According to new scenarios released Thursday by the World Bank, developing countries could control some 158 trillion dollars (at 2010 rates) by 2030, particularly in East Asia and Latin America. By that time, the developing world could account for 87 to 93 percent of global growth.

Under certain scenarios, “financial markets in economies like Brazil, India, and those of the Middle East will develop considerably, with these countries attaining, by 2030, a level of financial development comparable to the United States in the early 1980s,” a new report from the Washington-based development lender states. “Similarly, the quality of institutions in developing countries will tend to improve significantly.”

This analysis suggests that developing countries will soon gain the resources necessary to bankroll the major investments that the bank says will be necessary, particularly in infrastructure and services. This would mark a stark contrast with the past.

Further, World Bank analysts foresee a massive escalation of global investment from these countries. Whereas in 2000 international investment from developing economies constituted just a fifth of the global total, this could now triple over the next decade and a half.

“We found that developing economies will come to dominate investment,” Maurizio Bussolo, a World Bank lead economist and author of the new Global Development Horizons report, told reporters Thursday.

“By 2030, for every dollar invested around the world, 66 cents will be in developing countries. That’s a dramatic change, as for almost four decades such investments made up just 20 cents on the dollar.”

In fact, Bussolo suggests that developing countries will overtake the developed world in this regard much sooner, perhaps by the end of this decade.[related_articles]

Fast-strengthened systems

China and India are expected to be the largest investors by 2030, accounting for 38 percent of all global investment, almost as much as all high-income countries combined. In fact, China alone could be responsible for nearly a third of global investment by that time, the bank says, while Brazil, India and Russia will together constitute a larger investment bloc than the United States, at around 13 percent.

This means that total investments in the developing world could be half again as large as among developed countries, at 15 versus 10 trillion dollars.

Such changes will require the exponential development and strengthening of financial sectors in developing countries, as emerging economies inevitably move to quickly integrate with the international financial system in a way never before seen.

“Developing countries are currently almost absent from international financial markets, so you can see that we have a very long way to go in a historically short time period – 15 or 20 years for developing financial markets is not long,” Hans Timmer, director of the Development Prospects Group at the World Bank, told reporters.

“But we have seen in high-income countries that if you deregulate too rapidly you have a very dangerous situation. So we have a dilemma: the role of developing countries is increasing very rapidly, but we must deepen these financial markets only very gradually.”

Already, weak financial systems across the developing world are allowing for illicit outflows of capital that are at times far greater than the countries’ external debt, inexorably impacting on those countries’ ability to finance their public sector.

One report last year estimated that North African countries alone lost nearly a half-trillion dollars over the past four decades, almost the equivalent of their combined gross domestic product for 2010.

“It’s important to note that the World Bank is only talking about recorded capital here, but there’s so much illicit capital currently sloshing around that the multilateral institutions haven’t yet gotten their heads around,” Dev Kar, formerly with the International Monetary Fund (IMF) and currently the chief economist with Global Financial Integrity, a Washington advocacy group, told IPS.

“Our studies suggest that the unrecorded capital coming from developing countries is absolutely huge – the losers are losing far more than the gainers are gaining. As a result of these developments, you can understand why the North African countries blew up, as that kind of massive outflow of resources must have some kind of social impact.”

A level field

Of potentially considerable concern in the bank’s projections is where this new wealth will end up being concentrated.

“It’s one thing for the pie to be increasing, but how equitably is it being distributed?” Kar asks.

“Equity is a huge problem, as the rich seem to be getting richer and the poor getting poorer. Further, it seems the nouveau riche in the developing countries are a bit more callous than the established rich in developed countries.”

Kar notes that income inequality is generally not being helped through current redistribution mechanisms aimed at ensuring broader equal opportunity. Meanwhile, the poor, being unable to take advantage of globalisation, are being left behind across the globe.

According to the World Bank and numerous other analysts, wealth in developing countries is today largely locked up among the elite.

“For most of these countries, the first quarter of the population provides almost no savings. The bulk of savings comes from the richest quarter – there is lots of concentration,” the World Bank’s Bussolo told IPS.

In a separate statement, he noted: “Even if wealth will be more evenly distributed across countries, this does not mean that, within countries, everyone will equally benefit. Policymakers in developing countries have a central role to play in boosting private saving through policies that raise human capital, especially for the poor.”

