade envoy, referring to the agenda for the meeting.

“The G20 is not representative of the WTO because the poorest countries and countries in Africa, except for South Africa, have no say in setting the trade agenda,” the envoy said.

The G20 bloc of major and emerging economies is made up of Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, United Kingdom, United States, and the European Union.

Clearly, the rich countries have overwhelming influence in setting the agenda at the G20 meetings, the envoy said.

“The draft agenda for the meeting is basically asking trade ministers to agree on creating a super-body headed by the chiefs of the WTO and OECD (Organization for Economic Cooperation and Development) to oversee all the review and monitoring functions,” the envoy argued.

Therefore, the presence of the BRICS ministers is so essential and important, lest the trade agenda be radically altered for the next 10 years, said sources familiar with the BRICS ministers meeting.

During their meeting in New Delhi last week, the BRICS ministers discussed the draft G20 agenda issued by Mexico, and not yet made publicly available, the South African trade minister said.

Significantly, the draft agenda is silent on the Doha trade talks.

It aims to take decisions on core trade issues without first discussing them at the WTO, which is now grappling with new approaches to accelerate the DDA talks.

“We strongly believe that the process has to be multilateral and the central focus has to be on the Doha single undertaking,” said Davies, emphasising the importance of transparency and inclusiveness.

“Attempts to reshape the architecture without concluding the Doha talks are not correct,” Davies said, suggesting that the BRICS countries are ready to take small steps to reinvigorate the Doha trade negotiations. The minister insisted that agriculture is at the heart of the DDA and that precious little is done to address the continued trade-distorting subsidies of the industrialised countries.

It is important to accord primacy to the Doha multilateral trade negotiations by discussing issues first at the WTO, Davies argued.

The draft agenda for what is going to be the first G20 trade ministerial meeting of its kind – beginning on Apr. 19 – sets the stage for preparing a “New Trade Narrative.”

The five-page agenda obtained by IPS, which remains confidential, squarely addresses the trade interests of the rich countries, under subheadings such as “better understanding global value chains to better regulate trade” and “services, trade finance and trade facilitation are essential to oil global value chains.”

Angel Gurria, secretary-general of the OECD, known as the rich-country think tank, and Pascal Lamy, the WTO director general, will provide the justification for pursuing this new agenda to the G20 trade ministers.

The heads of the OECD and the WTO have been working in tandem for some time now to change the manner in which global trade is measured and assessed in a neoliberal framework away from a development perspective, say analysts.

But developing countries and the least-developed countries have opposed the framework advanced by the OECD and WTO Secretariats on market-led trade reforms.

In addition, the G20 ministers will discuss “trade, growth, and jobs.” The themes for discussion include “trade as a source of growth,” “trade as a source of jobs,” and “the imperative to keep markets open and to keep opening markets.”

Up until now, trade negotiations, including the very setting of the trade agenda for any negotiations, have been based on a give-and-take framework. But for the first time, Mexico is asking ministers to move away “from this setting in which many trade discussions happen” to identify “the links between trade and job creation and (to improve) trade statistics that consider global chains and value addition.”

Mexico also wants ministers to focus on “the major forces and challenges facing their economies, including protectionist pressures, and what alternative policies are there to deal with them, other than trade instruments.”

“Reading the draft agenda, one gets the feeling that there is a hidden language, which shows basically the interest of developed countries and not of developing countries,” said Isabel Mazzei, a former Oxfam International trade policy advisor.

Speaking in her private capacity to IPS, she asked: “What does it really mean ‘to change the trade narrative’- does it mean to ‘move the goal posts’?”

“The Doha Round is about development, agriculture, elimination of subsidies, policy space….and now it looks like this narrative is obsolete as there is no mention of agriculture or subsidy elimination,” she said. “Many developing countries still have a big portion of their labour force coming from the agricultural and manufacturing sectors.

“Clearly the G20 draft agenda is a concerted attempt to bring the issues and concerns of rich countries from the back door,” she concluded.

Brazil and South Africa have experienced a widespread contraction of their manufacturing industries, with the latter suffering massive unemployment as well, thanks to the rampant volatility and misalignment of dominant global currencies like the dollar, trade experts from the two countries say.

South Africa's unstable exchange rate made exports uncompetitive. Credit: Servaas van den Bosch/IPS

“Brazilian industry is at the receiving end of exchange rate appreciation and 2011 saw a negative growth in the manufacturing sector with textiles, leather, chemicals, rubber, and electrical industries, among others, having been adversely affected,” said Josue Gomes da Silva, the chief executive of the Brazilian company, Coteminas. He was speaking at a closed-door seminar at the World Trade Organization (WTO) on Mar. 27.

“Four hundred thousand small businesses closed down in South Africa over the last three years, resulting in unemployment of about 23 to 34 percent due to the unstable exchange rate that made South African exports uncompetitive,” said Stewart Robert Jennings, chief executive of South Africa’s PG Group.

“The South African Rand has strengthened during the last three to four years and is now the most volatile currency,” he said, suggesting that the Brazilian Real and Rand are at their highest appreciation values against the greenback.

Da Silva and Jennings offered a detailed account of the creeping “deindustrialisation” in their respective countries at a closed-door seminar convened by the WTO’s Working Group on Trade, Debt, and Finance.

The two-day seminar, which concluded on Mar. 28, is an outcome of a sustained campaign by Brazil over the last year to persuade members of the WTO to discuss the role played by volatile exchange rates in international trade.

However, several industrialised countries, as well as China, were reluctant to address the issue of exchange rates at the WTO, saying it is part of the International Monetary Fund’s (IMF) agenda. “The seminar is an attempt to give shape to a reality, away from abstract concepts,” Brazil’s trade envoy Ambassador Roberto Azevedo told IPS.

While representatives from the private and public sectors and academia were invited to discuss the role exchange rates played in trade, journalists were barred from the seminar at the insistence of Canada and the United States.

Though there was no consensus on the factors influencing the misalignment of currencies, which imply that there is a gap between a country’s real exchange rate and its equilibrium level, there was general recognition that a problem exists and is playing an adverse role in different countries.

While currencies in big developing countries appreciated significantly over the last few years, in other countries, currencies depreciated or were maintained at a steady peg to the dollar despite favourable macro-economic fundamentals.

The Real is overvalued by 42 percent, while South Africa’s Rand has appreciated in double-digit percentage terms against the dollar. The Indian Rupee also initially appreciated by five percent against the dollar from 2008 to 2009. However, it has recently depreciated sharply due to the country’s burgeoning current account deficit.

Consequently, Brazil and South Africa witnessed a sharp drop in their exports of manufactured goods, while imports from other countries shot up alarmingly. “Brazil has dropped to 14th place in machinery and equipment exports, while imports doubled because of exchange rate overvaluation,” said da Silva.

Meanwhile, the policy flexibility of South Africa, Brazil and India, as reflected by the Wiggle Room Index constructed by The Economist, is not high. The three countries are ranked 65th, 79th and 82nd, respectively.

Against this backdrop, WTO director general Pascal Lamy issued a nuanced statement on Mar. 27 on the exchange rate volatility and its various effects on traders. He said international trade needs exchange rate stability.

“Trade measures cannot correct policy imbalances elsewhere, and be an answer to non-trade policy concerns…. Tit-for-tat measures would be a recipe for protectionist crossfire,” Lamy cautioned.

All these issues, Lamy said, “require a mix of cooperation in the macro-financial field and proper domestic policies which lie outside the remit of the WTO.”

The director general exhorted participants to make sure that the “WTO system does not crumble under the weight of excessive expectations.”

In contrast, a senior official of the U.S. administration, which is providing credit at close to zero percent to its banks and industry since the onset of the financial crisis in 2008, complained that China had kept the Yuan nearly unchanged despite a growing current account surplus and bulging foreign exchange reserves.

“A strong consensus now exists on the importance of promoting market-determined exchange rate systems, enhancing flexibility to reflect underlying economic fundamentals, avoiding persistent exchange rate misalignments and refraining from competitive currency devaluation,” said Mark Sobel, the U.S. Treasury Department’s deputy assistant secretary for international monetary and financial policy.

China responded saying that those countries adopting unconventional monetary policy have contributed to the currency volatility and misalignment by adding liquidity to financial markets.

“Exchange rate volatility was intensified by the monetary policy of major currency issuers – the U.S.,” Ruogu Li, president of China’s Exim Bank, told the participants.

“Both developed and developing members have fallen victim to major currency issuers,” the Chinese banker said, according to sources present at the meeting. “For every iPhone sold in the U.S., Chinese workers and companies get less than two percent, while the rest of the profits go to the American companies.”

The seminar has underscored the need to acknowledge the problem.

“If countries agree that misalignments are a given in the current international economic and trade processes, it is important to discuss the trade-related aspects of the problem at the WTO,” said Azevedo.

At their summit in the Indian capital on Thursday, leaders of the coalition known as BRICS – Brazil, Russia, India, China and South Africa – made several noteworthy decisions that experts say hint at the converging of economic and political interests of a disparate regional bloc.

China’s trade minister Chen Deming opposed sanctions against Iran when rising oil prices were hitting BRICS. Credit: World Economic Forum/CC-BY-SA-2.0

Though the leaders chose to defer the long-awaited announcement of a ‘South-South Bank’ to next year’s meet, or beyond, the ‘Delhi Declaration‘ produced at the end of the summit said BRICS finance ministers have been directed to “examine the feasibility and viability of such an initiative, set up a joint working group for further study, and report back to us (heads of state) by the next Summit (in South Africa).”

“Creating such a ‘BRICS Bank’ involves complex issues, such as the medium of transfer of credit,” said Vivan Sharan, associate fellow at the prestigious Observer Research Foundation (ORF), which hosted a BRICS academic forum of experts and scholars from member countries in New Delhi from Mar. 4 – 6.

“But there are no roadblocks ahead and it is an idea whose time has come,” Sharan told IPS. “While the plan now is to supplement rather than supplant the existing global financial structure, there is clearly the ambition to go ahead.”

For now though, according to Sharan, citizens of the bloc, who account for nearly half the world’s population, can be content with the knowledge that by June there will be a BRICS Exchange Alliance in place, allowing trading options using local currency.

“Investors will soon be able to invest in each other’s progress and there will be greater liquidity, better market-determined integration and the possibility of extending credit in local (currencies),” Sharan said. “Two BRICS countries are among the top five in purchasing power parity terms and four are in the top 10.”

BRICS’ frustration with the policies of the wealthy G7 countries – France, Germany, Italy, Japan, Britain, the United States, and Canada – was palpable at the meeting of the new bloc’s trade ministers on Wednesday with Brazil’s Fernando Pimentel leading complaints of the G7’s tardiness in meeting reforms promised by the International Monetary Fund (IMF).

Pimentel’s concerns were reflected in the Declaration, which said: “The build-up of sovereign debt and concerns over medium to long-term fiscal adjustment in advanced countries are creating an uncertain environment for global growth.”

Further, the Declaration charged that “excessive liquidity from the aggressive policy actions taken by central banks to stabilise their domestic economies have been spilling over into emerging market economies, fostering excessive volatility in capital flows and commodity prices.”

But the toughest statements came over the sanctions imposed on Iran and the situation in the Middle East. “We respect the United Nations (Security Council) resolution but at the same time it does not forbid countries to engage in trade in essential commodities and what is required for human good,” said India’s Anand Sharma at a joint press conference of trade ministers.

China’s trade minister Chen Deming declared that his country could not be expected to follow unilateral sanctions against Iran at a time of rising crude prices that were adversely affecting the BRICS countries and the global economy.

BRICS leaders said in the Declaration they were agreed that the “period of transformation taking place in the Middle East and North Africa should not be used as a pretext to delay resolution of lasting conflicts but rather it should serve as an incentive to settle them, in particular the Arab-Israeli conflict.” “This is indeed a bold declaration coming from a group that is seen as disparate and one known to have divergent interests,” said Pushpesh Pant, a professor at the Jawaharlal Nehru University’s School of International Studies. “Earlier there were flip-flops over issues in the Middle East.”

Pant said it was still left to be seen how BRICS members will be able to carry out any of their articulations. “China has internal problems, Russia looks increasingly European, Brazil cannot shake off its Latin American moorings and India has serious problems in dealing with its neighbours.” “Will membership in BRICS encourage China to support India’s candidature for a permanent seat in the U.N. Security Council is a question that looms up,” said Pant. “Another is the sometimes conflicting interests of the Shanghai Cooperation Organisation (that includes China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan.)”

The Declaration said: “China and Russia reiterate the importance they attach to the status of Brazil, India and South Africa in international affairs and support their aspiration to play a greater role in the U.N.”

According to Sharan the strength of the Delhi Summit lies in the Delhi Action Plan (DAP), released along with the Declaration on Thursday, calling for meetings of BRICS foreign ministers on the sidelines of the U.N. General Assembly, and of its finance ministers around the G20 meetings.

There will also be, according to the DAP, meetings of finance ministers and fiscal authorities around those organised by the World Bank and IMF, including stand-alone meetings.

“All this means is that, in spite of the ifs and buts, we can expect more of the kind of coordination seen at the Security Council during the year 2011 and that there is a better chance for multilateral approaches when it comes to global peace and security,” said Pant.

By Servaas van den Bosch and - -
JOHANNESBURG, Mar 28 2012 (IPS)

South Africa’s membership of the bloc of leading emerging economies and its unique position in Africa heralded the country’s role as a gateway into the African continent. However, trade experts question whether it can live up to this position as investors begin to increasingly look towards other African markets.

Rail networks in Africa remain underdeveloped only 10 percent of transport goes via rail. Here a train crossing the Namib Desert. Credit: Servaas van den Bosch/IPS

And South Africa, as the most developed country in Africa, offers the infrastructure and services to unlock the region’s frontiers, they say.

With the International Monetary Fund forecasting 2012 growth figures averaging around six percent for sub-Saharan Africa – and with countries like Angola raking in GDP growth of almost double that – the continent is touted as the investment destination of the decade.

Africa’s population of just over one billion pales in comparison with Asia’s 3.8 billion, but the African market is largely untapped and most countries find themselves on a firm growth trajectory.

South Africa, therefore, should be the logical first port of call for investors. But regional trade experts gathered at a mid-March forum on South Africa’s Trade Policy, organised by the South African Institute for International Affairs (SAIIA), questioned the gateway concept.

“Yes, South Africa represents the continent in the G20 (bloc of developing nations), but that is not the point,” said Peter Draper, senior research fellow with SAIIA. “If a gateway is supposed to be a transmission belt between global and regional markets and production facilities, the question should be whether South Africa can use its physical and material infrastructure to fulfil a connecting function between Africa and the rest of the world.”

The answer to this question is not an unequivocal yes. “The need to get minerals down from the central African plateau to the ports, using South Africa’s good infrastructure, has boosted it as a transport hub,” said Draper. “But South Africa, geographically speaking, is not optimally located, and some of the traditional advantages are rapidly eroding.”

Places like South Africa’s economic province of Gauteng or its coastal city of Cape Town are no longer necessarily the preferred outposts from which multinationals conquer the continent.

The reason for this is not just because South Africa is relatively far from African markets.

Global player General Electric recently choose Nairobi as its sub-Saharan hub – following companies like Coca Cola, Nestle and Heineken – and it based its decision partly, say trade academics, on South Africa’s unpredictable policy environment.

“It raises the question: to what extent do foreign companies still use South Africa as a conduit into the continent?” said Draper, who said heavily populated centres of West Africa – and not South Africa – will drive future growth on the continent.

According to Dianna Games, chief executive officer of consulting firm Africa @ Work, South Africa used the gateway concept to position itself globally. “But this idea of South Africa as a single gateway into the continent is not necessarily shared by the rest of Africa.

“As foreign investors are disaggregating African regions and countries, South Africa is losing traction on a whole host of issues. This does not mean that other African countries are necessarily in a better position, but the reality is that these markets are moving up, while South Africa is sliding.”

She added that South Africa, situated at a remote tip of the continent, should deploy progressive strategies to keep attracting investment.

“Investors go directly to other African markets, because they can. The South African government is not as worried about the decline of this competitive edge as it should be,” she said.

Games said the South African port of Durban was one of the most expensive in the world. Though, with the rehabilitation of the East and West Coasts of Africa, some of it by resource companies needing to find more convenient export routes, trade patterns were starting to change in the region. In time, it is likely that Durban will be just one more port handling regional trade, rather than the main one.

“Investors are also worried about current government policies, including a decline in economic and press freedom. South Africa is losing its status as an exception in Africa, and is viewed by some to be on a downward trajectory, with some other economies rapidly improving. Meanwhile, the actions of petty bureaucrats have affected the relations between South Africa and other African countries, which generally are not managed well.”

