[DEBATE] : (Fwd) IBSA subimperial gathering in Durban

[Patrick Bond]

The Mercury 

Boost for developing world's 'big three'
South Africa, Brazil and India have joined forces in an economic and intellectual co-operative that will meet in Durban next month. David Canning takes a closer look at the initiative

September 07, 2007 Edition 2 


A co-operation initiative between South Africa, India and Brazil (Ibsa) will take on new impetus next month when these countries' respective heads of state meet in Durban.

The Ibsa dialogue forum summit is expected to be held in October between President Thabo Mbeki, the Prime Minister of India, Manmohan Singh, and the President of Brazil, Luiz Inacio da Silva, probably at Durban's International Convention Centre.

A series of meetings has taken place at other levels of government and civil society since the inaugural Ibsa summit in Brasilia on September 13 last year. The latest was a meeting of media editors in Delhi this week (September 3 and 4). 

Ibsa embraces the leading nations on three continents of the developing world involved in the South-South co-operation initiative. It is designed, among other things, to boost trade, encourage joint approaches on common problems and boost the bargaining power of developing nations in world affairs. 

Ibsa has had a relatively low profile, with many businessmen, academics, researchers and others unaware of its potential in their respective fields. 

However its ties are growing. Trilateral trade was expected to reach a target of $10 billion this year, India's External Affairs Minister Pranab Mukherjee said in officially closing the media editors' conference on Tuesday. 

The Confederation of Indian Industry further estimates that trilateral trade could reach $15 billion (R109 billion) in 2009, compared with only $6 billion (R44 billion) in 2005. 

Mukherjee said Ibsa had identified co-operative potential in many different fields, including energy, education, agriculture, health, science and technology, and public administration. 

Ibsa countries shared similar colonial backgrounds and had struggled to achieve democracy. Pluralism and ethnicity were issues in their multicultural societies. The three countries had substantial capabilities in different sectors and co-operation could help to provide answers. 

Speakers at the media conference also referred to areas of common interest.

They pointed out that, in economic terms, all three countries were enjoying better economic prospects, based in part on disciplined monetary and fiscal policies and market-orientated approaches. 

In broad terms, the three nations share common economic features and similar problems - such as wide income disparities, deep poverty and developmental backlogs. 

Growth wave

However, India is enjoying spectacular economic growth of nearly 10% a year. South Africa's growth rate is between 4.8% and 5%. In Brazil annual average GDP growth is projected to accelerate to 3.7% in 2007-11 from 3.2% in 2002-06, on the assumption that domestic demand will be a more powerful engine of growth. 

India is riding an economic growth wave, while certain income disparities between groups are decreasing in both Brazil and South Africa.

Some interesting comparisons were made at the media conference by Nicolina Spina, Chief Executive Officer of the Brazilian financial newspaper group Valor Economico: 

q India and South Africa are already classed as investment grade countries; Brazil is just one level below investment grade status.

q Together, Ibsa gross domestic products totalled $1.97 trillion in 2006.

q Ibsa countries represent 21% of the world population (potential consumer markets).

q They have a labour force of 621 million workers. 

q The countries (particularly Brazil and South Africe) are rich in natural resources.

q India has skills potential to beneficiate these resources.

Spina argued that to increase trade relations among Brazil, India and South Africa, these countries had to take advantage of common opportunities. There are challenges and opportunities. 

In terms of challenges, the governments of Ibsa will have to address issues such as a lack of confidence. Companies have a perception that the Ibsa project is more of a political than an economic project. 

There are also concerns, as Ibsa countries are competitors in sectors such as motor vehicles, steel and agriculture. 

There are doubts about the capacity of governments to implement trade agreements and there is insufficient information about regulations and rules to export to Ibsa countries. 

There are high transaction costs and a complex environment for business to operate within - too much bureaucracy. In Brazil and India import licences are required for some sectors, such as textiles and pharmaceuticals.

There are restrictions on foreign investment in India. 

For example, there is a ceiling on foreign capital participation in the civil aviation and in theirlucrative pharmaceutical sectors.

He also said there was some doubt about the long-term stability of the Ibsa economies - and potential political instability in India was still a concern.

However, when it comes to opportunities, Ibsa countries could be partners, not rivals in areas like bioenergy. Brazil and India are the two major world producers of sugar cane (an area where South Africa also has a significant industry). Plastics can be produced using ethanol and there is a possibility of migration from petrochemical to biochemicals.

India adds 5% of alcohol into petrol, Brazil adds 25% and South Africa has plans to build biofuel factories. 

In biotechnology, Brazil and India have great expertise in the pharmaceutical and medical industry (Brazil participates in the Genoma research project). In terms of small and medium enterprises, South Africa has a demand for management software. India is a world leader in software production, and Brazil also has a significant industry with competitive costs.

Advantages

Global economic growth also requires more food, and in this the Ibsa countries have competitive advantages. 

Other speakers made the point that millions of workers had moved into the middle income level jobs in all three countries. 

All three countries are liberalising telecommunications and trying to increase investment into infrastructure - road, rail, ports. 

In tourism all three countries have huge potential. India has emerged as a top destination. Brazil has captured the imagination of tourists as a "fun place" of carnivals and beaches. And South Africa has an opportunity to use the 2010 World Cup to project a better international image.