In particular, the new report places significant focus on increasing government funding for education. It points to analysis from Mexico suggesting that changes in education could result in a five percent greater household saving rate by 2050.

“If the distribution of education among workers of future generations were to remain as unequal as it is today, this would perpetuate inequality of earning capacity, saving, and wealth in the future,” the report states.

“Leveling the playing field in terms of educational opportunities could thus be supported not just in terms of fairness but also – given the positive effect on private saving – in terms of efficiency.”

(END/2013)

The triumph celebrated by the Colombian expert, who is a special adviser for health and development at the South Centre, was a landmark ruling against Novartis handed down Monday Apr. 1 by India’s Supreme Court.

The Geneva-based South Centre is an intergovernmental organisation of more than 50 developing countries that functions as an independent policy think tank.

Velásquez, who worked for over 20 years in the World Health Organization, explains in this interview with IPS his point of view on the legal battle in the courts in New Delhi and its consequences for developing countries.

Q: How do you interpret the ruling by the Supreme Court of India?

A: There are problems with the information that is being reported. Nearly everyone says that India rejected the patent for Glivec. That’s true, but it’s not all the verdict says.[related_articles]

Q: Could you explain?

A: At the heart of the verdict is the ratification of the criteria set by the Indian law for the approval of drug patents. That is, whether or not it meets the requisite of containing a genuine innovation.

Q: Could you describe the legal battle?

A: It all starts with the adoption of the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), one of the treaties established at the same time the WHO was born, in 1995.

India was the only developing country to use the (entire 10-year) transition period to enforce TRIPS, in 2005, when it passed the patent act.

Q: What happened to the patent applications presented during that decade-long transition?

A: They accumulated, until there were around 10,000 applications, and it was not until 2005 that the patent office began to examine them. They included the application for the Glivec patent.

But the new standards turned out to be stricter, such as the one that indicates that the innovation can’t be just a small change to a molecule, but has to be something substantial. In short, the patent for local sales of Glivec was denied in 2006.

Q: How does the story continue from there?

A: Novartis challenged that decision and brought a lawsuit in a court in the city of Madras (the capital of the southern state of Tamil Nadu; the city was renamed Chennai in 1996.) But the High Court of that city, three years later, also rejected the application. That year, 2009, the company appealed the decision – and lost again.

Q: What options are left to the company?

A: This is the aspect that hasn’t been sufficiently reported. In a cynical, perverse and very serious move, Novartis says (prior to the ruling): “If they didn’t give me the patent, I’ll go to the Supreme Court, but to ask this time for the elimination of the strict criterion established in article 3 of the patent act.”

“If more flexible, lower standards are set, then my medicine will be in,” was its reasoning.

Q: So the dispute took on this other face?

A: Yes, because with the intention of introducing its drug by force, the transnational corporation was trying to modify the law of a country – and of a country like India. I think that its executives were being short-sighted when they made that decision. This has been very costly for them in terms of their image.

Q: How do you reach that conclusion?

A: It is clear that it was a misstep to denounce India’s patent law, with the risk of losing. The transnational industry in general had suffered a blunder in South Africa, when it was forced in 2001 to back down from legal action against a law that authorised the patenting of lower-price imported medicines in order to address the AIDS epidemic.

You could suppose that “Big Pharma”, as the major pharmaceutical companies are called, had learned the lesson. Especially knowing that Glivec was patented in 40 countries, including the United States, China and Russia.

Q: Are you insinuating that there may be a domino effect?

A: If Novartis loses in India, as it did on Monday, any of the governments of the 40 countries could ask themselves: “Why don’t I review that patent and revoke it?” That authority is granted by the legislation of all of those countries.

Q: What standing do those 40 countries that recognise the Glivec patent have?

A: Most of them are industrialised states, large markets. But they also include some that are currently experiencing severe economic difficulties, like Greece or Spain, whose authorities could ask themselves why they should pay 2,500 dollars a month per person for a treatment against cancer. They could say: “Why don’t I just have it produced as a generic drug, and invalidate this patent.”

I think the Novartis executives did not take that into account when they launched this legal battle. Obviously, after the first impetus, they continued on to the end, and today they’re going to see repercussions.

Q: What could those consequences be?

A: It should be a lesson for the rest of the countries of the developing South. They should try to follow India’s example and introduce in their legislation clauses like the ones contained in article 3d, which restricts and sets criteria with respect to what amounts to innovation, which is necessary in order to grant a patent. That there can’t just be a small change, which is sometimes merely cosmetic, to a molecule in the medication.