In this vacuum, China and India have long since bolstered bilateral relations with most African countries. And Portuguese-speaking Africa, especially Angola, is Brazil’s well-established gateway into the continent.

“With 240 Australian listed mining companies, among others, and over 800 oil and gas outfits operating in Africa, the gateway concept is declining. Many of these companies operate from their host countries and go direct to the resources as required, rather than setting up headquarters in Africa…We focus heavily on BRICS and not on African countries. But BRICS might fizzle out,” Games said.

“We inherited the role of a gateway, it wasn’t necessarily a policy objective,” commented one South African trade official. “And we are certainly not a gatekeeper, which is the connotation that goes with the idea of a gateway.”

But according to the official, it is not really relevant whether South Africa is losing its gateway status. “We would welcome investments being routed directly to African countries. That way our collective growth trajectory is increasing. It means our policies are working. It means that the continent is growing and becoming more competitive. We need a growing Africa for South Africa’s own future.”

Excerpt:

By Ravi Kanth Devarakonda and - -
GENEVA, Mar 24 2012 (IPS)

Trade envoys of India, Brazil, and South Africa have warned industrialised countries not to hijack the Doha multilateral trade negotiations by adopting the controversial plurilateral approach to liberalise trade in services.

A plurilateral agreement allows member countries to voluntarily agree to new rules. In contrast, in a multilateral agreement all members have to be in agreement.

This, they say, could ultimately undermine “the possibility of resuscitating the Doha Round.” The Doha Development Agenda was launched almost 11 years ago to correct the historical imbalances and asymmetries in the global trading system and was designed to enable poorer countries to integrate into the system.

A closed-door Enchilada meeting was convened on Mar. 21 by the chair for Doha services trade negotiations, Ambassador Fernando de Mateo of Mexico. According to sources present at the meeting, the trading bloc known as IBSA (India, Brazil, South Africa) stated that while they are willing to explore new approaches to advance the Doha trade negotiations towards an early outcome, they would oppose any attempt to weaken the multilateral negotiations.

Over the last three years, the industrialised countries have changed the terms of the Doha negotiations without addressing the central issues. They seem determined to extract a high price involving steep cuts on industrial goods and sweeping market access for services from the four developing countries – China, India, Brazil, and South Africa – for meagre concessions to reduce their subsidies and market access for agriculture products.

The Enchilada provided the first encounter between industrialised countries and the IBSA countries in the face of sustained attempts by 16 industrialised and some developing countries to part with the Doha trade negotiations.

Thirty-three countries were invited to the Enchilada including: the United States, Argentina, Australia, Brazil, Canada, Chile, China, the European Union, India, and Singapore among others.

De Mateo said that it is important to fully explore different negotiating approaches based on the guidance provided by trade ministers at the eighth ministerial meeting of the World Trade Organization (WTO), while respecting the principles of transparency and inclusiveness. He said it is important to advance negotiations where progress can be made and asked the participants to suggest whether a plurilateral approach can be adopted to do this.

The three IBSA members warned that the existing methodology of negotiations, which involved inclusiveness and transparency, must not be replaced by an exclusive format of plurilateral negotiations involving select members.

“We are willing to explore new approaches to reinvigorate the Doha Round as directed by ministers at the WTO’s eighth ministerial meeting, but this has to take place within the framework of multilateralism, inclusiveness and full transparency based on the Doha mandate which has stipulated that negotiations to be conducted on the basis of Single Undertaking,” South Africa’s trade envoy Ambassador Faizel Ismail told IPS.

The Doha Round was launched on the basis of single undertaking in 2001 to enable the WTO members to address all the issues across- agriculture, industrial goods, services, rules, environment, and intellectual property rights – on a fair and balanced framework.

But the negotiations are facing a grave impasse due to untenable demands raised by some industrialised countries in market access for industrial goods. Trade ministers have repeatedly called for concluding the round based on a “fair and balanced” outcome that members could live without much pain.

However, powerful domestic lobbies in some major industrialised countries have raised the bar exceedingly high in areas like industrial goods and services beyond what is prescribed in the Doha mandate while turning their back on agriculture and movement of short-term services providers as demanded by developing countries.

At the WTO’s eighth ministerial meeting, ministers asked their envoys to explore new approaches to overcome the prolonged impasse in the Doha negotiations. But, the industrialised countries, along with some developing countries like Singapore, Colombia, South Korea, Hong Kong, Mexico, and Chile, are insisting on plurilateral negotiations that would exclude the participation of majority of countries.

The South African envoy argued that “the so-called plurilateral approached that has been proposed by some of the major developed countries is designed to raise the level of ambition beyond the capacity of the majority of developing countries and to change the existing methodology of negotiations of trade in serves as a stand-alone issue.”

“Any attempt to create new approaches would have the effect of undermining the Doha Round and further marginalising the smaller and poorer countries at the WTO,” he said.

Brazil’s trade envoy Ambassador Roberto Azevedo said, according to sources at the Enchilada meeting, that his country is ready to work on any multilateral approach in the context of the Doha Round that could make progress and help conclude the Round.

“Market access is an integral part of agriculture, industrial goods and services,” Azevedo told his counterparts. According to sources he was suggesting that some members are aiming at market access in services in total disregard to agriculture and industrial goods, which would be tantamount to a “business as usual approach” and which would not succeed.

According to sources, the Indian trade envoy Ambassador Jayant Dasgupta said his government is willing to discuss any issue in services under the Doha mandate at the special committee on trade in services.

Supporting the South African proposal for concluding the negotiations on a waiver for least-developed countries from undertaking any services commitments as well as duty-free and quota-free market access for the poorest countries, the Indian trade envoy cautioned against a plurilateral approach for services.

Even among the industrialised countries, there is no unanimity on a service plurilateral agreement outside the Doha. The European Union said at the Enchilada meeting that Brussels wants members to pursue an information and communications technology services agreement in parallel with the ongoing ITA- II (Information Technology Agreement) goods review.

But, the United States and Canada, two major drivers for the services plurilateral agreement among the 16 countries, kept mum at the Enchilada meeting. Significantly, the 16 countries – who call themselves the Real Good Friends of services liberalisation – hosted their own meeting on Wednesday and Friday to discuss how they must cobble their plurilateral agreement.

In a nutshell, the WTO is torn asunder by the two conflicting approaches. “The plurilateral approach will have the effect of excluding developing countries while undermining the possibility of resuscitating the Doha Round,” Ismail cautioned.

Excerpt:

India’s generic pharmaceutical industry meets 70 percent of domestic demand and exports 11 billion dollars worth of generic drugs annually. Credit: Kristin Palitza/IPS

By Ranjit Devraj
NEW DELHI, Mar 19 2012 (IPS)

By allowing a generic manufacturer to produce a patented cancer drug at a fraction of its current cost, India has declared that it is not about to abandon its role as the ‘pharmacy of the world’s poor’.

In a path-breaking move on Mar. 9, India’s patent office invoked compulsory licensing (CL) provisions under World Trade Organisation (WTO) rules to allow generic drug manufacturer Natco Pharma to produce and sell ‘Nexavar’ in India, a drug developed by the German pharmaceutical giant Bayer to treat liver and kidney cancer.

CL allows generic manufacturers to produce a patented drug or use a patented process when denied by the patentee. It is an important ‘flexibility’ clause in the WTO agreement on trade-related aspects of intellectual property rights (TRIPS), but one that countries capable of manufacturing generics are still putting to test.

The issue has aligned non-government organisations (NGOs) and the manufacturers of generic drugs with those governments prepared to take on powerful pharmaceutical multi-national corporations (MNCs) that sell drugs worth more than 800 billion dollars annually.

“India always had CL provisions, even in its original 1970 patent laws. In 2005, when amendments were made to make WTO laws consistent, CLs were retained and this was a major achievement (of the Doha declaration of 2001),” Sachin Chaturvedi, senior fellow at the Research and Information System for Developing Countries, a think-tank of India’s ministry of external affairs, told IPS.

“More generic drug manufacturers in India are sure to come forward now and seek licenses to cheaply manufacture drugs and make them accessible to the poor,” said Meera Shiva, chairperson of the Health Action International – Asia Pacific, an NGO dealing with public health issues.

Shiva told IPS that the cost of treatment with Nexavar – the trade name for sorafenib tosylate – is expected to drop by nearly 97 percent, from 5,500 dollars for a month’s treatment per person to about 175 dollars, once production of a generic version by Natco Pharma begins.

“This will bring relief to more than a million people suffering from liver and kidney cancer and extend their lives by several years,” said Shiva. “It brings hope in a country where government surveys have shown that 65 percent of the 1.1 billion population fall into debt as result of ‘out-of-pocket’ healthcare spending.”

India’s patent office ruled that “the mandate of the law is not to just supply the drug in the market, but to make it available in a manner such that (a) substantial portion of the public is able to reap the benefits of the invention. If the terms are unreasonable, such as high cost, availability is meaningless.”

Shiva said what is significant is the realisation that avenues exist within the WTO for governments to intervene on behalf of their people and ensure access to medicines in the face of attempts by pharmaceutical MNCs to keep profit margins high.

Indian Move a Victory for IBSA

Volunteers for the humanitarian organisation Doctors Without Borders (known by its French acronym MSF) in Brazil and South Africa – countries that have benefited from the Indian generics industry – hailed the Indian move.

“In 2007, the Brazilian government issued a CL for the drug Efavirenz, used to treat AIDS, after declaring it of public interest,” said Felipe de Carvalho, project officer with MSF’s Access Campaign in Brazil.

“Right after the issuance of the CL for Efavirenz, while local production was being developed, Brazil bought generic versions from Indian generic producers,” de Carvalho said. “In 2007 alone, the purchase of cheaper versions of Efavirenz represented savings of 30 million dollars.

“So, if the use of CL in India is expanded and allows for exportation, countries like Brazil can benefit from the resulting generic production, as happened in the case of Efavirenz,” de Carvalho told IPS.

When the Brazilian government issued the CL for Efavirenz, the country became the target of intense denouncement by pharmaceutical companies and developed country governments, de Carvalho said.

“The decision in India is important to reinforce developing countries’ right to use TRIPS flexibilities.”

India’s CL has brought on a storm of protests from pharmaceutical MNCs. In a published statement Ranjit Shahani, who heads the Switzerland-based Novartis in India, warns that the move will “work to the detriment of patients through the negative impact they (CLs) will have on future investment in innovative pharmaceuticals.”

However, Shiva debunked this claim that investments in research and development for drugs come solely from excessive profits generated by the pharmaceutical industry. “The fact is, there is publicly- funded research and often big pharma benefits from that too.”

Catherine Tomlinson, senior researcher at the Treatment Action Campaign in South Africa, said it was “heartening to see India’s ongoing resistance against pressure from developed countries to not use the TRIPS provisions to protect health and we hope it will serve as a positive example for our own government.

“For activists in South Africa, it is distressing that our government continues to bow to pressure not to use CL provisions, despite the country facing numerous health emergencies and many critical medicines remaining unavailable to the majority of the population,” Tomlinson told IPS.

Leena Menghaney, a lawyer who works for MSF’s Access Campaign in New Delhi, said India’s patent laws had many advantages. “CLs can be issued to generic producers if patented drugs are unavailable or unaffordable, or if countries that lack production capacity order drugs from India.

“In fact compulsory licensing, under Indian law, is not reserved for emergencies – this is another myth spread by the MNCs,” Menghaney said.

Between 1970 and 2005, India did not recognise patents for medicines, allowing the growth, in that period, of a large and powerful generic pharmaceutical industry that takes care of 70 percent of domestic demand and also exports 11 billion dollars worth of generic drugs annually.

Excerpt:

By Ravi Kanth Devarakonda and - -
GENEVA, Mar 17 2012 (IPS)

India, Brazil, and South Africa, the international grouping for promoting international cooperation among the three countries known as IBSA, along with China and several other developing countries, have denounced the ongoing attempts to craft an exclusive, plurilateral agreement to liberalise trade in services without concluding the multilateral trade negotiations of the World Trade Organization.

IBSA has denounced the ongoing attempts to craft an exclusive, plurilateral agreement to liberalise trade in services. Credit: Servaas van den Bosch/IPS

In sharp contrast, the proposed plurilateral agreement for services, which aims to seek WTO commitments for the 16 countries part of the initiative, will turn the clock back for providing the much-promised developmental gains from the poorest and developing countries.

Ahead of the current turmoil in global trade negotiations, the IBSA trade ministers warned that that “plurilateral initiatives go against the fundamental principles of transparency, inclusiveness, and multilateralism.”

The 16 countries, the United States, countries from the European Union, Japan, Canada, Norway, Switzerland, Australia, New Zealand, Singapore, South Korea, Taipei, Pakistan, Mexico, Colombia, and Chile, call themselves the real good friends (RGF) of liberalisation of trade in services.

The RGF coalition will hold their third brainstorming session on Mar. 21 to prepare the ground for a plurilateral services agreement outside the WTO. Though the contours of the form and substance of the proposed agreement are not clear yet, the coalition appears determined to achieve an outcome based on the highest common denominator, say trade envoys from the coalition.

The IBSA countries have not adopted any formal position on the ongoing plurilateral initiative of the RGF coalition. But trade envoys from the respective countries spoke against the dangers it would pose to the multilateral negotiations in general, and the Doha trade negotiations in particular.

“We don’t think that plurilateral initiatives will comply with the requirement of transparency and inclusiveness, which is the basis for any multilateral process,” Brazil’s trade envoy to the WTO, Ambassador Roberto Azevedo, told IPS. “Brazil doesn’t believe it is a building block for the resumption of multilateral negotiations and on the contrary it would make that even more difficult.”

Brazil, said Azevedo, “is perfectly willing to negotiate multilateral market access in services as long as others are willing to negotiate market access in agriculture which is at the heart of the WTO’s Doha trade negotiations.”

The plurilateral route for an agreement on services will undermine the “balance” in the Doha trade negotiations, said Ambassador Jayant Dasgupta, India’s trade envoy. South Africa’s trade envoy Ambassador Faizel Ismail expressed concern that a plurilateral agreement will undermine the much- promised “developmental” outcome in the Doha trade negotiations.

Even the EU, which is taking an active part in the current RGF plurilateral initiative remains uncomfortable. “Our line is that we should not take initiatives that undermine the WTO because the WTO is very important for trade,” the EU’s trade commissioner Karel de Gucht said on Mar. 12.

Under the WTO’s General Agreement on Trade in Services (GATS), which governs global trade in services, any group of countries can strive for economic integration by seeking higher and deeper services commitments among themselves.

Until now, there was no attempt by any group of countries to craft an exclusive plurilateral services free trade agreement among a select group of countries within the WTO since its establishment in 1995.

In the past there were open-ended plurilateral agreements such as the WTO’s Information Technology Agreement involving liberalisation of trade in various electronic goods, and the telecom services agreement.

The ongoing exploratory talks among the 16 countries are taking place at a time when the WTO members have not been able to conclude the much-promised Doha negotiations, which were started in 2001.

A continued stalemate in negotiations between a large majority of countries seeking a palatable outcome and one major industrialised country making “maximalist” demands has put paid to an early conclusion, said trade diplomats.

As opposed to multilateral negotiations in which all members have an equal say, at least on the paper, the plurilateral process involves closed-door negotiations among select-members. The U.S. and other major industrialised countries, however, reckon that it is difficult to negotiate with 153 countries as it would involve a grand bargain of compromises.

“We live in a consensus based-organisation and what that means is that 153 members have to approve on everything and what that means in practice is the least common denominator,” the U.S. trade envoy to the WTO, Ambassador Michael Punke, told a seminar organised by the European Centre for Political Economy in Brussels.

He said “we should look at the services plurilateral as a different, fundamentally different way, of approaching the agreement.” Punke argued that the RGF group would provide the ideal ground for accomplishing an outcome based on “highest common denominator” since most of them are engaged in significant liberalisation of trade in services.

However, developing countries remain opposed to the assault on the multilateral framework. “The greater the number of participants, it would be difficult to reach a common agreement but it would provide greater benefits,” said Azevedo. “In short, a modest outcome with a larger number of participants should lead to more attractive and meaningful outcome.”

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By Isolda Agazzi and - -
GENEVA, Mar 9 2012 (IPS)

Decades after peasants’ networks have advocated for a new legal instrument to protect the rights of small farmers to land, seeds, traditional agricultural knowledge and freedom to determine the prices of their production, the United Nations Human Rights Council (UNHRC) may decide to start drafting a declaration on peasants’ rights next week.

