IBSA: Challenges and Prospects
Frequent exchanges of business delegations, liberal visa regime and more convenient air and sea routes for travel and cargo would facilitate mobility of businessmen and capital among IBSA members, said FIEO President Mr. Ganesh Kumar Gupta while addressing IBSA Business Summit at Johannesburg on 16th October 2007. Excerpts from his speech:
"In recent years, we have witnessed dramatic growth in the role of major developing economies which are joining the ranks of top global economies. In fact, in the last two decades, emerging market economies had growth rates substantially higher than those of G-8 countries. The demographic structure of the global economy is also beginning to assume greater importance as can be seen from the growth of most populous and fastest developing countries like China and India. Since most of the future increase in global population will take place in the developing world, this factor is going to emerge as a more important element impacting on the future growth.
At the same time, we have also witnessed that the levels of priority given to the South-South relations have fluctuated. In mid-90’s it was primarily a foreign policy priority in developing countries. Now South-South cooperation is getting a fresh breath of life and is being effectively revived through economic forums such as IBSA, G-20 and NAC, etc. This cooperation has been very successful in various other multilateral forums on a variety of issues ranging from trade to security and has led to influential outcomes. The IBSA member countries have pioneered this collaboration.
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The leaders of our three countries consciously advanced themselves as champion for an emerging developing world. This was specifically recorded in clause 2 of the Brasilia Declaration of June 2003, which acknowledged that "the importance and necessity of a process of dialogue amongst developing nations and countries of the South had emerged". This IBSA initiative was different from the previous third world initiatives that aimed at alternative and independent multilateral orders; it does not seek to create new geo-political divisions. Instead, this initiative consists of a group which, in the worlds of Brazilian Foreign Minister, "spreads goodwill and the message of peace". After the Doha Ministerial meeting in 2001, the trade officials of large number of developing countries joined together to give rich content to South-South cooperation through promotion of special trading arrangements and other means. As could be expected, the IBSA member countries played the lead role in this venture. The establishment of IBSA Dialogue Forum must, therefore, be seen as a ‘core’ grouping that is aiming to build the relations between South and North. Creation of IBSA Trilateral Commission in the aftermath of G-8 summit in 2003 |
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Mr Ganesh Kumar Gupta, President,FIEO addressing the gathering. |
was yet another focused effort aimed at providing a forum for coordinating strategy between the three leading industrial countries of the South.
The IBSA initiatives are guided by the desire for cooperation between states that enjoy similar positions in global politics. At the same time, these countries have expressed concern that large parts of the world have not benefited from globalization. They have stressed that globalization must become a positive force for change for all peoples, and must benefit the largest number of countries.
In simple words, the key objective of IBSA is to make the international economic system responsive to the needs of developing world. The main driving force behind the IBSA initiative of coalition building among developing countries is that they believe in liberal economic order at institutionalized level. Their initiative is therefore ‘reformist’ in character, and not ‘transformative’.
In terms of trade, IBSA countries are among the top developing countries. Their growing significance in international trade is shown by the way India has doubled its global trade share from 0.8% in 2000 to more that 1.2%. Similar trend can be seen in the South African and Brazilian trade. Their intra trade more than three fold the decade 1994-2004. IBSA countries can reinforce the economic strength of each other by creating a market of 1.2 billion people, 1.8 trillion dollars of GDP and foreign trade of nearly 600 billion dollars. In recent years, there has been a qualitative and quantitative leap in intra-IBSA trade. From a mere $ 20 million in 1998 and $ 800 million in 2002, Indo-Brazil trade has reached $2.5 billion; India-South Africa trade has also exceeded $4 billion this year. These trends indicate that IBSA trade is close to the $ 10 billion target set for this year.
IBSA’s evolving trade and investment focus has induced some changes in the quality, quantity and direction of international trade. Each of the three countries has displayed strong comparative advantages and specialization in specific areas. While Brazil is regard as an "agricultural powerhouse", South Africa has a combination of strengths in agriculture, manufacturing and services, and India has displayed good strength in Services Sector. Of course, each has a large and diversified economy and has displayed high level of technology, R&D and human resource capacity, along with a rich mineral base. These countries have, therefore, become important suppliers for global sourcing of goods and services. There is some overlapping, but it is mostly complementary.
IBSA countries have now become major buyers and they can become part of each other’s global production chains. India and South Africa can source competitive agricultural products and ethanol, construction materials, and vehicle parts from Brazil, while Brazil and South Africa can source most competitive pharmaceuticals and IT- enabled services from India. India and Brazil can source equally beneficially certain minerals and metals from South Africa. In their intra-trade, several sectors are emerging more dynamically. Some of these key sectors include chemicals, electrical goods, automobiles and automotive parts, engines and motors, ores and metals, textiles and certain services sectors including outsourcing. These sectors have displayed consistently high growth and increased share in world trade in which IBSA countries have also made impressive gains, though these are still below potential. They could individually and collectively plan new tie-ups amongst them which could enable them to expand their existing share of global trade. The dynamic sectors being among the fastest growing product group’s n global trade, well structured and more focused relationship among IBSA countries in these sectors at policy, industry and company levels will contribute significantly to their individual and collective export dynamism.
In view of the growing importance of regional trade agreements, FTA between IBSA countries would have to be pushed through. In today’s world economy, IBSA countries like others, must continuously strive to become and retain competitiveness, both regionally and internationally, and diversify their production and trade, to achieve their developmental goals. Of course, an IBSA FTA will imply an FTA between two integration groupings and one country that is between MERCOSUR, SACU and India. The IBSA FTA would provide important market access opportunities for India into MERCOSUR and SACU for Brazil into SACU and India, and for South Africa into MERCOSUR and India. Brazil and South Africa will of course have to consult and seek agreement of their respective union partners.
There are sound economic strengths that could provide a solid launching ground for deeper economic integration between its members. This would ensure that they would become "natural" trade and investment partners fully exploiting their synergies.
In the wake of post 9/11 developments, the developed world appears more willing to consider developmental concerns of the South. This is an opportunity as well as a necessity in bridging the increasing gap between the North and South. In this process, IBSA could play key role in defining South’s concerns for poverty eradication, debt relief and other problems. This sets out an important lead role for IBSA not only from their regional development perspective, but also from an international systematic one.
IBSA has therefore the potential of emerging as the key grouping in the global economy in general and in the South in particular. It could be the engine of economic development and voice in the developing world. And, this would inevitably have important implications for global politics, especially on those related to global economy and development. IBSA countries have already acquired significantly increased weight and influence in international trade and economy, and are contributing in an unprecedented way to its dynamism. Their intra-trade although still well below true potential, and small in terms of their overall trade, has been growing dramatically.
It may also have to be borne in mind that a key challenge being IBSA is how to overcome the physical, cultural and economic distance between its members. It would be necessary to simultaneously seek to bridge these three gaps. It is our experience that bridging the economic distance greatly helps in developing closer bonds in other areas.
Several analysts have identified the sectors where untapped potential can be exploited in order to further strengthen and expand intra-IBSA trade. Frequent exchanges of business delegations between the three countries, liberal visa regime and more convenient air and sea routes for travel and cargo should be put in place to facilitate mobility of businessmen and capital between the three countries.
On behalf of Indian trade and industry, we would again emphasize our full support to all those efforts which would help raise the level of economic cooperation amongst IBSA group to new heights".