Q: What prospect is there for the spread of that criterion?

A: In India, the Philippines and Argentina, that prohibition already exists, while others are introducing it through alternative routes.

Q: And other consequences?

A: India will be able to continue to make generic versions of all new medicines that are not truly original, and it will continue exporting them without any problem. It’s necessary to take into account the fact that 95 percent of the antiretrovirals consumed in Africa come from that Asian country.

So that means the Indian Court’s ruling is extremely important, with very concrete repercussions for that medicine and some 10,000 others that are on the waiting list in the patent office in New Delhi.

Q: What percentage of those could get patents?

A: In 2010, Argentina approved 2,000 pharmaceutical patents, and China 4,000. But actually, just 40 or 50 products a year are true innovations.

Q: Why that enormous difference between patents that are granted and truly innovative products?

A: The pharmaceutical industry is facing huge difficulties in coming up with innovations.

So it clings to a very short-sighted way of thinking, very short-term, but enormously profitable. This consists of launching incremental innovations, as they are called – in other words, a small product with just a gradual change, but accompanied by a major marketing campaign.

(END/2013)

On Tuesday, leaders of five large emerging economies – Brazil, Russia, India, China, and South Africa, known as the BRICS – will gather in Durban, South Africa to discuss harnessing their formidable resources on behalf of faster development progress in Africa and elsewhere.

The summit’s intent is to promote global policy reforms, and to draw on their own national experiences and comparative advantages to help solve global problems.

The gathering is important: it is another sign that the world as we knew it is quickly changing.

High on the BRICS agenda is a commitment to kick-start the stalled Doha round of world trade talks and to push for fairer rules governing commerce in agriculture and other critical areas. The BRICS bloc will also be exploring ways to boost growth and overall development progress in Africa through expanded trade, investment, technology transfer, and financial support.

In one especially bold initiative under consideration, the five countries will examine proposals to create their own BRICS development bank.[related_articles]

The readiness of the BRICS countries to offer their own new international development initiatives and policy ideas is a clear manifestation of the changing global development landscape examined in UNDP’s newly released 2013 Human Development Report, “The Rise of the South: Human Progress in a Diverse World”.

This dramatic change in global dynamics, however, goes well beyond the BRICS. More than forty developing countries are estimated to have made unusually rapid human development strides in recent decades, according to the Report. Together, they represent most of the world’s population and a growing proportion of its trade and economic output.

The progress of these fast mover countries measured in human development terms has accelerated markedly in the past decade. These geographically, culturally, and politically varied countries share a keen sense of pragmatism and a commitment to people, as seen through investments in education, health care, and social protection, and their engagement with the global economy. Neither rigid command economies nor laissez-faire free marketeers, they are guided by what works in their own national circumstances.

The BRICS countries themselves, while not alone, are key movers behind the rise of the South. As the 2013 global Human Development Report documents, they are contributing to development elsewhere in the South through trade, investment, and bilateral assistance. There are now many opportunities to harness the collective experiences of the rising South for the benefit of those countries not developing as fast.

The 2013 Report proposes convening a new “South Commission”, drawing on the pioneering example of the South Commission led in the late 1980s by Julius Nyerere, then president of Tanzania, and Manmohan Singh, now prime minister of India.

Through such a commission, leaders of the South could put forward their own recommendations for more inclusive and effective global governance in the 21st century.

As the BRICS summit demonstrates, the nations of the South are not standing still, waiting for reforms to happen in global governance. They are putting increasing energy and resources into newer instruments of political and economic co-operation, including regional institutions from Southeast Asia, southern Africa, and South America, to the Gulf States, the Caribbean, and West Africa’s ECOWAS group.

They have good reason to do so. If better coordinated, through what the 2013 Report terms “coherent pluralism,” with a clear consensus on shared goals, this evolving ecosystem of bilateral, regional, and international groupings can help advance sustainable human development in decades to come.

Multilateral action remains crucial for problems requiring global solutions – climate change is perhaps the most urgent example.

Yet the system of global governance devised in the mid-20th century is increasingly distanced from 21st century realities. China, for example, is the world’s second biggest economy, and holds more than 3 trillion dollars in foreign exchange reserves – more than all of Europe combined. Yet it has a smaller voting share in the World Bank than do France or the United Kingdom. Africa and Latin America also have issues of under-representation in important world fora.