Henry Saragih, the general coordinator of Via Campesina, a movement representing more than 200 million small farmers worldwide. Credit: Isolda Agazzi/IPS

For the Indonesian activist, labelled by some international media as “one of the twenty green giants of our world”, next week could mark the first victory in a battle that has gone on for more than a decade: the UNHRC will discuss a study of its Advisory Committee that recommends the elaboration of a new legal instrument on the rights of peasants, on the basis of a declaration proposed by the expert body.

This instrument would be modelled on the U.N. Declaration on the Rights of Indigenous Peoples, that has been replicated in some national constitutions and local tribunals.

It would complement another long-term battle of Via Campesina: the recognition of the principle of food sovereignty, namely the right of each country to decide what to produce locally and how much to rely on international trade, with a priority given to local production and consumption.

“Since 2001, we have brought the issue of peasant’s rights to Geneva,” Saragih continued. We have found understanding by some governments, non-governmental organisations like CETIM and FIAN, the expert Christophe Golay and the former rapporeur on the right to food, Jean Ziegler, (along with his successor), Olivier De Schutter. And after the 2008 food crisis, the world has become more sensitive to the problems of the small farmer.”

“Today, almost one billion of the world’s people suffer from hunger and malnutrition. Among them, 80 percent live in rural areas and 50 percent are peasant families,” Melik Özden, director of the Geneva- based NGO CETIM (Centre Europe Tiers-Monde), told IPS.

“These violations are due, among others, to the lack of agrarian reforms and aid to family farmers, forced displacement of peasants, confiscation of seeds by transnational corporations through the enforcement of intellectual property rights and the criminalisation of activists and peasant leaders.”

He adds that in recent years large scale land grabbing by some foreign governments and transnationals, wide-scale production of agro-fuels and stock market speculation on agricultural commodities have significantly worsened peasants’ lives.

“Year after year, Via Campesina has alerted the HRC about the violations of the rights of peasants, their limited access to justice in most countries and the scarcity of complaint mechanisms at the international level,” Christophe Golay, author of the first drafts of the study and of the declaration told IPS.

“But it has also become clear that some important rights were not included in any available instrument, such as rights to land, seeds, traditional agricultural knowledge and freedom to determine the prices of agricultural products.”

Africa Mthombeni, from the Landless People Movement (LPM) in South Africa and also a member of Via Campesina, is convinced that a favourable decision in Geneva would be an important step forward. “The HRC is the intergovernmental forum that guides national policies and a declaration on the rights of peasants would oblige governments to take them seriously,” he told IPS.

“Land reform in South Africa is too slow,” he continued, “and as a result poverty and unemployment are very high. The majority of our people live on social grants. The land question in South Africa has improved only insignificantly since the end of apartheid and more than thirty million people are still landless.”

He explained that 100,000 commercial farmers and big corporations own 80 percent of arable land, with 13 percent left to traditional communities. Only seven percent of land has been transferred since 1994, yet the government pledged to release 30 percent by 2014. And most of this transfer takes place in the form of cash, not real land delivery.

But while most developing countries seem to be in favour of a declaration – particularly states like Indonesia, South Africa, Bolivia, Venezuela and Cuba – many industrialised nations are rather sceptical if not openly against the proposed declaration.

While officially these countries have declared that there is “no need” for a new instrument, NGOs believe the indsutrialised world is rather scared by the implications of the Advisory Committee’s draft declaration; especially clauses such as the right to reject intellectual property rights on resources and certification schemes established by transnational corporations.

The WTO has also declared its opposition to a model of agriculture that is hardly compatible with the current system of “free” trade.

The outcome of the discussion is still open. Jean Feyder, ambassador of Luxembourg to the U.N., considers it is “very important to support small farmers that were marginalised for so long. Therefore, we would be very satisfied if we could get a group of countries from all continents to support the proposal of the Advisory Committee and agree on a process: either the creation of a working group to draft the declaration, or the appointment of a special rapporteur on peasants’ rights.”

“This declaration would be very important for us,” Saragih concluded. “It would help us monitor the way in which countries respect peasants’ rights. Many international institutions have repeated it over and over again: to feed the world, we need to support small scale farmers.”

Excerpt:

The 146-kilometre railway line to be established between South Africa and Swaziland will help reduce the cost of doing business between the two countries.

Soon a railway line will link South Africa and Swaziland and add a much-needed boost to the economies of these two countries. Credit: Oxyman/Wikicommons

“Trains are not widely used in the country because the capacity of the rail industry is limited and hence confined to few of the big companies,” said Sibusiso Sibandze, an entrepreneur.

The railway will run from Lothair in Mpumalanga, South Africa to Sidvokodvo, Swaziland.

Announcing this project in Johannesburg on Jan. 12, South Africa’s Minister of Public Enterprises Malusi Gigaba said his country would pay 1.5 billion of the two billion dollars the railway will cost, while Swaziland will pay for the remainder. Construction will start next year and end in 2016.

“Transport is one of the reasons why the cost of doing business in this country is a bit high,” said vice- chairperson of the Federation of the Swaziland Business Community, Hezekiel Mabuza.

Swaziland imports more than 80 percent of its goods from South Africa, which in turn imports about 70 percent of Swaziland’s exports, which include coal, sugar, beef and citrus fruits. However, the new railway line will predominantly transport coal.

Recently the country revived its iron ore mine and Salgaocar Swaziland is in the process of setting up an iron-ore reprocessing factory to extract the mineral from disused mine dumps. But the reprocessing factory is yet to be constructed and Salgaocar currently transports the iron ore to Mozambique via road for processing.

Daily, 30 trucks travel between Swaziland and Mozambique and many citizens are concerned about the number of heavy vehicles On the roads.

“The high density of heavy traffic will deplete our roads and that’s why we’re excited about this project because we hope that Salgaocar will also seize the opportunity to use the railway,” said Mabuza.

Mabuza added that because Swaziland was landlocked, this made it even more expensive to transport goods into and out of the country.

“When transporting goods by ship we still have to spend more money getting them by road from or to either Mozambique or Durban,” said Mabuza.

Business people hailed the new railway line between South Africa and Swaziland, called the Swazilink Railway Line, as a breath of fresh air in the transport industry in the region because it will not only create jobs for many but it will also boost the economies of the two countries.

About 63 percent of Swaziland’s 1.1 million people live below the poverty line of two dollars a day. The country was hard hit by the global recession as it lost 60 percent of its revenue from the Southern African Customs Union. Foreign direct investment is very low while the economic growth rate is below two percent.

“We’re very excited that Swaziland is part of the development because this project will also increase the amount of goods transported in the region,” said chief executive officer of the Federation of Swaziland Employers and Chamber of Commerce, Zodwa Mabuza.

“We expect industries to develop along the rail infrastructure and jobs to be created for the communities,” said Swaziland Railway chief executive officer Dr. Gideon Mahlalela. Mahlalela added that the new railway would also target ports in Maputo, Mozambique.

“We are also looking to connect with other ports in the future which might develop along the eastern coastal belt,” said Mahlalela. “Railways without port solutions are not the answer to customer logistical needs.”

Although the railway line will mainly transport coal, said Mahlalela, it will also unlock the potential for other minerals, not only between the two countries, but also in the whole region.

Financial institutions are already salivating over project and Mahlalela said money for its construction will not be a problem, as it will fund itself through the demand it will create.

Gigaba and Swazi Minister of Public Works and Transport Ntuthuko Dlamini marked the start of the project at a sod turning ceremony on Jan. 12 at Lothair. Hailed as the first large-scale investment in Southern Africa since the Richards Bay line constructed in 1976, when complete it will create an additional capacity of 15 million tonnes.

“Globally, rail infrastructure is undergoing a major renaissance as an investment and a vehicle for the upliftment of citizens in an environmentally friendly and cost effective manner,” said Brian Molefe, chief executive officer of South Africa’s rail and freight group Transnet.

He said Transnet has done a high-level risk assessment to identify the strategic planning, funding, construction and environmental risks to ensure that the infrastructure sees the light of day.

“We expect the first train to run in three years time after the necessary land purchase agreements and environmental approvals have been resolved,” said Molefe.

Gigaba said this project is strategic in the region because it has the potential to attract traffic to the Maputo and Richards Bay corridors, providing alternative export corridors critical to the southern African ports. He said it will also encourage economic and rail transport in Swaziland.

“The capacity created for general freight via this link line will relieve pressure on the Coal Line,” said Gigaba.

He said Africa’s competitiveness in the global economy demands that countries take measures, both individually and collectively, to modernise the continent’s infrastructure systems.

Dlamini said this project would reduce poverty significantly because the railway line will run through the marginalised areas of Emerlo in South Africa and Sidvokodvo in Swaziland.

Emerging economies China, South Africa and Brazil have indicated their openness to legally-binding carbon emission reduction targets from 2020 during the United Nations climate change summit in Durban, South Africa.

Emerging economies face developmental challenges but are also significant contributors to greenhouse gas emissions. Credit: Zukiswa Zimela/IPS

Climate experts say the three countries’ willingness to consider legally binding commitments, even if they will not take immediate effect, was potentially “a great step” to unlock one of the big political issues of this year’s climate change talks.

Only India continues to refuse to commit.

The European Union (EU) proposed a “roadmap” last week, which stipulates that all major economies, including emerging countries like South Africa, Brazil, India and China, generally called the BASIC group – and not only industrialised nations as currently under the Kyoto Protocol – will be subject to legally binding carbon emission targets.

BASIC countries all face developmental challenges but are at the same time significant contributors to greenhouse gas emissions. Major emerging economies and other developing nations already emit more than half of current carbon emissions. Within the next 20 years, they are projected to account for two- thirds.

The 194-nation climate talks, which will wrap up on Dec. 9, are abuzz with speculation on the prospect of emerging economies agreeing on the proposed roadmap.

In a move that surprised many after a tough week of negotiations that brought to the fore deep rifts between different countries’ demands and expectations, China announced for the first time it would accept a legally-binding climate deal after 2020, when current voluntary pledges will run out. After first insisting the demands of the EU roadmap were “too much,” China now seems open to finding a middle ground, especially with Europe.

“But there are pre-conditions,” said China’s top climate negotiator Xie Zhenhua. “A second Kyoto commitment period is a must for rich nations. After (the second period has ended), we need to review what has been done. Based on this assessment can we start negotiating what we shall agree after 2020.”

China laid out five conditions under which it would consider a legally-binding carbon reduction deal. Apart from a second commitment period of carbon-reduction pledges by industrialised nations under the Kyoto Protocol, they include hundreds of billions of dollars in short- and long-term climate financing for developing countries.

China also wants to see the Green Climate Fund signed off during the summit and demands the implementation of a range of agreements outlined at the 2009 Copenhagen summit, which were integrated into the United Nations Framework Convention on Climate Change (UNFCCC) at last year’s climate gathering in Cancun. These include initiatives for technology transfer, adaptation to climate change and new rules for verifying that carbon-cutting promises are kept.

South Africa and Brazil – two countries most vulnerable to the adverse effects of global warming, especially with regards to agriculture and biodiversity – have also shown interest in the roadmap.

South Africa’s Minister of Environment Edna Molewa said the EU roadmap was “seen favourably”, but noted that South Africa would, like China, want to place “conditionalities” on any binding agreements.

“We would like to work towards a legally binding outcome. As South Africa, we’re of the opinion that the seriousness with which we will deal with the level of contributions that South Africa can make in the global arena is understood in the context of articles 4.1 and 2 of the UNFCCC,” confirmed South Africa’s second negotiator Xolisa Ngwadla.

UNFCCC article 4.1 refers to “common and differentiated responsibilities” depending on the gross domestic product (GDP) of each country, while article 2 refers to the stabilisation of greenhouse gas emissions at a level that allows ecosystems to adapt naturally to climate change, to ensure that food production is not threatened and enable economic development to proceed in a sustainable manner – a point important for countries that heavily feel the effects of climate change.

“Our future commitments will also depend on finance, technology transfers and capacity building,” Ngwadla added.

Contrary to South Africa, Brazil said it is not placing any conditions on committing itself to an internationally legally binding instrument to reduce carbon emissions as long as such a treaty helped the fight against climate change based on scientific studies.

“We could agree already today on an internationally legally binding instrument, but not on any. It has to be robust, respond to what science is telling us is needed and therefore something that will make a difference in the fight against climate change,” explained Ambassador Luiz Alberto Figueiredo, head of Brazil’s delegation. “We would not adapt a legally binding instrument for the sake of it.”

Currently, Brazil has set voluntary carbon reduction targets, which have been passed into national law. Figueiredo said he is aware this commitment will have to increase over time: “We understand that this regime will have to evolve over time. We think voluntary actions alone usually don’t add up to the level of international response that science tells us is needed. We are willing to play our part in the future evolution of the international fight against climate change.”

As part of the Group of 77 and China negotiating bloc, a group of 132 developing countries, Brazil is pushing for the adoption for a second commitment period of Kyoto Protocol before the end of the climate change summit on Dec 9. The country is also lobbying for a sign off of a fully functional Green Climate Fund, which will have short-term and long-term financing mechanisms so that developing nations can adapt to climate change.

Delegates from BASIC countries have repeatedly noted that South-South cooperation is important to them, not only economically but also with regards to decisions made during the climate change summit, and have indicated that they would support each other’s positions.

India, however, the fourth member of the BASIC group, does not seem to fall into line. It has repeatedly expressed its opposition to the EU roadmap, as it is not willing to consider signing a legally binding agreement to cut carbon emissions.

India said it felt implementing its voluntary target of reducing the emission intensity of its GDP growth by 20 percent to 25 percent by 2020, compared to 2005, was sufficient. Having one of the smallest per-capita-carbon footprints in the world, tougher targets weren’t necessary, said India’s lead negotiator J.M. Mauskar: “We are not a major emitter.”

India was only willing to negotiate “mutual reassurances”, he said. “In terms of the Cancun pledges, developing countries’ voluntary pledges by 2020 amount to more mitigation in absolute terms than that of developed countries,” Mauskar further explained, insisting that rich nations, not developing countries and emerging economies must ramp up their commitments.

India has criticised industrialised nations, especially the United States, for not making firm commitments to cutting green house gas emissions. “We are deeply concerned that there has been hardly any progress in achieving a second commitment period of the Kyoto Protocol,” said Mauskar.

Russia, a signatory to the Kyoto Protocol, which belongs with South Africa, China, Brazil and India to the BRICS economic bloc, has blankly refused to consider a second commitment period.

By Ravi Kanth Devarakonda and - -
GENEVA, Nov 17 2011 (IPS)

The convergence of leading countries from the global South – China, India, Brazil and South Africa, among others – to assist the poorest countries in sub-Saharan Africa and elsewhere constitutes a new “dynamic” in the emerging global economic partnerships, says the United Nations Conference on Trade and Development.

In a report released on Thursday on the poorest countries – often referred to as the least-developed countries (LDCs) – UNCTAD calls for “a new path of development” to break from the “structural maladjustment” policies that led to “boom and bust cycles and growth collapses.”

There are currently 48 poorest countries with low per capita income of less than a dollar a day. About two-thirds of LDCs are located in Africa, and all indicators suggest that they are the worst affected by the International Monetary Fund (IMF) and World Bank’s market-oriented policies.

“The neo-liberal policies (fostered by the IMF and World Bank) devastated these countries,” says Dr. Supachai Panitchpakdi, UNCTAD’s secretary general. “These policies turned most sub-Saharan African countries from net food producing countries into net food importing countries.”

Team leader for the report, Zeljka Kozul-Wright, said that the LDCs are the victims of “structural maladjustment” policies followed over the last 40 years, which resulted in “boom-bust cycles and growth collapses.”

“LDCs suffered unstoppable marginalisation, and what we are saying is that if the current trends persist, the LDCs would become major loci for extreme poverty in the global economy sooner rather than later,” cautions Charles Gore, UNCTAD’s chief for the African division, LDCs and special programmes.

“The only way to reverse this trend is to create a new type of catalytic developmental state in the poorest countries with an adequate policy framework that would strive for structural transformation,” Gore told IPS.

“South-South cooperation opens up more opportunities and policy space needed to build such a catalytic developmental state,” he argued, suggesting that the economic and technical assistance offered by China, Brazil, and India comes without any conditionalities.

He dismissed suggestions that LDCs are merely exporting oil and other vital raw materials to China. Though the report cautions about “commodity-dependence”, it also says that there are positive examples where manufactured exports from LDCs to other developing countries increased by 18 percent per annum during the last decade.

Faced with worsening international trading conditions and haemorrhaging economic crisis in the centres of leading industrialised countries, LDCs face major challenges. The only plausible path to stay afloat in these difficult times and sustain their economic growth in the short and medium term is by enhancing their partnership with the Southern champions of economic development, the report says.

The report says that overall, the LDCs’ real GDP increased by 5.7 percent last year, “which is a slight improvement – one percentage point – in comparison with the result in 2009, but is far below the 7.1 percent average annual growth rate attained during the boom period between 2001 and 2008.”

Latest estimates suggest that LDCs are expected to grow by about 4.9 percent this year. The breakdown of the growth projection suggests that while Asian and island LDCs are expected to grow by 5.2 percent and 5.4 percent, the African LDCs and Haiti are likely to grow by 4.9 percent.

In terms of real GDP per capita income growth, African LDCs are expected to grow by 2.1 percent, which is barely sufficient given the high population growth. The Asian LDCs performed better than their African counterparts, the report says.

The report forecasts an average growth of around 5.8 percent for the LDCs during the medium term. “Clearly, it is an Asian LDC story,” says Gore, suggesting that the poorest countries in Africa are not there yet to realise their potential.

“The reason for the better performance of Asian LDCs has much to do with the flying geese model involving the catching-up process of industrialisation of latecomer economies from the international division of labour in East Asia based on dynamic comparative advantage,” he told IPS.

The performance of Asian LDCs – Bangladesh, Cambodia, and even Nepal – is impressive because of textile and other exports of manufactured goods. The African LDCs exports of manufacturing products comprise processing raw material, which have some initial value-addition.

Against this backdrop, the African LDCs must adopt the model followed in East Asia where the state played a dominant role in creating new, productive capacities and structural transformation. The state must be able to provide industrial subsidies, and credit for the development of industry and pursue robust policies in the social sector – health and education, Panitchpakdi told IPS.

South-South cooperation can become a “game changer” in the emerging economic partnerships of countries outside the industrialised North.

“The benefits of South-South cooperation support the building of developmental state capacities and the objectives of developmental states in LDCs, while the developmental state in LDCs in turn generates and augments the development impact of South-South cooperation,” Panitchpakdi says.

At a time when there is a complete drought in the much-promised official development assistance by rich countries, a mere one percent contribution by the leading developing countries from their 3.5 trillion dollars in foreign exchange reserves held by developing country sovereign funds can result in a significant development finance for the poorest countries.

This is where “developmental regionalism” can play an important role “that accepts globalisation as a historical trend, but rejects the market-led approach to it,” Panitchpakdi says.

Excerpt:

By - - and Kristin Palitza
CAPE TOWN , Nov 16 2011 (IPS)

South African health experts are calling on governments to use legally available mechanisms to promote the production or import of generic drugs in their countries.

Patented drugs limit patients access to public health care. Credit: Kristin Palitza/IPS

Pharmaceutical patents continue to drive up drug prices, making it expensive to treat patients. This often leads to limited access to health care, especially in developing countries where the disease burden is high, but public health budgets remain low, experts said.

Governments can revert to the Doha Declaration – a declaration on the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS) and Public Health, which was signed 10 years ago by member countries of the World Trade Organisation in Doha, Qatar – which exits to ensure that patents do not undermine the ability of countries to achieve the right to health.

“Countries, like South Africa, may interpret TRIPS as they see fit. They can enact national legislation to allow fewer patents and promote generic production of drugs to promote access to medicine for all,” explained Médecins Sans Frontières (MSF) South Africa access and innovation officer Mara Kardas-Nelson.

The availability of generic medications can have drastic consequences for public health. “When generics were produced for antiretroviral (ARV) treatment for HIV-patients, costs rapidly decreased from over 10,000 dollars per patient per year to about 600 dollars,” said Kardas-Nelson. “It allowed increased access to medicines for millions of people.”

But when the TRIPS agreement was signed in 1995, pharmaceuticals were allowed to apply for 20-year patents for their drugs, which meant that during that period, no generic versions of those medicines could be produced. This drastically reduced the global availability of generics. Only six years later, when the Doha Declaration was signed, were governments allowed to circumvent the strict patenting regulations in the interest of protecting their citizens access to health care.

Surprisingly, very few developing countries, including South Africa, have amended their Patent Acts to make use of the possibilities the Doha Declaration provided – mainly due to international pressure from the pharmaceutical industry, the United States and European Union, where many of the world’s patented drugs are manufactured, health experts argue.

“Countries must not bow to this pressure,” warned Treatment Action Campaign (TAC) senior researcher Catherine Tomlinson. South Africa currently provided patent protection beyond what is required by the TRIPS agreement, she said.

“Unlike South Africa, India, Brazil and Thailand have used flexibilities allowed under TRIPS to curb excessive patenting of pharmaceuticals and promote public health. While South Africa granted 2,442 pharmaceutical patents in 2008 alone, Brazil only granted 278 pharmaceutical patents between 2003 and 2008,” Tomlinson explained.

Publicly, the South Africa government repeatedly confirmed the need for generics. In a joint declaration with India and Brazil, South African President Jacob Zuma officially acknowledged earlier this year that the impact of intellectual property on health, access to drugs and prices can best be tackled by scaling up production of generic medicines. But up until now, such declarations have remained lip service.

“We demand Zuma lives up to his commitment. We have not yet seen any concrete indications that government will take steps to change the Patent Act law,” said Tomlinson. “There is lack of political will.”

TAC and MSF also demand stricter and independent review of patent applications, as well as for third parties to be able to oppose patents pending approval and the first year after they have been granted.

Moreover, South Africa should make use of its right to issue compulsory licenses under the Doha Declaration that would allow it to access generic versions of otherwise patented medicines in cases where prices are prohibitively expensive, the organisations say. In contrast to other developing nations, such as Thailand, South Africa has not once made use of this option.

The consequences of South Africa’s strict patent protection are high medicine costs and the delayed availability of affordable generic medicines. South African pharmaceutical benefit management company Mediscor reported in its 2010 medicines review that drug expenditure increased by 25.2 percent between 2008 and 2010, while medicine use only increased 5.8 percent.

For patients receiving chronic, life-saving medication, such as ARVs, availability of generic medication can mean the difference between life and death.

Nokwanda Pani, an HIV-positive woman who lives in South Africa’s third-largest township, Khayelitsha, near Cape Town, has been receiving ARV treatment since 2005. Four years later, when she developed resistance to the drugs, she was put onto a second line of medication.

She now worries about what will happen to her if her body stops responding to the medication again. Because, in South Africa, third-line treatment is only available in the private health care sector, at a high cost of 4,200 dollars per patient per year – an amount that Pani cannot afford.

Without generic competition, the cost of second- and third-line ARVs can be up to 20 times more expensive than first-line ARVs, confirmed MSF. Such price differences do not only apply to HIV treatment but to all drugs, including those needed to treat cancer, tuberculosis, diabetes or high-blood pressure.

“Because I rely on the public health sector, third-line treatment is not available to me. If I build up resistance again, it’s the end of the road for me,” Pani says. For her, it all comes down to one central question: “Why is our government putting the profits of pharmaceutical companies before our lives?”

Excerpt:

By Kristin Palitza and - -
CAPE TOWN , Nov 15 2011 (IPS)

South Africa and the Democratic Republic of Congo have signed an agreement to build a major hydroelectric power project, which is said to bring electricity to more than half of the continent’s 900 million people. But economic analysts warn that foreign investors will prevent the grid from benefiting the general public.

Sub-Saharan Africa has large potential for hydropower generation, but is yet to exploit it. Credit: Kristin Palitza/IPS

The Grand Inga hydropower project will have a capacity of 40,000 megawatts (MW) – more than twice the power generated by the Three Gorges Dam in China, the world’s largest hydropower dam, and more than a third of the total electricity currently produced in Africa.

“It will enhance energy access to clean and efficient energy across the continent and contribute significantly towards a low carbon economy and economic development,” declared Zuma in the DRC’s second-largest city Lubumbashi, where the signing took place. Zuma described the event as “a day to prove Afro-optimists right.”

Grand Inga will be the world’s largest hydropower scheme and part of a greater vision to develop a power grid across Africa that will spur the continent’s industrial economic development. Up until now, the power of the Inga Falls has been largely unused, with the two existing hydroelectric dams, Inga I and Inga II, operating at a low output of mere a 1,775 MW.

The reasons for the underutilisation of the waterfall’s power has largely been money: The construction of Grand Inga – with completion pegged at 2025 – comes with a whopping price tag of 80 billion dollars. Connecting Inga to a continent-wide electricity grid will cost at least an additional 10 billion dollars. These are not sums South Africa and the DRC are able to bankroll alone.

But help is not far: The globe’s top development financiers, World Bank, African Development Bank (AfDB), European Investment Bank as well as a number of private, foreign energy companies are all keen to contribute large sums to the Inga project. In return, they expect to gain vast economic benefits from this mega-project – and are likely to take away attention from the development needs of Africa’s poor majority.

“Foreign investors are contributing to the construction of the dam to get their share of large quantities of cheap power upon completion of the project,” warned Institute for Democracy in Africa researcher Charlotte Johnson, who is based in South Africa. “This will force the state’s hand … to enter into agreements concerning the final destination and usage of the power generated.”

Despite the development-focused marketing hype surrounding the project, the Congolese government and investors have made no plans to open the grid for public use, said Johnson. Instead, it is marketed as a commercial product. And foreign investors will always be able to pay more, instantly removing the poor from the consumer competition.

“Local power grids are not included in the budget. African communities living in darkness are not the intended beneficiaries of Grand Inga, and the 500 million people who have been promised electricity will remain in the dark,” she added.

For now, the project looks at building only long-distance transmission lines to Africa’s mining and industrial heartlands as well as to urban centres in South Africa, Egypt and even Europe.

According to the AfDB, a Franco-Canadian consortium is in the process of conducting a 15 million dollar study to assess the potential for developing the site in stages.

“This is a major investment, and it won’t be possible to mobilise resources in one go. The final decision will of course be taken by the DRC government,” explained AfDB director of energy, environment and climate change Hela Cheikhrouhou at the development bank’s annual meeting in October.

According to the AfDB, hydropower represents 45 percent of power generation potential in Sub-Saharan Africa, but only four percent has currently been tapped. As a result, only every fifth person has access to electricity in the region.

“To achieve energy access for all, Africa must maximise clean energy options, emphasise energy efficiency and work with developed countries and development institutions to quickly and effectively channel a more substantial share of climate financing,” she added.

With the backing of the world’s major development banks, the DRC and South Africa are forging ahead with their plans to build Grand Inga. After the signing of the agreement, Zuma and Kabila ordered the start of negotiations for a treaty over the next six months, which will put into effect the agreement by detailing time frames and implementation stages for the dam construction.

Once completed, the generated electricity will be managed by the state-owned utility companies of both countries, South Africa’s Eskom and the DRC’s Societe Nationale d’Electricite Societe a Responsibilite Limitee National. From there it will be sold to the highest bidders. Africa’s still unconnected poor will certainly not be among those.

Excerpt:

When the G20 leaders meet for their fifth summit in Cannes, France, on Thursday, they will be confronted with several worsening global economic and trade issues. Among them is how to strengthen the international trading system and how to overcome the developmental deficit that continues to create an uneven playing field for poor countries.

A police car burns at last year's G20 summit in Toronto, Canada. Credit: Marty Olauson/IPS

So far there is no consensus among the members of the WTO on what the blueprint to addressing the endemic ills plaguing the organisation is, particularly on how to deliver on the developmental promises made in the Doha Development Agenda (DDA), say trade diplomats.

The DDA was launched over 10 years ago to correct the historical imbalances and asymmetries in the global trading system and was designed to enable poorer countries to integrate into the system.

The EU and its allies, including Switzerland, want the G20 leaders to instruct their trade ministers to agree to an “ambitious” agenda that would make the WTO an active and lively body.

“The EU’s stand is also subtly supported by the WTO’s Director General Pascal Lamy, who wants an expanded agenda,” says a trade diplomat familiar with the discussions.

“A number of delegations want new approaches to be consistent with the Doha mandate, suggesting that the WTO could play its role in responding to global challenges, including its role in keeping protectionism at bay,” Lamy told members at the WTO’s General Council meeting last week.

Though Lamy did not mention the exact number of delegations or their composition, he was primarily alluding to a small group of countries led by the EU, says a trade diplomat from the IBSA countries.

Lamy, who will attend the G20 meeting, is expected to lobby leaders for his expanded agenda to revitalise the WTO.

But China and IBSA members do not share the need for an expanded agenda. At a time when the WTO is yet to deliver on the promised developmental goals set out in the Doha agenda, they are asking why members should abandon the single undertaking of the DDA negotiations and embark on a new programme. The single undertaking principle stipulates that nothing is agreed upon until everything is agreed upon in the entire Doha package.

Clearly, there are differing perspectives at play, particularly between the EU, IBSA and China. “We are not telling the public the truth about where we are and how members must make a collective effort to recover the credibility of the organisation,” says Ambassador Roberto Azevedo, Brazil’s trade envoy to the WTO.

He disagreed with the EU’s specific demands, which include an early realisation of select issues, including trade facilitation and improvements in the Dispute Settlement Understanding (the WTO’s procedure for resolving trade quarrels).

“Characterising extremely difficult issues as areas of potential outcome for early harvest would not reflect the truth and would set us up for additional failures to deliver on a realistic promise,” Azevedo told IPS.

IBSA and China have adopted common positions on the DDA and other issues at the WTO. China supports the recent IBSA declaration that reiterated the trading bloc’s commitment to the DDA in addressing the core inequities and uneven playing field that poses problems for the poorest countries trying to integrate into the global trading system. China wants to ensure that there is a strong outcome on the development package.

The emergence of BRICS (Brazil, Russia, India, China, and South Africa) countries on the global stage brought tectonic shifts, even at the WTO. While Russia is yet to join the WTO, China and IBSA present common strategies on developmental issues in the Doha mandate.

In their statement issued on Oct. 19, the IBSA leaders said “the demands of the current negotiations in the Doha Development Round reflect an imbalance in the sense that there is too much accommodation of the sensitivities of developed countries in agriculture, alongside unjust demands on developing countries to open their markets in the services and industrial sectors.”

Over the last three years, the industrialised countries have changed the terms of the Doha negotiations without addressing the central issues. They seem determined to extract a high price involving steep cuts on industrial goods and sweeping market access for services from the four developing countries – China, India, Brazil, and South Africa – for meagre concessions to reduce their subsidies and market access for agriculture products.

In sharp contrast, the EU issued a “non-paper” for the G20 Summit in Cannes, on the same day when the IBSA declaration was made public. Brussels’ “non-paper”, obtained by IPS, is totally silent on the issue of addressing “the high levels of protection and subsidies in agriculture in the developed countries” as demanded by the IBSA leaders.

Incidentally, high levels of protection and tens of billions of dollars in farm subsidies are still prevalent in the EU and several farm defensive countries – Japan, Switzerland, and Norway among others – have more to do.

The EU, however, defended its proposal saying it is “our initiative” and others can discuss their proposals. “We are open to the proposals from other members,” said the EU’s trade envoy Ambassador Angelos Pangratis. “We certainly look forward to other initiatives,” he told IPS, suggesting that Brussels would like members to discuss the elements it had proposed.

By Zukiswa Zimela
JOHANNESBURG, Oct 18 2011 (IPS)

As the India Brazil and South Africa Summit of heads of state and government starts Tuesday, editors from the respective countries have resolved to provide better coverage of the economic body.

“This meeting was very important and critical. As we know there has been a major shift in the world in terms of economic power, political power and so on towards the south and the countries of India, South Africa and Brazil have become very important players in the world,” South African Editors’ Forum (SANEF) chair Mondli Makhanya said Monday as editors met at the IBSA Editors’ Forum in Johannesburg.

The forum was co-hosted by SANEF and Inter Press Service Africa in conjunction with the World Bank and the South African department of Government Communication and Information Systems (GCIS).

Members of the editors’ forum will be among the “people to people” organisations presenting their recommendations to the IBSA Heads of State and Government Dialogue Forum in Pretoria on Oct. 18.

Makhanya said it was important that IBSA received relevant and sufficient coverage and it was vital for the three countries to tell their stories to the rest of the world.

“So the purpose of today was to put in place infrastructure and a framework within which we are able to communicate those kinds of messages without the media being a spokesperson for the respective governments,” he said.

Jimmy Manyi, chief executive officer of GCIS, said the South African government was interested in working with the editors. He added that the way IBSA was portrayed by the media would affect the way other countries engaged with the economic group.

“If we continue not to talk about our agenda it means people will know less and less about us and we would really like this forum to be a stepping stone to promoting and marketing the three countries among ourselves and with the north as well,” he said.

He said that the relationship between the countries could be more than economical. Manyi said that there is a wealth of information to be shared by the trio and the media could help disseminate this information.