The rise of the South does not imply an eclipse of the North. Human development is not a zero-sum game. People everywhere benefit from a healthier, better educated, more prosperous, and more stable world. A better-balanced North-South partnership can help achieve those goals.

A greater voice for the South also means greater responsibility, with shared accountability for solving problems and sustaining progress. A more engaged, successful South, meanwhile, helps the North, through its economic dynamism and collaboration on global challenges. As the 2013 Human Development Report says, the South still needs the North, but, increasingly, the North also needs the South.

(END/2013)

Khalid Malik. Photo Courtesy of UNDP

And “never in history have the living conditions and prospects of so many people changed so dramatically, and so fast,” says Khalid Malik, lead author of the study and director of the HDR Office.

“Without doubt, the South’s three largest economies – China, India and Brazil – are driving forces in this phenomenon, due both to their sheer size and the recent speed of their overall human development progress,” he tells IPS.

By 2020, the combined economic output of the three leading developing countries alone will surpass the aggregate production of Canada, France, Germany, Italy, the UK and the United States, says the 203-page study.

And “much of this expansion is being driven by new trade and technology partnerships within the South itself,” according to the HDR.

China has already overtaken Japan as the world’s second biggest economy while lifting hundreds of millions of people out of poverty.

India is re-shaping its future with new entrepreneurial creativity and social policy innovation, while Brazil is lifting its living standards through expanding international relationships and anti-poverty programmes that are being emulated worldwide, says the HDR.

Still, out of 187 countries, five of the top achievers in the Human Development Index are all from the North: Norway, Australia, the United States, the Netherlands and Germany.

The bottom five are from the developing world: Burkina Faso, Chad, Mozambique, the Democratic Republic of Congo and Niger.

Malik pointed out that the 2013 HDR identifies more than 40 developing countries – on all continents – that have performed much better than would have been predicted in HDI terms over the past two decades, with this progress accelerating notably in most since 2000, he added.

The study says the South is “developing at a pace unprecedented in human history, with hundreds of millions of people lifted out of poverty, and billions more poised to join a new global middle class.”

Asked if this phenomenon is largely confined to just the three leading countries while most developing nations are still lagging far behind in alleviating or eradicating poverty, Malik singled out the 40 countries categorised as being among the “human development high achievers”.

The 40 countries include Bangladesh, Chile, Ghana, Indonesia, Malaysia, Mauritius, Mexico, Rwanda, South Korea, Thailand, Tunisia, Turkey, Viet Nam and Uganda.

Malik said the HDR looks in greater detail at 18 of the 40 countries, and their paths to human development improvement. [related_articles]

He pointed out that the 2013 HDR also looks at the potentially highly positive impact of this phenomenon on today’s 47 least developed countries (described as the poorest of the poor), which include new markets, new sources of investment, better access to appropriate technologies, and, most important, many useful policy lessons.

“And while a number of low-income countries will miss their own national goals of halving extreme poverty by 2015, it is important to emphasise that the world as a whole has already met this target ahead of time, largely due to massive poverty eradication in many of the leading South nations since 1990,” he added.

Excerpts from the interview follow.

Q: The rise of the global South includes countries such as Mexico, South Korea and Chile. But how do you justify their categorisation as part of the South when Mexico left the group of 77 developing nations to join the industrial world back in 1994, South Korea in 1996 and Chile in 2010? And do you still consider them part of the global South?

A: The terms “South” and “North” are used in the report to distinguish between the long-established advanced industrial nations (the latter) and more recently emerging economies.

The OECD (Organisation for Economic Cooperation and Development in Paris, described as the rich man’s club)) does indeed include Mexico, South Korea, Chile and Turkey as well – all countries which belong nonetheless to the ‘South’ in that broad sense.

The geographical origins and connotations of the terms are of course inexact: Australia and New Zealand are rather counter-factually assigned to the ‘North’ for this purpose.

Q: The HDR takes a critical look at “global governance” – which includes multi-party democracy, human rights, transparency and accountability – as a political benchmark for the rise of the global South. If so, how do you account for the fact that China, considered by the West to be a non-democratic regime with the absence of rule of law and a free press, emerging as the world’s second biggest economy outranking Japan? Shouldn’t multi-party democracy be an integral part of economic progress in the South?