“What are the opportunities around education? What are the trade skills we can assist each other with? Because from time to time we have skills gaps so we have to piggy back on each other to make sure that we are as skilled as (the other countries),” he said.

Lola Nayar, the associate editor of Outlook magazine in India, agreed saying the countries can work together to share information on important issues like climate change mitigation strategies. Nayar said that in the field of energy and agriculture the three countries where looking at similar issues.

“India has become a major player in wind energy and in solar power energy and these are technologies it could share with South Africa,” she said.

Claudia Antunes, foreign affairs editor at Folha de Sao Paulo in Brazil, said that the three countries have to commit to speaking in a unified voice in order to achieve their goals. “IBSA as a group lacks a strong personality,” she said.

Excerpt:

By Kanya D'Almeida
WASHINGTON, Sep 25 2011 (IPS)

Headlines this week have been saturated with protests against unaffordable food, unfair taxes and unsustainable austerity measures, with one distinct difference setting these stories apart from countless others in recent history.

The people demanding reform are no longer marginalised Asians, Africans and Latin Americans, but poor, working class Europeans.

As citizens of Western Europe – particularly in Portugal, Italy, Greece and Spain, or PIGS – flood the streets of their once-stable countries demanding an end to cuts in public education, health care, youth programmes and housing subsidies, the big question at the annual fall convergence of the Bretton Woods Institutions is, “Who will solve the impending crisis in Europe?” Rana Foroohar wrote in Time Magazine last month, “While the crisis appears to be Europe’s problem, if it results in a break-up of the euro zone or a growth-dampening series of costly bailouts, it will reverberate from Beijing to Boston and back.”

“Europe is the largest trading partner of… China. If they stop buying our stuff, everyone suffers. Meanwhile, a dissolution of the union would make nations from Asia to Latin America that hold the Euro as a reserve currency much weaker,” she added.

Small wonder then the world’s leading emerging markets– Brazil, Russia, India, China and South Africa, or BRICS – took centre-stage at the World Bank/International Monetary Fund meetings in Washington this week, discussing everything from possible investment in troubled euro zone sovereign bonds to domestic job creation.

The BRICS possess a combined 4.3 trillion dollars in hard cash reserves, with China holding three-quarters of the kitty, much of it in Euros.

Following the “Lehman Crash” and ensuing financial crisis in 2008, the BRIC countries experienced the fastest rebound, with India and Latin America springing back to life with surprising resilience to the shock waves.

The result has been a shifting of the power relations within the economic arena increasingly towards emerging economies, which will likely account for 60 percent of global economic growth by 2014.

A communiqué issued following a meeting of BRICS finance ministers and central bank governors Thursday expressed a stern warning to the developed world to “adopt responsible macroeconomic and financial policies, avoid creating excessive global liquidity and undertake structural reforms to lift growth”.

Given the fact that nearly every euro zone country has flouted the three-percent annual budget deficit limit and the 60-percent debt-to- GDP ratio, the BRICS’s concern appears to be well founded.

“The BRICS are open to consider, if necessary, providing support through the IMF or other IFI (international financial institution) in order to address the present challenges to global financial stability, depending on individual country circumstances,” the communiqué stated, though it steered clear of hard numbers or blueprints for such actions.

“What everyone has to realise is that we, as a cluster of nations, face an enormous demand for resources at home, particularly in the realm of (poverty reduction),” D. Subbarao, governor of India’s Reserve Bank, told the press on Thursday.

“This causes an incredible amount of tension between allocating money to multilateral institutions for the sake of global stability and meeting stability at home,” he added.

In fact, the Bank’s release Wednesday of a report calling for more and better jobs in South Asia predicted that the region, home to half a billion poor people, will have to generate 1.2 million jobs every month over the next 20 years, equivalent to about 40 percent of the increase in the global labour force, in order to ward off extreme poverty and unemployment.

“Most of us are democracies, so we are constrained by democratic processes of when and how much is given to the (global pool) of monetary reserves,” Subbarao added at the press conference, a likely reference to China as one of the only economic players capable of acting outside of the will of the majority of its people.

Numerous economists have echoed this view, tempering the media speculation that the BRICS will “save the day”.

“When people talk about the BRICS, they really mean China, and to a lesser extent India and Brazil,” Omar Dahi, professor of development economics at Hampshire College, told IPS.

“However, while (these countries) have the clout to be heard on international policy as well as to refuse the impositions of the Quad (the United States, the European Union, Canada and Japan), they do not yet have the ability to reshape international economic policy and certainly not to pull Europe or the U.S. out of its slump.”

“The BRICS are not thinking or speaking in unison,” Susan Schadler, a visiting fellow at the Centre for International Governance Innovation (CIGI) and former deputy director of the IMF’s European Department, told IPS.

“I would not look to a large contribution to financing from the BRICS soon. A token contribution is all that is likely in the immediate future. What would be the incentive for the BRICS to expose themselves on a significant scale to the risk inherent in the European situation, when the high saving countries of Europe (such as Germany) are worried about their (own) exposure?” she asked.

Stubborn Inequalities

The dominant view of South-South cooperation indicates that a “shifting of the power relations” will somehow end the legacy of economic hegemony by now waning superpowers.

But discussions between the BRICS this week threw that assumption into question.

Chinese national economist Luo Xiaopeng said earlier this week, “After so many years of humiliation (from Europe), they (are now) kneeling down to beg from us and you cannot underestimate the satisfaction and joy that Chinese politicians derive (from this).”

“If the euro zone collapses because of the (PIGS), it would result in a global financial crisis,” said Yukon Huang, a senior associate at the Carnegie Endowment for International Peace, adding that China was unlikely to lend a hand until Europe came up with a solid solution on its own.

“China is not going to put its money into a situation where there are enormous risks and only downsides,” Huang added.

Projections like this suggest that “whatever country or group of countries holds significant shares of global wealth will be driven to preserve their wealth and place in the global economy,” Schadler told IPS.

“I doubt that from the point of view of creating a more equal opportunity for the most and least wealthy countries of the world, having former colonies or developing countries in the driver’s seat will make much difference. The ways in which China has pursued its self interests in establishing its interests in commodity producing countries and resisting calls for ending global imbalances perfectly (encapsulates) this,” she added.

“While increased south-south integration, trade, and foreign direct investment have reduced reliance on Northern markets, it has also led to rising inequalities within the global South as well as tensions between rising powers – China’s presence in Africa is an example of benefits and drawbacks of this cooperation,” Dahi told IPS.

“More broadly, we are witnessing a worldwide crisis of capitalism, and the type of global economy that will emerge is still not clear,” he added.

Excerpt:

Studies by the India-Brazil-South Africa (IBSA) Academic Forum on food security issues in the three countries suggest that providing food access works best when backed by cash transfers.

A paper on food security brought out by the UNDP’s Brasilia-based International Policy Centre for Inclusive Growth (IPC-IG), under the Forum, shows that despite the great strides in food production made by India people in this country are just not eating enough.

Citing indices of the World Bank, Food and Agriculture Organisation (FAO) and International Food Policy Research Institution, the paper shows that India needs to improve on poverty, hunger, nutrient intake and per capita consumption.

Ramesh Chand, director of New Delhi-based National Centre for Agricultural Economics, who was involved in preparing the paper, said the Indian situation calls for a mix of food distribution and cash transfers.

Chand told IPS that India’s decline in cereal production since 1995 is a cause for concern.

“Either we ensure access to nutrition through livestock foods, production of which has increased, or we address the decline in cereal intake by the poor,” says Chand. “Since the markets can’t support this huge intake, I feel a mix of cash and grains is necessary,” explains Chand.

India’s main tool for access to food, besides a mid-day school meal scheme, is its vast targeted public distribution system (TPDS), the world’s largest food distribution mechanism benefiting 160 million families.

Food subsidies in the 2010 – 2011 annual budget saw 14 billion dollars allocated to meet the difference between the actual cost of foodgrains and sale prices fixed under welfare schemes including the TDPS and also to maintain buffers stocks of wheat and rice.

The TPDS, however, is acknowledged, even by the government, to have huge infrastructural and systemic flaws, with significant numbers of the poor being excluded from its subsidy ambit.

P.V. Satheesh, founder of the Deccan Development Society, a voluntary agency which has successfully shown that indigenous grains are an infallible method of addressing overall food security, suggests introducing locally grown millets into India’s PDS.

Currently, the transportation of rice and wheat to all parts of the country in the PDS is expensive, and deterring the production of nutritious millets. Production of white, polished rice is also environmentally destructive, being water and chemical-intensive agriculture.

“Millets address food, health, fodder and livelihoods by being cultivable almost everywhere,” Satheesh explained to IPS.

Brazil-style cash transfers, suggested by the IBSA Academic Forum, are currently controversial in India, with the new Food Security Bill, tabled to be passed in parliament in the coming weeks, recommending it as one of several measures.

A group of research scholars, including prominent development economist Jean Dreze, wrote to Prime Minister Manmohan Singh, In July, opposing cash transfers as an alternative to the PDS.

“We urge you to ensure that the National Food Security Act includes the strongest possible safeguards against a hasty transition from food entitlements to cash transfers”, the letter requested the prime minister.

“Cash transfers will be a disaster; Brazil’s position is not the same as that of India,” Satheesh told IPS.

As per FAO’s Hunger Map 2010, undernourishment actually increased in India, from 20 percent in 1990 to 21 percent in 2007, whereas it dropped from 11 percent to six percent in Brazil during the same period. It has remained consistently very low (under five percent) in South Africa.

Brazil’s food security measures are an integrated mix of its zero hunger strategy of over 20 programmes in strengthening access to food, family agriculture and income generation.

One significant strategy has been Brazil’s Food Acquisition Programme (PAA), a system of public procurement and distribution under which food was bought from 138,000 farmers in 2009, and donated to 13 million people. Its budget in 2009 was 300 million dollars.

But Brazil’s proven strongpoint has been its Bolsa Familia (PBF) programme of conditional cash transfers launched in 2003, using over eight billion dollars to reach 12 million households in 2010.

PBF gives monthly cash payments to pre-defined poor families provided they fulfill education and health stipulations, basically related to pre- and postnatal care, school attendance and immunization.

The IBSA paper suggests India’s National Rural Employment Guarantee, ensuring work for pay for rural households, as a feature worth emulating.

In South Africa, as per its General Household Survey 2009, 20 percent of households have inadequate or severely inadequate access to food.

“The largest expenditure is on social welfare programmes, grants and cash transfers which assist in providing people money with which to buy food,” said Josee Koch, contributor to a 2011 policy document by the Wahenga Institute on public support for food security in India, Brazil and South Africa.

“The social grants are critical,” Koch says. “If you look at an analysis of what poor households spend on food, it’s between 50 to 70 percent of income that goes towards food. With rising food prices, there is little chance that this proportion will drop.”

There is debate in South Africa over the sustainability of grants, with concerns raised over the large number of recipients against the size of the workforce whose taxes must support them.

In contrast, Brazil’s Interministerial Chamber on Food and National Security and the National Council of Food and Nutritional Security, both at high political levels, have been significantly effective in a co-ordinated effort at all the related indices to food security.

India, says the IBSA paper, can in turn offer its experience in consolidating a rights-based approach to food security.

Indian civil society’s Right to Food Campaign has used the courts to guarantee basic entitlements.

*With reporting by Terna Gyuse in Cape Town

Members of the emerging economy grouping known as IBSA – India, Brazil and South Africa – have joined China and Russia in opposing measures against Syria.

“The South African government is of the view that the Syrian issue is best resolved by the Syrians themselves and they must be given space to do so,” South African Department of International Relations and Cooperation spokesperson Saul Kgomotso Molobi told IPS. “The Syrian government has indicated that it has been and continues to take reforms to open up the political space.”

Molobi said the international community’s positions are informed by the interests of the leading countries rather than a desire for change in the Middle East. “The examples are Bahrain and Yemen, where despite repression there were no attempts to seriously sanction and weaken the regime. In the case of the former, all was done to bolster it through military support from the Gulf Cooperation Council.”

IBSA appears keen to play an independent role. On Aug. 10, a delegation with representatives from all three countries met with Syria’s President Bashar al-Assad and the Syrian foreign minister, Walid Al- Moualem.

At the meeting, the Syrian government again outlined its assertion that the protests stem from three disparate sources – academics and intellectuals pushing for democratic reforms, sections of the population responding to economic hardship and repression in particular regions of the country, and militants fighting to overthrow the government.

Assad acknowledged that “mistakes” had been made in the government’s response to the protests and repeated his claim to be committed to reform, offering as evidence proposed new laws he says will steer the country towards multi-party democracy in consultation with the citizenry.

“The Syrian government has indicated that it has been and continues to take reforms to open up the political space,” said Molobi. “It also wants to open up the economic space. This will be achieved through various laws that are being passed, such as the multi-party law, the media law and others. A national dialogue forum has been started although it has not attracted the attention of the country as a whole. The government would like to see an elected parliament that would continue the reform process.”

Molobi said South Africa and IBSA condemned violence – “by all parties” – but conceded there has been little sign of restraint by the Syrian government since the meeting – which shelled Latakia with tanks and gunboats on Aug. 14.

“We regret the escalation of violence and call on all parties to exercise restraint since an all-out conflict will be a disaster for all,” said Molobi.

University of Cape Town political scientist Zwelethu Jolobe said IBSA’s position should be seen to some degree as a reaction to the slowly growing international response to the Syrian crisis: “Everyone is giving their two cents and they probably felt they should too.”

He said that South Africa’s previous engagement with Syria was limited to a pair of bilateral agreements on trade and education, signed over the past two years as part of South African President Jacob Zuma’s administration’s broader activity in the Middle East.

South Africa’s calculations on Syria’s present crisis, he argued, are primarily informed by the significant roles each country plays with respect to the Palestinian Authority. South Africa’s ruling African National Congress Party has strong ties with the ruling West Bank party Fatah, dating back to the days of the anti-apartheid struggle and extending to financial and political support at present.

Syria has been a strong backer of Fatah’s sometime-rival Hamas, offering financial, military and political backing as well as hosting the party’s political bureau in Damascus.

“South Africa cannot afford to have Assad’s government completely implode – it upsets a delicate regional balance with extremely high stakes, within which South Africa has invested an enormous amount of historical, emotional, political and financial resources,” Jolobe said.

The relationship between Syria and Hamas is under strain, in part due to Syria’s internal crisis. The Palestinian party has refused to make a public show of support for the Assad government and a Palestinian neighbourhood in Latakia was among those which came under attack by state security this week.

Hamas is actively exploring relocating its offices to Cairo – a country with which Jolobe says South Africa has invested far more time cultivating close ties recently.

Asked whether, given the history of international support for the anti-apartheid struggle in South Africa, the ANC government’s affirmation of Syria’s “sovereignty, independence and territorial integrity” was somewhat implausible, Molobi responded, “The situation in Syria has different aspects to it and violence is the sad part of it. This has been perpetrated by government and non-government groups with serious results. There are no short cuts and a proper Syrian process is the only hope to bring peace in Syria and no outsiders can do this.”

While highlighting the uneven responses by the U.S. and European countries to uprisings and violent state repression across the Middle East this year is important, the people who have not retreated from the streets even after months of repression surely require more from South Africa and its IBSA partners.

Friday saw the close of another deadly week in the five-month-old uprising in Syria. Activists documenting protests from within the country said demonstrations took place in several parts of the country; security forces are again accused of firing on protesters, killing at least 10.

The protests, which activists inside the country say involved thousands of people in the capital Damascus, the eastern city of Deir ez-Zour, the southern province of Daraa, and the port city of Latakia, came a day after the European Union and the United States called for Assad to step aside.

Speaking on Syrian state television on Sunday, Assad rejected calls to step aside, while announcing multi-party elections for parliament would be held in February. A U.N. humanitarian mission finally on the ground in Syria was greeted by protesters calling for Assad to step down in the city of Homs; according to the Local Co-ordination Committees, security forces opened fire once the team had left.

By Louise Redvers
JOHANNESBURG, Jul 20 2011 (IPS)

South African companies are being urged to use the leverage of its government’s strong political relationship with India to develop new business and investment opportunities.

Now a member of the BRICS emerging economies grouping alongside Brazil, Russia, India and China, South Africa, is in a strong position, experts believe, to enhance its South-South co-operation.

Trade volumes between South Africa and India doubled from 2007 to 2010, with India becoming South Africa’s sixth-largest destination for exports and its ninth-largest source for imports.

South Africa’s minister of trade and industry, Rob Davies, said he believes there is huge potential for furthering mutually beneficial trade exchange and increasing investment channels between South Africa and India.