A: The 2013 report identifies more than 40 developing countries, China included, that have made remarkable human development gains in recent decades, with progress accelerating in the past 10 years. These countries represent a variety of national histories and evolving political systems. Most of these countries, though not all, would be characterised today as multi-party democracies.

The report argues strongly in favour of the importance of giving people a greater voice and opportunities for meaningful participation in civic life, which has long been central to the human development philosophy.

The report says further that rising living standards and education levels lead to greater expectations from, and demands on, governments, in terms of accountability, responsiveness, and effective delivery of social services.

The report also looks at the increasing importance of civil society in driving human development change in countries spotlighted in its ‘Rise of the South’ analysis.

That some East Asian and Latin American “developmental states” were not democracies in different stages of their development has prompted a misconception that the most effective developmental states are typically autocratic.

But evidence of the purported relationship between authoritarianism and development is scant. Democratic countries such the United States and post-World War II Japan were highly successful developmental states.

Since the 1950s, the Scandinavian countries have also acted as developmental states, where political legitimacy is derived from social services and full employment rather than from rapid growth. In Brazil, Mexico, Chile and elsewhere in Latin America, human development progress has accelerated since the consolidation of democratically elected civilian rule over the past two decades.

China’s political culture is fast evolving as living standards continue to rise, with an increasingly well-informed citizenry demanding greater government accountability. And India, a prime force in the Rise of the South, has been the world’s largest representative democracy for more than six decades.

(END/2013)

Luisa and Liliana Terán are cousins from Caspana, an Atacameña indigenous community; Elena Achú and Elvira Urrelo are from the Quechua village of Ollagüe; and Nicolasa Yufla is an Aymara Indian from Toconce. The three villages, with a combined population of 1,000, are in the Atacama desert.

Water is scarce and there is no electricity in their villages, located more than 3,000 metres above sea level in the Chilean altiplano, near the Bolivian border.

“We get power from a generator for just two and a half hours late in the evening,” Luisa Terán, an artisan, told IPS.

Last year, the five women travelled to the village of Tilonia in the northwestern Indian state of Rajasthan, which is home to the Barefoot College.[related_articles]

The College has been working since 1972 to improve the lives of the rural poor by addressing basic needs for water, electricity, housing, health, education and income. It is now training poor, rural women from Africa, Asia and Latin America as solar engineers, to bring solar lighting to remote inaccessible villages off the energy grid.

For six months, the five Chilean villagers received hands-on training at the College in fabricating, installing and maintaining solar lighting systems.

“An ad reached us that said they were looking for women between the ages of 35 and 40 to receive training in India. I was interested from the start, but when they told me it would be for six months, I was hesitant, because that was a long time to be so far away from the family,” Terán said.

Encouraged by her sister, who took care of her two daughters, and her mother, she decided to make the journey. But she left the village without telling anyone else where she was going.

Now that the solar panels have arrived, she’s afraid that she has forgotten what she learned, after six months without being able to apply her knowledge.

“I knew what I was there for, but it still took me three months to adapt, mainly to the food and the incredible heat,” she said.

The five women left on Mar. 15, 2012, as part of an initiative organised by the Barefoot College, Chile’s National Women’s Service (SERNAM), the Regional Secretariat of the Energy Ministry, and the Italian company Enel Green Power, which donated the equipment.

The three solar kits that arrived in the villages this month each include a 12-volt panel, a 12-volt battery bank, a 4-Amp LED light, and an 8-Amp charge controller.

So far, 700 women from 49 countries in Asia, Africa and Latin America have taken the course to become “barefoot solar engineers”.

In that capacity, they are responsible for installing, repairing and providing maintenance for solar lighting units in the households of their villages, for a minimum of five years. They are also expected to set up a rural electronic workshop to store the necessary components, which functions as a mini-electric plant with a potential of 320 watts per hour.

Thanks to this and other Barefoot solar initiatives, 450,000 people in remote villages in different regions now have light, and the carbon emissions caused by burning fuel and firewood have been reduced by 13 metric tonnes a day.

In Latin America, the aim is to bring light to 1,000 homes.

In Chile, “it is very important for communities to learn about our potential for the development of renewable energies, and solar energy projects in particular,” Carlos Arenas, the regional energy ministry secretary for the Macro Zona Norte in northern Chile, told IPS.

The northern region has vast potential, especially the Atacama desert, which has one of the highest solar radiation levels worldwide, according to studies by the University of Chile: between 7 and 7.5 kwh per square metre.

In fact, solar panels covering an area of 400 square km could fully meet the country’s energy needs, experts say.

But most of the demand in the north comes from the mining industry, which absorbs 90 percent of the energy produced, while the remaining 10 percent goes towards household, commercial and public use.

“Our energy system is still being developed, and in many villages electricity comes from generators powered by fossil fuels such as diesel,” said Arenas. “But in some cases we are complementing these supplies with renewable sources, particularly wind and solar.”

For that reason, “we supported this initiative…an enriching experience for the people who live in such remote villages and who lack a steady energy supply, and in some cases pay a high cost for energy,” he added.

When the five Chilean women reached India, they found out that the course was in English. It was difficult for them to understand the instructors, Terán said, but in the end they managed to communicate through signs, gestures and drawings.

They also found themselves in a place radically different from their villages. “There were many bugs, lizards and other animals. We slept on mats on hard wooden beds. And the poverty there was terrible,” she said.

In the group, there were also five indigenous women from Peru “who were sad, and cried a lot,” she said. But now, those Peruvian mothers and grandmothers have brought solar lighting to the households in the village of Japopunco, 4,800 metres above sea level, Terán added.

“These are women with skills, but they live in remote places, which means it was an incredible personal experience for them,” Paola Diez, the director of the SERNAM department of women and work, told IPS.

Her office and Chile’s national indigenous development agency, CONADI, are implementing a plan to train native women around the country in sustainable enterprises, helping to pull them out of a subsistence economy.

The initiative is aimed at boosting women’s insertion in the labour market in Chile, where 47.7 percent of women work, and the government wants to bump that up to 50 percent.

Terán is ready to put her newfound knowledge to use in Caspana. “The idea is to start by bringing light to the houses, and maybe later we could install a refrigerator, which everyone wants,” she said.

“We also want to share our training, but we need help to start making and selling solar lamps. And people want us to teach them, so that the women themselves will know how to install solar lighting in their homes,” she added.

(END/2013)

South Africa is a member of the India, Brazil and South Africa (IBSA) developing nations grouping, as well as the fledgling Brazil, Russia, India, China and South Africa (BRICS) club.

But international relations and trade consultant John Maré told IPS that South Africa might be walking “a political tightrope.”

“I think many African leaders, political and business, are resentful of South Africa having too great a role in the leadership of Africa,” he said.[related_articles]

While he added that there may be an increased pragmatism that accepted the strengths which South Africa has in many fields, it could soon become tiresome.

“The pragmatism may wear thin if South Africa overplays its hand, especially in such contexts as BRICS where other African countries do not enjoy parallel forms of special relationships,” he said. He added that other African countries did, however, have special relationships with the European Union, even though South Africa had originally been chosen as a special strategic partner with the bloc.

“The manner in which South Africa acts in the BRICS context becomes especially relevant and, given perceptions (outside Africa) that Africa wants South Africa to be its leader, it will not go down well – although voiced disapproval may be slow to emerge and will do so in a varied pattern,” he said.

He added that the growth of regional economies in Africa also helped undermine South Africa’s right to be the key gateway for the continent.

The African Development Bank (AfDB) predicted that despite the global economic slowdown, sub-Saharan Africa is expected to see economic growth of 6.6 percent in 2013. According to the World Bank’s “Africa’s Pulse” report, released in October 2012, “new discoveries of oil, gas, and other minerals in African countries will generate a wave of significant mineral wealth in the region.” In addition, Ethiopia may be one of Africa’s poorest countries but its economy is expected to grow at a rate of seven percent for 2012/13, according to the International Monetary Fund.

Memory Dube, a researcher at the South African Institute for International Affairs, an NGO that focuses on South Africa’s and Africa’s international affairs, suggested that South Africa needed to consult more to strengthen its credentials to speak on behalf of Africa.

“What South Africa needs to embark upon is a proper consultation process, particularly with the other key states such as Nigeria, Algeria, Kenya, Egypt and Ethiopia,” she told IPS.

“The BRICS leaders are going to engage with African institutions such as the New Partnership for Africa’s Development, the African Union (AU) and the AfDB as well as regional economic communities,” she said, adding that it would be a good move, especially if African priorities, as defined by South Africa, are drawn from a continental dialogue.

“However, bilateral relations still remain key and engagements with institutions should be complementary to these bilateral relations with other key African champions,” she said.