Speaking at the launch of the India Africa Business Network (IABN) at the University of Pretoria Gordon Institute of Business Science (GIBS), Davies, said world trade patterns were changing and that South Africa was in a good position to seize new opportunities.

“The African continent is now in a fortunate position where there is now a diversity of trade and investment partners,” he told an audience of Indian and South African business leaders and bankers at the GIBS Sandton campus in Johannesburg.

“No longer are we confined in terms of trade and investment to the old powers that we used to know in the past,” he said.

“We now have broader opportunities, particularly from BRIC (Brazil, Russia, India and China) countries being here on the African continent, and India is of course among them.”

He added: “There’s a very solid commitment from the South African government and our institutions to support South African businesses in becoming more involved in India.”

The minister welcomed the IABN as a way to help grow business relations and address what he called a “mindset issue” relating to how South African companies could position themselves better among dynamic markets.

The IABN will be run out of GIBS’ newly-formed Centre for Dynamic Markets (CDM) and will complement existing networks such as IBSA (India, Brazil and South Africa) and the India and South Africa CEOs forum co-chaired by leading Indian industrialist Ratan Tata and Patrice Motsepe, executive-chairman of Africa Rainbow Minerals.

The new network’s founder and director, Abdullah Verachia, described IABN as a “knowledge hub for India-Africa commerce” promoting exchange between business leaders and educational institutions in both countries.

He said: “We want to provide a forum where senior South African and Indian government and business leaders can meet and interact so as to increase trade and investment between the two economies.

“There are incredible opportunities for South African businesses in India, which has a population in excess of one billion. The two countries are also on the first tier of emerging market economies and both face similar challenges of poverty and inequality.”

He agreed with Davies that the political foundations that united the two countries through their anti- colonial struggles provided a strong platform for economic engagement.

“It is now how we leverage that that counts,” noted Verachia, who is also a director at the Johannesburg-based Frontier Advisory strategy and research company.

Indian investment in South Africa is estimated to be more than six billion dollars with several major Indian multinationals such as Tata, Reliance, and Mahindra and Mahindra having established a firm foothold in the local market place.

This week Tata is due to begin construction on a vehicle assembly plant in Rosslyn, outside Pretoria.

Although details are being kept firmly under wraps until the launch on Jul 22, the factory is believed to be the first of its kind in South Africa and will assemble pre-manufactured parts to produce light commercial vehicles, which are currently imported into the country.

India’s High Commissioner in South Africa, Virender Gupta, told IPS: “Tata has been importing vehicles to South Africa for a long time and it was the logical step to start manufacturing here.

“It’s a very significant development and I would really like more Indian companies to go that route, of creating manufacturing facilities and jobs here in Africa.”

South African investment in India is so far only at around the 250 million dollar mark, spearheaded by SABmiller, First Rand (the first African bank to get an operating license in Africa) and Airports Company South Africa, which won a lucrative contract to rehabilitate Mumbai Airport.

Verachia said the aim of the IABN was to help address that imbalance and help more small and medium South African businesses find their way into the Indian market.

“If you look at Indian investment coming to South Africa, it is in a second wave through smaller businesses, and we as South Africans need to look at that see how we can take advantage of similar opportunities in India,” he explained.

Davies said that mutually beneficial trade was South Africa’s key objective going forward and that greater engagement with emerging economies gave them an “historic opportunity to create new patterns of trading”.

“The dialogue we are having at the moment is looking at the areas where we are directly competitive and those where we are complementary,” he explained.

“The questions are, can we not identify the complementary areas and prioritise those and so contribute to both growth and employment in both of our countries?”

Davies said South Africa currently exported primary or scrap products like coal and wood pulp, while India exported value-added items like petroleum oils, cars, pharmaceuticals and mobile phones.

“We need to find a balance between competiveness and co-operation,” he said, something he believed the Cape to Cairo Free Trade Area would help achieve, as it would create a larger single market of Africa nearer in size to other BRIC economies.

Excerpt:

By IPS Correspondents
JOHANNESBURG, Jun 15 2011 (IPS)

A reduction in red tape and an improvement in political conditions means that sub-Saharan Africa is becoming a more attractive destination for foreign direct investment, especially from India.

Stephen Gelb of the University of Johannesburg says there is more to trade than dollars and cents. Credit: Tinus de Jager/IPS

Oti Ikomi, group head of corporate banking products at the Ecobank Group, argues that the decrease in political risk and incidents of conflict in sub-Saharan Africa is creating opportunities. Ecobank is a regional banking institution with branches in west, central and east and southern African countries.

“Added to that, GDP (gross domestic product) on the continent is up 70 percent to 1.76 percent of the global total. While this is still very small, it is a substantial increase. Average inflation is dropping from 13.6 percent in 2008 to eight percent in 2010.

“Africa is the third fastest-growing region in the world, after the Middle East and Asia. But foreign direct investment is currently relatively flat compared to numbers from 2008.”

Ikomi says in addition to the favourable political conditions, red tape is also disrupting business less in Africa. In general, economic conditions are becoming more favourable: “It now takes two days, and three steps, to set up a company in Rwanda.

“Government debt is still comparatively low in comparison to the first world and access to this capital should be used to uplift communities in Africa. The fact is the African middle classes are growing rapidly. This means there is more money to spend on goods, creating more opportunities for investors,” Ikomi enthuses.

However, there still remains some caution about the overall conditions for foreign direct investment in Africa. Problems include the substantial lack of human resources and economic skills on the continent. Closer cooperation between African states and India and China could “do much to better the situation”, believes Ikomi. But the interaction must create a win-win situation for all parties.

Stephen Gelb of the University of Johannesburg says statistics show that trade between India, China and South Africa are steadily increasing. Figures from the South African Reserve Bank show that trade totalled 18 million dollars between South Africa and India in 2002. By 2009, these numbers had shot up to 342 million dollars.

Gelb says these numbers may be “a serious underestimation” of the actual trade that happens between India and South Africa. “The investment from Tata Holdings, alone, could be as much as 1.6 billion dollars.

“A large share of Indian investments moves via Mauritius, which then does not reflect on the score sheet. This is done for tax reasons.

“Another factor may be that the official data is simply wrong, as can be seen in the discrepancy between the South African and Indian trade statistics.” This makes a guess on the true value of the trade relationship between South Africa and India very difficult.

Gelb’s research shows that, in 2010, there were 93 Indian companies operating in South Africa, compared to 47 Chinese companies. Some 45 South African companies were operating in India and 32 in China.

Statistics show that four dollars out of every 10 dollars spent on investing in South Africa goes towards the manufacturing industry, despite local countries taking their money out of manufacturing, Gelb argues. “Another interesting trend is that these companies are looking to sell in the local and regional markets and are not looking to export the products back home.”

The Indian pharmaceutical company, Ranbaxy Laboratories, is also putting up the first new medicine production plant in South Africa in 20 years.

Gelb says statistics go far in alleviating fears that Africa is being unfairly treated in South-South trade. “A big fear is that both Indian and Chinese investment comes with imported labour. However, statistics show that this is simply not true. Both countries operate with more than 90 percent of their labour recruited in South Africa.”

Anthony Rayment, CEO of South African Coalmine Holdings, which belongs to a large steel manufacturer in India, agrees. “Perceptions are often not the reality, and that is certainly true of investment in Africa. Many companies are actively persuing direct investment on the continent.

“What helps Indian companies to invest is that the operating environment in Africa is similar to what they are used to. It is an emerging market; there is a lot of value that can be exchanged between the continent and India. The markets are well regulated. Entrepreneurs exist in both spheres. All of these factors lead to a similar feeling for investing.”

Africa receives some 12 percent of India’s outward investment, which is about 10 times higher than the global average. And this creates competition with western investment, which also benefits the continent in the long run.

Excerpt:

By Thalif Deen
UNITED NATIONS, May 19 2011 (IPS)

Since the election of Camille Gutt of Belgium as the first managing director of the International Monetary Fund (IMF) back in 1946, the Europeans have continued to claim that job as their political and intellectual birthright.

Outgoing IMF chief Dominique Strauss-Kahn is accused of sexually assaulting a maid in a New York hotel. Credit: UN Photo/Rick Bajornas

The resignation Thursday of the current IMF chief, Dominique Strauss- Kahn of France, following allegations of rape in a New York hotel room last week, has triggered speculation about another European for one of the most powerful jobs in international finance.

As things stand, one of the front-runners for the job is the current Finance Minister of France Christine Lagarde, who could well be the first woman to run the Washington-based IMF, if she is elected to succeed the departing Strauss-Kahn.

James A. Paul, executive director of the New York-based Global Policy Forum, told IPS the resignation of Strauss-Kahn offers an important moment of opportunity.

“At last there is the possibility that the chief of the IMF might be drawn from somewhere other than Europe and selected in a transparent way,” he said.

The international financial institutions (IFI) have always been long the captives of the United States and Europe, with candidates chosen far from the public eye, said Paul.

“Like the (U.N.) Security Council, the IFIs reflect an outworn geopolitics and an outworn geo-economy,” he said.

In the 1940s, the United States and Europe struck a “gentleman’s agreement” that while the IMF managing director will necessarily be from Europe, the president of the World Bank will be a U.S. national.

In contrast, the post of secretary-general of the United Nations has been rotating among regional groups: Europe (Norway, Sweden and Austria have held the job since 1946), Africa (Egypt and Ghana), Asia (Burma and South Korea) and Latin America and the Caribbean (Peru).

Paul said that several names have been put forward – promising new leadership from Turkey, South Africa, India, etc.

“Yet suddenly we are told that Christine Lagarde, the French finance minister, is the front-runner for the job,” he noted.

True, it would be an important step forward to have a woman leader of the Fund – and all the more so, in light of Strauss-Kahn’s abysmal record on gender equality, said Paul.

“But surely it is time to have a serious process of selection in place, a process that will give due consideration to candidates from all the world’s regions, not just anoint a pre-cooked candidate in the same old way,” he said.

Let the Board take this process seriously and democratically, said Paul, and let women candidates get every consideration, “but let us not fall back on the old formulas of Western domination in a world that has moved on”.

The Europeans who are staking the claim for the job say the IMF needs a European to resolve the spreading economic crisis in Europe.

Strauss-Kahn was involved in overseeing the 141-billion-dollar bailout loans to Greece, Ireland and Portugal.

Chakravarthi Raghavan, a veteran journalist who has covered the United Nations both in New York and Geneva for several decades, refuses to buy that argument.

“As for the EU argument that they need one of their kind because of the spreading economic crisis in Europe?, it is (really) a valid reason for having a non-European to head the IMF, and steer the international monetary and financial system safely through this crisis,” he said.

In the 1980s, he said, when restructuring and democratising international institutions was very much on the agenda, the United States and Europe used to argue that since the developing countries are borrowers, they can’t be allowed to control the bank.

“This logic applies here. No European should be allowed to head the IMF,” said Raghavan, a former chief editor of the Geneva-based South- North Development Monitor and editor of Third World Economics.

In fact, the rescue packages for Europe are turning out to be efforts to protect the interests of the French and German banks, who are the major creditors, as bondholders, of Greece, Spain, and Portugal, he pointed out.

“And probably British banks are the creditors of Ireland (that has guaranteed the private bank debts),” he added.

“I am not sure about the chances of the various candidates for any of them to prevail. But the developing countries have to stand together,” said Raghavan.

Speaking on condition of anonymity, a U.N. diplomat told IPS: “The Europeans have indicated they would like to keep the job. So they have no plans to let go off their hold on the IMF.”

It will be difficult for the emerging world to stake a claim if the Europeans take this approach, he said. This is especially so as Europe, the United States and Japan hold the majority of voting shares.

That is not to say that there are no capable candidates from the strongest emerging economies, he added.

“I am sure that BRICS (Brazil, Russia, India, China and South Africa) or others can put up good candidates, if they want to,” he said.

But if Europe wants to retain its hold on the top job, and they have cited their current financial and economic difficulties as a reason for wanting to make sure they have the job – needing someone sympathetic to their plight – than it is going to be difficult for the Asians, Africans or Latin Americans to get it, he added.

Traditionally, the IMF head is elected by the 187 members of the institution.

The winner must obtain 85 percent of the votes. But the voting power is concentrated among the top contributors to the IMF, including the United States (16.7 percent), Japan (6.0 percent), Germany (5.8 percent), UK (4.8 percent), France (4.8 percent), China (3.6 percent) and Italy (3.2 percent).

So, in effect, the Europeans have command of the majority voting powers.

Meanwhile, a global coalition of non-governmental organisations (NGOs) is calling for an open and transparent process in the election of the IMF head and a break in the European monopoly.

The campaigners, including the Bretton Woods Project, ActionAid, Oxfam, and Eurodad, want “a fair, transparent and merit-based process for the selection of the next head of the IMF”.

Oxfam spokesperson Elizabeth Stuart said, “The only way to give the new IMF head legitimacy and authority is through open voting, with the winner backed by a majority of countries, not just a majority of shares.”

Strauss-Kahn was expected to continue his term of office until 2012.

Excerpt:

By Sanjay Suri
ISTANBUL, May 13 2011 (IPS)

The glass isn’t exactly half-full, but it certainly is not entirely empty either. Within the broad failure of the weeklong Fourth U.N. Conference on the Least Developed Countries (LDC-IV) in Istanbul that concluded Friday, many delegates are taking heart in a strengthening South-South front that has emerged.

Demba Moussa Dembele, chairperson of LDC Watch, speaks to IPS. Credit: Sanjay Suri/IPS

There was no hiding the disappointment over the conference, though. “We were looking for a bold, forward looking and ambitious programme of action,” Arjun Karki, chair of the LDC-IV Civil Society Forum told IPS. “We thought member states would learn from past three conference failures.”

The LDC conference, organised through the U.N., is held every ten years. That gives countries a lot of time to prepare progressive policies for the LDCs – and then just a week to give expression to them. The developed world largely failed, despite progress at this conference on some counts.

“We had really been looking for a new aid architecture for the LDCs,” said Karki. “The present structure is not really helping LDCs. That is based on the principle of market fundamentalism and neo-liberal policies that have privatised profits and nationalised losses.”

But looking at the silver lining, Karki said, “we are also encouraged by the political spirit of the LDC member states. They are working unified, very close together, and they tried to defend their interests until the very last minute. So there is some political achievement in terms of building and strengthening the LDC group as a political bloc.”

The partnership between the LDCs and civil society has really improved, Karki said. “So we can work together as a political group and as a pressure group in days to come so that our voices are heard by key development voices who make policies and programmes.”

There are deeper gains that others point to, even if these did not show by way of a deliverable new trade deal for the LDCs.

“South-South is really picking speed because the latest UNCTAD [United Nations Conference on Trade and Development] report for the least developed countries for 2010 says the South is now the major market for LDC exports,” Demba Moussa Dembele, chairperson of LDC Watch told IPS.

“Most foreign direct investment received by LDCs comes from the South,” he said. “Not only in terms of financial resources but technology transfer. The emerging companies are becoming major players in the LDCs’ economies. And loans given by emerging economies are mostly on a concessional basis, or grants.”

That new cooperation was strongly confirmed and strengthened at the Istanbul conference, Dembele said. “We would like to push for greater South-South cooperation because in our opinion it’s one way for LDCs to have more political autonomy to design their own policies and formulate their own priorities, and to implement policies that are in the best interests of their citizens.”

A clear sign of progress is what is not taking place, or at the least not being so confidently pushed, to corner the LDCs. Prime among these are the Economic Partnership Agreements (EPAs) that the European Union (EU) has been seeking with many of the African, Caribbean and Pacific (ACP) countries. The EU has succeeded in forcing Papua New Guinea and Fiji already to sign such deals.

There is widespread unanimity among the poor countries against such agreements that can be seriously damaging to LDC economies in the long run. The new South-South front is a bulwark against such agreements, says Dembele.

“The EU wanted to force these agreements on Africa in 2007,” Dembele said. The EU is easing pressure now “because the EU is seeing the South-South connection becoming stronger and stronger, especially through China, India and Brazil. These three have very deep financial and political relations with Africa. And so the EU is afraid of losing its backyard, economically speaking.”

For the LDCs this means an important new path, he says. “For 500 years and more we have been mistreated by Europe. This South-South cooperation is fresh air for us. It is excellent for our liberation – if of course we use it wisely.”

Excerpt:

By Rousbeh Legatis
UNITED NATIONS, May 4 2011 (IPS)

“In South-South cooperation we are all partners,” Josephine Ojiambo, ambassador of Kenya to the U.N. and president of the U.N. General Assembly High-Level Committee on South-South Cooperation, told IPS. “SSC specifically shies away from the donor-client relationship.”