But South African Minister of Foreign Affairs Maite Nkoana-Mashabane dismissed suggestions that the country was not properly consulting its African neighbours.

“I sit in meetings where I know we truly and faithfully engage with all the independent countries on the continent,” she told IPS.

“They all have individual policy perspectives, but we all belong to the AU, and take decisions together. We have friendly and cordial relations with them and take none for granted,” she said adding that South Africa was an integral part of the continent.

“What we wish for South Africa, we wish for all the countries in the continent. We champion Africa’s cause, as Africa took the struggle for South Africa (against apartheid) as their cause.”

Nkoana-Mashabane was unrepentant about South Africa’s links with its BRICS and IBSA partners and gave her firm support to the developing nation economic blocs.

“We also champion South-South cooperation, and this is what our forefathers envisioned,” she explained. “Because of our history, we don’t ignore our historic links with countries of the north either.”

The minister suggested that there would be benefits for all from the BRICS summit, which will be hosted in Durban, South Africa from Mar. 26 to 27. She said that ahead of the summit, for the first time “BRICS leaders will be meeting in a retreat with about 20 heads of state of Africa.”

“The BRICS member states know investing in Africa is not charity – there is no better place to be but in Africa,” she emphasised. “They know they will get good returns for their investments, and on their own they have chosen Africa as a partner.”

Nkoana-Mashabane added that South Africa would call for investment in Africa’s infrastructure at the summit.

(END/2013)

“There is no doubt that the BRICS Development Bank will be a welcome development,” Sandile Zungu, the Secretary of South Africa’s Black Business Council, told IPS.

“The need for the bank is fairly obvious if you look at the growing trade among the BRICS countries and the frustrations these countries have had with existing development financing institutions like the World Bank and the IMF,”  he said.

Zungu particularly pointed to existing bureaucracy, the criteria for lending, the conditions attached to loans and the slow pace in processing applications.[related_articles]

“Then there’s the fact these countries have such massive infrastructure roll-out programmes, which gives all the more reason to create this bank – the need is there.”

Infrastructure financing within BRICS will indeed be a key focus of the bank, along with alternative models of cooperation to finance such projects, according to Hannah Edinger, head of Research and Strategy at emerging-markets consultancy group Frontier Advisory.

South African Finance Minister Pravin Gordhan earlier this week told parliament that the the bank’s establishment is “intended to mobilise domestic savings”  to co-fund these infrastructure projects in developing regions.

Talking to IPS, Edinger said that at least 15 trillion dollars is required in the BRICS countries over the next 10 to 20 years to finance such projects, especially in India and South Africa.

At a recent press briefing, Lynette Chen, Chief Executive Officer of the New Partnership of Africa’s Development Business Foundation, estimated that there cirrently is a 480-billion-dollar deficit in funding for infrastructure in Africa, which the new BRICS bank should help to tackle.

“The BRICS Development Bank could become the lender of choice for Africa,” Chen said.

“Other areas of finance include green technology projects, biofuels, dams and nuclear power plants in Africa,” according to Edinger. “Yet, financing to the African continent is expected to be a smaller share of total financing extended to the BRICS.”

While there will be some scope to fund environmentally friendly projects in Africa,  this will not initially be the prime focus of the new Bank, the strategist said.

Projects with a focus on sustainable development and climate change will be part of the mix particularly where they concern “larger and cross-border infrastructure-type projects in the transportation and power sectors, to promote regional integration and regional market building,” according to Edinger.

While the upcoming BRICS Summit in Durban at the end of March will be the first to be hosted on African soil,  officials have been holding a series of meetings in countries to ensure that the political club is given a real economic backbone.

Zungu predicted that the new bank would “cement” the BRICS spirit of co-operation by giving a tangible institutional foundation.

Edinger agreed. “The establishment of the BRICS Development Bank will be an important milestone for the BRICS grouping as it would add credibility, substance and ownership of the BRICS concept as the first institution coming out of this club.”

She said that while a number of working groups and forums exist as part of the BRICS mechanism, the establishment of the bank would signal a move away from just being a political discussion forum that proposes reforming the international financial system, creating a vehicle that is more attuned with the interests of the BRICS emerging markets, as well as the interests of the greater Global South.

Experts at South Africa’s Standard Bank believe that the BRICS Development Bank will initially be capitalised at 50 billion dollars, with 10 billion dollars from each of the BRICS members.