Ambassador Josephine Ojiambo of Kenya, President of the U.N. General Assembly High-Level Committee on South-South Cooperation. Credit: Courtesy of GSSD Expo

While partnership and support received by Least Developed Countries (LDCs) from traditional donors is often “far from adequate”, exchange of resources, technology, knowledge and best practices between developing countries – generally referred to as South-South cooperation (SSC) – is gaining momentum, Ojiambo said.

In the run-up to the 2011 Fourth U.N. Conference on the Least Developed Countries (LDC-IV) in Istanbul, IPS talked with Ojiambo about how Southern solutions could complement North-South cooperation with LDCs. Excerpts from the interview follow.

Q: What makes South-South sharing so helpful for LDCs? A: The countries of the South are a tremendous source of tested solutions to development challenges faced by all developing countries especially the LDCs. SSC offers new concrete ideas, models and practices for LDCs and thus provides major additional opportunities. Additionally, Southern countries tend to offer technologies and solutions that are more appropriate to the special needs and circumstances of LDCs, given their similarities in environment, background or development path.

Developing countries – regardless of their size or level of development – have something to bring to the table… Today when LDCs participate in international negotiations, particularly as a group, they are able to exercise a stronger voice at the table while also bringing forward appropriate technologies, agricultural models, and other successful solutions.

Southern countries are now at the centre of the new geography of international trade – as producers, traders and consumers in global markets… South-South [Foreign direct investment] FDI flows peaked at 187 billion dollars in 2008 (representing 14 percent of the total global FDI), up from 12 billion in 1990 (4 percent of the total global flow). The LDCs have been major recipients of FDI from other countries of the South – accounting for 40 percent of total FDI from developing countries.

China, India, Brazil and South Africa in particular have become important sources of development financing for LDCs.

Q: Do the emerging southern powers – India, Brazil, and South Africa (IBSA) or China – help LDCs within a South-South framework? How? A: Many developing countries have developed substantial knowledge and acquired capacity and experience in setting up dynamic successful institutions for social and economic management, as well as for science and technology development and environmental management. There is now the potential for the sharing of concrete experiences among the South – with development-replicating value. A win- win scenario for all partners.

Examples of some success stories are the ‘Bolsa Familia’ hunger alleviation programme of Brazil, the ‘National Food for Work Programme’ of India, and the central regulatory and liberalisation policies followed by China. These are potentially useful practices to be replicated in other countries.

China and India both also have Africa strategies, which is relevant given the large number of LDCs within the continent.

Q: Building on the Nairobi Outcome of the High Level U.N. Conference on South-South Cooperation a large number of LDCs have called for an international programme of action aiming at reducing the number of LDCs by half over the next decade. What concrete steps can be taken at the upcoming LDC- IV to put LDCs on track to meet this goal? A: At LDC-IV delegates have to agree on how the successes of the Global South over the last two decades can be translated into solutions to the numerous development challenges faced by LDCs in areas including: food security, agricultural/industrial productive capacities, climate change, public health, education, desertification, trade and investment, infrastructure, transportation, information and communications technology.

The Delhi Declaration – adopted by Foreign Ministers, Ministers, and Representatives of the LDCs and India at the India-LDC Ministerial Conference in February – stresses that the interconnected and globalised world has made it essential for the international community to accord its highest priority to the cause of LDCs.

The international community must express its highest political commitment in support of the Istanbul Program of Action as well. There is an urgent need for the development community to further its engagement with LDCs by helping to enhance their productive capacities, through such means as private sector development, the transfer of productive technologies, and the enhancing of LDCs’ enabling environments.

By developing their productive capacities, LDCs will be empowered to mobilise domestically the resources needed to finance their economic growth, thus lessening their dependence on aid and attracting the sort of private capital inflows that can support their development.

Of special importance is the need to commit to specific measures needed to boost LDC productive capacities – delegates emphasised at the February preparatory meeting for LDC-IV in India.

South-South and triangular cooperation, particularly that which engages the private sector through public-private partnerships, have the potential to play a significant role in this agenda as the South is home to many successful examples of effective partnerships, innovative technologies, and sustainable solutions to the very challenges faced by LDCs.

Now, more than ever, it is critical that the development community utilise South-South, triangular and public-private partnerships to empower LDCs’ in poverty reduction, employment creation and sustainable development, enabling LDCs to truly integrate into the international economy, engage in beneficial trade, and escape the poverty trap.

The UN Office of the High Representative for the Least Developed Countries, Landlocked Developing Countries and Small Island Developing States (UN-OHRLLS), which serves as the coordinator of the LDC- IV process, has mobilised the entire U.N. with a view to deliver a comprehensive, action-oriented and meaningful outcome of the conference, including concrete deliverables.

In response to this call, the Special Unit for South-South Cooperation will be hosting an event entitled ‘South-South Development Roundtable: Building Productive Capacities of Least Developed Countries through South-South, Triangular and Public-Private Partnerships.’ The main objective of the roundtable is to showcase announcements of concrete plans for the successful transfer and scaling-up of actual mechanisms for increasing the productive capacities of LDCs through the effective and efficient application of South-South, triangular and public-private partnerships… The event will feature several presentations of successful, transferable Southern mechanisms… each of which will include a comprehensive description of the mechanism and its expected benefits, and announcement of concrete plans and financial commitments for its transfer and scaling-up.

Q: What is the role Northern-industrialised countries have to play? A: South-South cooperation is not a substitute for North-South cooperation.

SSC operates on very different principles from those of Northern donor aid. Not only does SSC encompass financial flows, such as loans and grants for social and infrastructure investment projects and programmes, but it also embraces cooperation through experience sharing, technology and skills transfer, preferential market access and trade-oriented support and investment, transmitting and stimulating similar kinds and levels of development, generating employment and building capital and capacity.

However, despite rapid progress in South-South cooperation in scale, scope and dimension, there are limitations also – as Southern countries, particularly LDCs, face huge challenges in terms of a high prevalence of poverty, malnutrition, and unemployment, serious deficits in infrastructure and productive capacities and the impact of external shocks. North-South cooperation and triangular partnerships remain critical in this regard.

Southern development opportunities can be brought to the table through multilateral mechanisms, such as the U.N. Fund for South-South Cooperation managed by the Special Unit for South-South Cooperation hosted by UNDP. The multilateral development system can be a bridge between the countries of the South and Northern partners – it can mobilise donors and be a catalyst for developed and developing countries to intervene where and when needed.

Q: What are limits of South-South cooperation in supporting LDCs? And why? A: Funding and resources are significant limits. In the last few years, during the financial crisis, LDCs are expressing concern that even past development gains have been eaten away.

Excerpt:

By Kanya D'Almeida
WASHINGTON, Apr 16 2011 (IPS)

The first weeks of April have witnessed a maelstrom of multilateralism – from the chambers of the annual Spring Meetings of the World Bank and the International Monetary Fund (IMF) here to the round tables of the BRICS summit in the resort island of the Hainan province in China – leaving in its wake a tome of unanswered questions regarding the contours and configurations of the new world order.

Referring to Mohamed Bouazizi – the iconic fruit-vendor whose last desperate act of self-immolation on the streets of Sidi Bouzid, a rural town in Tunisia marred by corruption and economic strife, sparked the ongoing Arab Spring – World Bank President Robert Zoellick said at the opening press conference here on Thursday, “Keep in mind – the late Mr. Bouazizi was driven to burn himself alive because he was harassed with red tape.”

Stressing that international aid was not just a question of money, Zoellick added that lessons from the Arab Spring pointed to the necessity of democratic reforms and for the urgent need for governments to provide basic employment opportunities to their people.

Zoellick’s words perfectly capture the nature of the behemoth global conventions happening simultaneously around the world, where calls for democracy in the spirit of recent revolutionary fervor walk complacently alongside a strict adherence to old development agendas.

“We need to act fast on modernizing multilateral institutions,” Zoellick said at a panel discussion at the World Bank headquarters here on Thursday.

Referring to the Bank’s birth in the catacomb of the International Bank of Reconstruction and Development (IBRD), he added, “Reconstruction is no longer what it was in the post-World War II era… It now means Cote d’Ivoire, Southern Sudan, Liberia, Sri Lanka and, I hope, Libya.”

While touching lightly on the changing geopolitical-economic landscape, Zoellick did not tarry long enough to address the frustrations of increasingly irate emerging market countries, whose assembly on the other side of the world has heavy consequences for world economy.

The collective economies of Brazil, Russia, India, China and South Africa, known by their acronym BRICS, are worth roughly 12 trillion dollars, according to a recent article in the Washington Post, and are slated to surpass the 15-trillion-dollar-strong United States’ economy as soon as 2020.

Moises Naim, a former executive director of the World Bank, reported this week that developing economies grew by 6.1 percent every year since 2000, while the advanced economies straggled far behind, at an average of about 1.8 percent annual growth.

According to Jin Canrong, a professor of international studies at the Renmin University in Beijing, BRICS account for 18 percent of global GDP, and are straining against the leash of the old, Western imperial system to join the “rule-makers and judges” in what they consider their rightful place – a seat at every major decision-making table.

Reflecting the determination of what commentators have been calling “strange but strong bedfellows”, the final statement of the BRICS summit stated that the signatories to the Sanya Declaration were committed to revising the global monetary system in favour of “a broad based international reserve currency system,” the Washington Post reported Friday, an effort to reduce reliance on the dollar.

BRICS leaders also expressed the desire to exert a heavier hand on which currencies should sit in the IMF-sponsored “basket” of emergency reserves.

Overshadowing Old Outrage

While hot winds blow fresh demands from the South over the meetings in Washington, they also seem to have swept away some of the old furies that previously brought activists, organisers and progressive economists out in droves whenever the financial giants convened to map the economic future of the world.

Naim writes “the demise of the IMF/World Bank protests is a reflection of broader transformations in the international economy […] that have rendered these institutions less fearsome and less relevant.”

However, the numbers holding up international financial institutions (IFIs) tell a different story – according to a recent report in the Financial Times, the IMF has tripled its resources and “escaped its reputation as a thumb-screw merchant.”

On Thursday, Zoellick said at a panel that the Bank hoped to “move 100 million dollars into Cote d’Ivoire in the next couple of weeks,” with still larger amounts for “citizen security and development” stashed within quite easy reach.

Earlier Friday, the New York Times reported that the Bank planned to move 500 million dollars into Tunisia in exchange for a broad package of reforms. A report from the Bretton Woods Project, outlining the World Bank’s International Finance Corporation (IFC) lending, noted that lending commitments reached a record 18 billion dollars in the 2010 fiscal year.

Despite the rocky recovery of the 2008 crash, IFIs do not appear to be suffering from a dearth of resources – it is more likely that the cacophony from the political elite of the developing world has drowned out the old dissent against fiscal austerity, financial deregulation, free capital flows, and tariff cuts – in other words, against the neoliberal policies that continue to thrive despite the revolutionary upheavals of the last six months and that have found a nurturing surrogate in the bellies of the rising economies.

“What these so-called rising powers represent is the power of mobile capital, the power of multinational corporations seeking the cheapest place with the highest exploitation,” Vandana Shiva, renowned Indian environmentalist and author on bioethics and genetic engineering, told IPS.

“And when it’s the World Bank or the multilateralism of the G20 talking, you know it’s not going to represent the multilateralism of the people,” she added.

Privileging People’s Democracy

Even in the vortex of the power struggles between dominant and emerging financiers, many critics remain firmly rooted in the old soil that housed historic movements against capitalist expansion and the impact of neoliberal policies on local economies and indigenous communities.

“The World Bank has historically used its clout to promote undemocratic processes,” Shiva told IPS. “They have pushed India to violate the laws of the tribals and the farmers, because once they settle on a certain line of investment, then no law that supports the democratic rights of the people can survive – if they finance a superhighway that highway gets built, if they finance a mining project, that project happens no matter who or what it destroys in the process.”

Addressing Zoellick at a panel at the World Bank Thursday, Jay Naidoo, founding General Secretary of the Congress of South African Trade Unions and the former Minister of Communications in President Nelson Mandela’s cabinet, said, “Global governance cannot be determined by elites, sitting in fora like we are now – civil society cannot simply be relegated to side forums at events like these.”

Reiterating the fact that at the core of the anti-apartheid movement in South Africa was the struggle against a labour system that exploited black workers, Naidoo was confident that real democratic movements would spring from the grassroots, oblivious to conversations in Washington.

“Of course there will be attempts to co-opt these movements but I am confident that the leaders know what they want,” Naidoo told IPS.

Referring to the recommendations of this year’s World Development Report (WDR), Louise Arbour, President of the International Crisis Group, warned that the Bank’s adherence to the old discourse of security and stability have limited scope for an evolving landscape.

“I despair of how the rule of law has been trivialised and reduced to law enforcement,” Arbour said. “The need is not to build more police forces or more prisons but to move to a justice-oriented model where all citizens are equal before the law,” Arbour said.

Excerpt:

By Aprille Muscara
WASHINGTON, Apr 14 2011 (IPS)

Finance ministers of the G24 group of developing and emerging countries met on the sidelines the World Bank and International Monetary Fund spring meetings here on Thursday, warning against continued risks to their economies, despite largely “strong” growth as the world climbs out of the global financial crisis.

“[T]he nature of that recovery and the very expansionary monetary policies in advanced economies have had important spill-over effects on developing countries, contributing to a surge in capital flows and overheating pressures,” Lesetja Kganyago, the G24‘s current chairperson, told reporters after the meeting.

The cost and price volatility of commodities was also high on the group’s agenda. While improved trade terms benefit commodity- exporters, they said, high food and fuel prices partly driven by excessive financial speculation are a pressing concern for developing countries, who are most vulnerable to price shocks.

“The sharp increases will…accentuate inflationary pressures, pose a renewed threat to the poor and vulnerable, exacerbate social tensions, and add significantly to fiscal and import burdens, endangering growth prospects, especially of low income countries,” the group warned in a communiqué.

“Beyond the recovery, the environment for growth and development in the post-crisis period will be characterised by major structural changes. A major challenge is how to ensure that growth in the future is inclusive and employment-intensive,” Kganyago, director-general of South Africa’s National Treasury, added.

“A push to raise investment, including for infrastructure improvement, can help sustain and broaden growth poles in the developing world, but this will require a reinvigoration of development finance,” he said.

In their communiqué, the G24 ministers called for a “shift towards multi-polar sources of growth”, noting, “[T]he most dynamic sources [are] now centred in the developing world.”

Notably on Thursday, South Africa officially joined the so-called alliance of powerhouse emerging market BRIC (Brazil, Russia, India and China) nations.

The group also continued discussion on climate financing and again called for “even-handed surveillance” of not only developing countries but also advanced economies and the expansion of the SDR basket to include emerging market currencies.

The G24 ministers also rejected two proposed IMF policies that would provide greater oversight and that they consider to be restrictive.

These include a new method of determining whether a developing country’s given level of foreign currency reserves is “adequate”. Although reserve build-ups can lend to exchange rate manipulation and global imbalances, they are a necessary line of defence against potential crises, the group said.

Another sticky matter is a newly planned framework for staff to advise countries on managing capital flows – much of which streams from developed to developing nations.

“[T]he idea of having a toolkit is a good one,” Kganyago said. “What we had a problem with is to then say that these things get integrated into the surveillance programme of the IMF and will form the basis of the advice of the IMF staff.”

“The second issue where we had a problem with the Fund’s approach was the fact that the focus tended to be on receiving countries,” he added. “You cannot just say that there are these inflows that are coming into developing countries without dealing with the source of the problem.”

“Certainly, the question of capital flows will still create some debate, but it is a very important, very interesting one, and it shows that the institution doesn’t shy away from difficult problems,” IMF Managing Director Dominique Strauss-Kahn told reporters on Thursday. “On the contrary, we want to address this problem directly and try to find collective solution.”

Meanwhile, the France-chaired G20 of advanced and emerging economies are slated to meet here on Friday, when they are expected to grapple with commodities concerns and the thorny issue of global economic imbalances as well as assess the world economy and prospects for growth more broadly.

On Wednesday, 1,000 economists from over 50 countries penned a letter to G20 policymakers urging them to adopt a so-called “Robin Hood Tax,” which would impose a minimal levy on financial transactions and could potentially raise hundreds of billions of dollars for development financing.

“[T]here can’t be a business as usual approach to growth,” Oxfam spokesperson Luc Lamprière said, echoing a sentiment expressed by Strauss-Kahn. “The G20 talks about inclusive sustainable growth but it’s going to have to turn the rhetoric into action on a whole range of policies including fair tax systems.”

*Follow Aprille Muscara on Twitter at @aprilledaughn.

Excerpt:

By IPS Correspondents
BEIJING, Apr 8 2011 (IPS)

At the upcoming Brazil, Russia, India, China and South Africa (BRICS) summit, to be held on the tropical Chinese island of Hainan Apr. 14, discussion will focus not only on deepening economic ties among members, but will also likely touch on global political events, including the crisis in the Middle East and North Africa. But China insists the club has no political agenda.

Officials at the China Institute of International Studies (CIIS), a think-tank under the Chinese Foreign Ministry, told reporters recently that BRICS’s aim is to broadly focus on larger issues related to international governance. It called the group an “ad-hoc political club” of developing nations and insisted that it was not an “anti-U.S. bloc.”

Qu Xing, CIIS’s president, pointed out that there were no consultations between BRICS countries in the lead-up to the U.N. Security Council vote that allowed international strikes to impose a no-fly zone on Libya. China, Russia and India abstained from voting, while South Africa voted in favour.

“I believe the timing is not right to have a common political agenda. The reason why the BRICS countries came together is because of the similar economic development stage they are in, and a similar foreign trade structure,” Liu Youfa, vice president of CIIS, told reporters. “The leaders, when they meet, may discuss some political issues. I do not think having a political agenda is a key concern for the BRICS mechanism at this point of time.”

BRICS member nations accounted for 18 percent of global GDP in 2010, and trade volume between the countries has soared, with an average growth rate of 28 percent from 2001 to 2010, according to figures from the Xinhua News Agency. Total trade volume among the BRICS countries reached 230 billion dollars in 2010.

In attendance at the upcoming meeting in Sanya, capital of Hainan Province, will be Chinese President Hu Jintao, Brazilian President Dilma Rousseff, Russian President Dmitry Medvedev, Indian Prime Minister Manmohan Singh and South African President Jacob Zuma. South Africa is the most recent country to join BRICS.

The leaders “will have an in-depth exchange of views on the international landscape, economy, finance, development and other issues, and map out further cooperation among the BRICS countries,” according to a statement from China’s Ministry of Foreign Affairs.

At the end of March, Beijing hosted the BRICS Think Tanks Symposium, organised by the Research Centre of Contemporary World Economy and the China Foundation for Peace and Development.

During a speech at the symposium’s opening ceremony, Sun Jiazheng, vice chairman of the Chinese People’s Political Consultative Congress and the chairman of the China Foundation for Peace and Development, said BRICS must focus on major financial problems within the world economy and promote a more equitable and inclusive international economic order, according to the People’s Daily, an official government newspaper.

Last month, China’s Foreign Minister Yang Jiechi hinted toward the club’s lack of a political agenda, saying that BRICS nations are committed to cooperation – not confrontation – with developed countries.

“Cooperation among the BRICS countries is open and inclusive. It is an important part of the South-South cooperation and an important bridge for North-South cooperation,” Yang told reporters here.

Yang lauded BRICS’ role in addressing the global financial crisis and climate change, as well as its help facilitating economic recovery. “I believe the BRICS nations will play a bigger role in those areas as a result of the meeting” in Sanya, he said.

Lin Yueqin, a researcher with the Chinese Academy of Social Sciences and secretary general of the Chinese Association for Development Strategy, says BRICS nations should work together to address global trade issues, encourage and develop trade between member nations, and reduce the potential for trade tensions. Lin told IPS that BRICS should reduce tariffs and strengthen free trade agreements among member countries.

Challenges remain, however. Lin says BRICS will likely face tension from other existing international trade organisations, and because the organisation is new, growing pains will occur. “Since there is no acknowledged leader and [each country’s] goals differ, conflicts are unavoidable,” he says.

Lin says China should take a greater role in multilateral and bilateral economic organisations, including BRICS. “China is capable of playing a greater role and it should take advantage of it,” Lin said, adding that China must engage and cooperate with other developing nations, or else countries such as India and Russia will emerge as leaders of the developing world.

Jiang Shixue, deputy head of the Institute of Latin American Studies at the Chinese Academy of Social Sciences, says BRICS needs to focus on addressing legitimate issues – including reforming international financial institutions, food security, energy safety and climate change – in order to avoid becoming solely a mouthpiece for member nations.

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By Isolda Agazzi
GENEVA, Apr 8 2011 (IPS)

“IBSA what?” is the question you most often get in Geneva when enquiring about the India-Brazil-South Africa (IBSA) dialogue forum, established in 2003 between these three multicultural democracies and emerging markets “to contribute to the construction of a new international architecture”.

El Hadji Diouf: South Africa will try to trump its IBSA partners when it comes to market access in Africa. Credit: Isolda Agazzi/IPS

They also called for an “early conclusion of the Doha Development Round with a balanced outcome which ensures the development needs of the developing countries, especially the least developed countries”.

A trade diplomat from one of the IBSA countries at the World Trade Organisation (WTO), speaking to IPS on condition of anonymity, says, “we don’t coordinate our actions formally as a group. We hold common membership in various coalitions, so we coordinate on an ad hoc basis.”

He explains that Brazil, South Africa, India and China are members of the Group of 20 (G20) in agriculture; of the NAMA-11 group in the non- agricultural market access (NAMA) negotiations; and that they share most positions on intellectual property.

The G20 is a coalition of developing countries but their interests in agriculture may diverge. Brazil, for example, tends to take the offence, while India adopts a defensive position, pushing for a strong special safeguard mechanism that allows developing countries to increase tariffs in the case of import surges or sudden drops in world prices.

The NAMA-11 is a group of emerging market states that asks for flexibilities in the implementation of tariff reductions and for greater market access in industrial goods.

“But, even though the interests of Brazil and India in agriculture may seem divergent, in practice they have been able to find a middle ground with regard to market access, the reduction of trade-distorting domestic support and the elimination of export subsidies,” the trade diplomat points out.

Christophe Bellmann, programmes director at the Geneva-based International Center for Trade and Sustainable Development (ICTSD), explains, “the March Delhi statement is mainly in response to U.S. pressures on sectoral initiatives in the NAMA negotiations.” ICTSD is an independent non-governmental organisation based in Geneva.

Currently, the main divergences in the WTO Doha Round negotiations stem from the U.S. request to large emerging markets to deeply cut or even completely slash tariffs in entire industrial sectors, like chemicals, industrial machinery, electronics and forestry.

Brazil, China and India responded that these initiatives are supposed to be voluntary and must remain so. For Brazil, these sectors represent one third of all its industrial products and, for China, more than 55 percent of all its NAMA imports.

These deep differences have brought Pascal Lamy, WTO director general, to acknowledge last week that the Doha Round “may fail.”

For Bellmann, alliances are “not political or ideological,” but based on commercial interests and therefore very volatile, with the exception of the African group that works more along a regional line.

“Countries don’t think as a group, but in a strategic way, for example, how to increase their weight in negotiations by building alliances, ideally with big countries like China, India and Brazil,” he told IPS.

El Hadji Diouf, executive director of the African Agency for Trade and Development, regards “IBSA as a good initiative of South-South cooperation, but its impact in trade negotiations is limited.” The agency is a Geneva-based non-governmental organisation that specialises in issues regarding trade and Africa.

“The common interest of IBSA is to position itself as an alternative to the hegemony of traditional commercial powers,” he told IPS.

“But these countries must secure access to new markets and are therefore in competition with each other. They can cooperate sincerely on the elimination of agricultural subsidies but cannot make a common offer in market access.”

Neither do they have the same commercial partners. “Brazil has witnessed an incredible growth in recent years and it is globally becoming stronger and stronger. It has a vested interest in the conclusion of the Doha Round, more than the others. South Africa, in contrast, has many relations at the regional level, in addition to its EU relationship,” explains Diouf.

But what can the much smaller South Africa bring to this alliance? “South Africa is a good market for India and Brazil’s exports and, even more so, as an entry point into the African continent because of its membership in different African regional organisations,” Diouf argues.

Concerning the possible effect of IBSA cooperation on African least developed countries (LDCs), Bellmann explains that WTO requirements that apply to South Africa do not apply to LDCs since they don’t have to open their markets in agriculture, NAMA and services.

“We are looking to ways of implementing duty-free and quota-free market access for LDCs,” says the trade diplomat. “India and Brazil are taking steps in this direction.”

The Doha mandate asks developing countries that are in the position to do so to open their markets to LDCs’ products, but without setting a specific target as for developed countries, currently at 97 percent.

“However, because of its geographical position, South Africa could try and get better market access to African LDCs than its IBSA partners,” Diouf reflects.

“IBSA does not exclude competition. Pretoria, for example, does not favour trade liberalisation between its African partners and the EU in sectors like services, to avoid having to share the regional market in which it already has a hand. This is a pre-emptive fight with a commercial rationale that could crop up between IBSA partners.”

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By Mantoe Phakathi
MBABANE, Mar 31 2011 (IPS)

While Swaziland struggles to alleviate its fiscal crisis with foreign aid because of its World Bank classification as a lower middle-income country, the government has increased the budget for King Mswati III, Africa’s last remaining absolute monarch and one of the richest royals in the world.

Swaziland's health minister Benedict Xaba receiving donated medical supplies from UNICEF. Swaziland gets limited help of this nature. Credit: Mantoe Phakathi/IPS

“It has been shown that the economic growth experienced by Swaziland during the 2000s has not been pro-poor,” reads the Swaziland Household Income and Expenditure Survey report. More than 160,000 people depend on food aid while 26 percent of the productive age group of 15 and 49 years lives with HIV.

Swaziland’s projected budget revenue for this year stands at a tiny 1.2 billion dollars, with grants amounting to a “minimal” 57 million dollars, according to finance minister Majozi Sithole.

Now that the government is facing fiscal challenges, the country is feeling the foreign aid squeeze more intensely. Following the slash in Southern African Customs Union (SACU) receipts with which Swaziland used to finance its budget by up to 60 percent, the country needs foreign aid more than ever before.

Pat Muir, principal secretary at the ministry of education and training, says, “the country’s World Bank classification makes it impossible for us to partner with international organisations that could assist us with some of our services”.

When the government sets out to raise foreign aid, donors always remind Mbabane that Swaziland is not regarded as a country poor enough to “deserve” much of this kind of assistance, notes Muir.

Sithole decries the skewed distribution of wealth in the country, which contributes to the country being classified as a lower middle-income country. This status is based on an elite representing only 10 percent of the population but controlling 60 percent of the country’s wealth.

Forbes Magazine in 2009 listed Mswati, whose wealth is estimated at 100 million dollars, excluding an alleged 10 billion dollars which was put in trust in his name by the late King Sobhuza II, his father. The government of Swaziland has not come out to deny these claims.

Despite the fiscal crisis, the government increased Mswati’s budget from 24 million dollars in 2010 to 30 million dollars in 2011.

This happens at a time when the government, as advised by the International Monetary Fund (IMF), is cutting salaries by five percent and freezing wages for the next three years to bring down the public wage bill, the biggest in the region, by five percent annually.

“Civil servants would have to make a choice between earning 90 percent of their salaries, or nothing at all if they insist on getting 100 percent of their wages,” Sithole announced a while ago.

Obviously such measures do not apply to the royal budget.

Swaziland’s lower middle-income status also presents a problem to civil society organisations as donors’ focus shifted to least developed countries.

According to Emmanuel Ndlangamandla, the director for the Coordinating Assembly for Non-Governmental Organisations (CANGO), foreign aid to Swaziland started to dry up from the 1990s.

“Since then, NGOs have been downscaling operations because donors are not interested in funding Swaziland because of its lower middle-income status,” says Ndlangamandla.

What has further compounded the problem, states Khangezile Dlamini, the general secretary for Council of Swaziland Churches (CSC), is the system of governance that breeds corruption and does not allow transparency.

“Donors tell us that government hosts the king’s birthday celebrations every year, yet it fails to provide for its poor people,” said Dlamini. Despite the fiscal crisis, government still plans to host the king’s birthday celebrations on Apr. 19.

She said CSC had to discontinue a programme where the organisation was installing boreholes for poor communities in drought-prone areas. “Our donors told us that government should be responsible for providing these services to its people.”

Corruption in the country is a major problem, with Sithole claiming that the government is losing 11 million dollars every month to this scourge: “We’ve also been seeing a lot of over-expenditure on the part of government where departments would buy big expensive cars just to use on tarred roads.”

The conspicuous consumption over the years has been worsened by the availability of money from the SACU receipts. “A big party has come to an end,” said Joannes Mongardini, the IMF Africa head of mission.

The drop in SACU earnings followed the global economic meltdown that had reduced the amount of exports from SACU, of which Botswana, Lesotho, Namibia and Swaziland (BLNS) are members, along with South Africa.

SACU receipts have been reduced from over 700 million dollars for 2009/2010 to about 400 million dollars for 2011/2012, finance minister Sithole pointed out as motivation for loans to be made available by the African Development Bank (AfDB).

“We need assistance to increase our non-SACU revenue,” Sithole said at a budget analysis forum where the AfDB and the IMF were in attendance.

Swaziland is under the IMF’s staff-monitored programme which requires that a delegation from the international financial institution visits the country every six months to observe its fiscal management.

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By Servaas van den Bosch
WINDHOEK, Mar 28 2011 (IPS)

A new revenue sharing formula in the Southern African Customs Union (SACU) could boost development but has met with resistance from the governments of poorer states in the sub-region that are interested in “just getting the money”.

Swaziland's autocratic King Mswati III, photographed at SACU's centenary in Windhoek in 2010, has come under attack for being a spendthrift. Credit: Servaas van den Bosch/IPS

The South African government’s treasury department wants a revision of the formula.

Smaller member states Botswana, Lesotho, Namibia and Swaziland (BLNS) argue that SACU’s common external tariff (CET) gives South Africa an instrument to protect its own industry, while the level playing field in the union makes it hard for the peripheral countries to build their own industrial bases and compete with their much larger neighbour’s products and services.

For this they deserve to be compensated, they argue.

At the Mar. 25 heads of state meeting in Pretoria “a lot of time was spent on working out the formulation of a new mechanism, but nothing definite was decided on”, says researcher Paul Kruger of the Trade Law Centre of Southern Africa (TRALAC) near Cape Town, South Africa.

SACU stated in a communiqué after the meeting that, “the summit reiterated that the review of the revenue sharing arrangement is critical, particularly in the context of the volatility of customs revenues. The summit directed that this work be pursued and concluded urgently in line with the equitable and development objectives embedded in the SACU Agreement”.

In an article last week Catherine Grant, senior researcher at the South African Institute of International Affairs (SAIIA), and a colleague warned against an “unrealistic’’ perception of the balance of power in SACU.

“South Africa feels that it cannot be expected to receive less than that its due,” Grant tells IPS. “In the BLNS countries there is a shocking lack of understanding of the realities. The South African treasury is frustrated over having to hand over so much money, without really having control over it.

“Most notable is the case of Swaziland where there is little fiscal discipline and the budget is controlled by the (autocratic) royal family. We have seen the same frustration in the EPA negotiations, where South Africa seemed to have very little control over what other SACU members signed on to,” she adds.

“South Africa should top up the revenues for reasons of political stability and economic policy but the formula shouldn’t just focus on trade. It should rather stimulate development.”

But, “it will be very difficult to get countries on board. Previous changes in the revenue sharing formula were triggered by significant political events, such as independence struggles and the end of apartheid.

“The current revision is mainly inspired by the recession and a couple of years of experience with the current revenue formula, which South Africa now wants to renegotiate. Such changes are not significant enough to drive the process,” explains Grant.

A leaked February draft report on the proposed changes to the formula caused an outcry in the BLNS, being pitted heavily in favour of South Africa. Countries are still studying the report with a final decision expected in Apr. 2011.

One of the options on the table is to increase the development component of the pool with funds, for instance, going to regional infrastructure projects instead of state coffers. “It is doubtful that countries like Swaziland and Lesotho will be keen on that,” opines Kruger. “For them, it is more important than anything else to get the money.”

Grant foresees lengthy negotiations: “I don’t think that the report will fly. It can serve as a catalyst for discussions but the suggestions of the consultants are not anywhere near what the BLNS countries can sign up to.”

Kruger comments that, “aiming for April for finalisation of the issue of the revenue sharing formula indicates SACU wants it resolved as soon as possible. It will be very difficult to continue with other items before the issue is solved.”

These other issues include SACU’s common industrial policy, the trade facilitation programme focused on relaxing border procedures, external trade agreements and common institutions like the SACU tariff board and tribunal. There has been little movement on any of these since 2002. In their Mar. 25 statement the heads of state merely ‘‘noted’’ that work on these areas was ‘‘ongoing’’.

“There seems to be no real impetus behind any of these other issues, especially on the side of the BLNS,” says Grant. “Negotiating trade agreements with the EU and India has proved lengthy, while only South Africa has ratified the agreement with (South America’s) Mercosur.”

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