“The bank would also give a sense of assurance to private financiers,” according to Chen. She agreed that many infrastructure projects in Africa would be cross-border, involving “development corridors.”

Eyes on Durban

Economist Jeremy Stevens of South Africa’s Standard Bank, who is based in China, told IPS that more clarity about the bank would emerge in Durban.

“The main ambition of the bank is to direct development in a manner that reflects the BRICS’ priorities and competencies. Therefore, the bank will focus on infrastructure development and providing auxiliary support for project preparation, like feasibility studies,” according to Stevens.

“Later the working group will establish technical commitments and governance structures.”

The BRICS Development Bank provides an institutional underpinning to the group,  Stevens said,  while “contributing constructively to the development of more robust and inter-dependent ties between the BRICS members.”

He predicted that the scope of the bank’s activities might initially be limited, but could expand as it grows over time. He also asserted that its role would not be as a rival to existing development financing institutions, but as an auxiliary source of funding.

The symbolism of Shanghai

China is the largest economy in the BRICS and is expected to press for the new BRICS Development Bank to be headquartered in Shanghai, and for it to operate in the Chinese currency, the yuan.

“As part of its development process, China needs to deepen its financial markets,” John Cairns, currency strategist at South Africa’s Rand Merchant Bank, told IPS.

“One part of this is to have a stronger and more flexible, market-determined, exchange rate. This, in turn, requires that the currency be traded openly like any other currency, and therefore be internationalised.

“China’s authorities hope that the currency will become as important as its economy, so as to allow local (Chinese) companies and investors the ability to quote in their own currency.”

He said that progress on this has been “slow but steady” but was not convinced that the benefits to China from its currency being used by the BRICS Development Bank would go much beyond the symbolic.

“I’m not sure that it means very much,” he said.

“This would just be the currency of denomination – practically, the yuan would have to be converted into dollars or another international currency when transactions with third parties are being made.”

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“Given that tourism was identified and committed to by our government as a key driver for job creation, South Africa needs to secure every opportunity to promote higher levels of tourism to our country,” head of the South African Chamber of Commerce and Industry, Neren Rau, told IPS.

“The BRIC nations hold substantial potential for encouraging tourism to South Africa, given that our conventional tourism markets were substantially impacted by the global economic crisis.”

Head of the South African Chamber of Commerce and Industry, Neren Rau, says South Africa needs to secure every opportunity to promote higher levels of tourism to the country. Credit: John Fraser/IPS

But since 2012, South Africa has seen successful growth in the industry, with rates at twice the global average, according to Rau.[related_articles]

As the industry expands, India, China and Brazil are important tourism targets, chief executive of South African Tourism, Thulani Nzima, told IPS.

“The organisation invests significantly in growing awareness of destination South Africa in those markets, and in implementing marketing campaigns there,” he said.

Fellow BRICS member Russia, meanwhile, remains somewhat sidelined in South Africa’s ambitions, largely because of the long distance and the lack of no direct air links between the two countries.

The upcoming BRICS summit hosted in Durban, South Africa, in March will provide an opportunity to showcase the country as a tourist destination, while also bringing immediate benefits to the tourism industry, Nzima suggested.

“It will enjoy significant editorial coverage in the BRICS nations, raising awareness about South Africa’s capability, beauty, accessibility and warm, welcoming, friendly culture towards tourists.”

The latest figures for tourism arrivals in South Africa show healthy growth from the other BRICS nations for the first nine months of 2012.

Tourist arrivals in that period showed a 51.7-percent increase of travellers hailing from Brazil, and a 62.8-percent rise in Chinese tourist. Indians and Russians, meanwhile, increased their travel to South Africa by 16.8 percent and 34.6 percent, respectively.

However, the combined BRICS travel into South Africa still does not surpass that of United Kingdom, which highlights the growth potential still to be realised in the emerging markets.

Michael Tatalias, the chief executive of the Southern Africa Tourism Association, SATSA, told IPS that the first step to boosting tourism between BRICS partners is by increasing air links – which will be good not just for tourism, but for trade as well.

“An initial key goal for South Africa would be to become an airline hub between South America and Asia,” he said.

He added that currently about one million people a year travel from South America to Asia via the Middle East and Europe and that South Africa could divert some of that air traffic.

“Where air links open up, business travellers follow, deals are made, and cargo and sea trade follows,” he said. “With increased air access, business and trade increases. But crucially, tourism gets economy class seats to use for leisure travel.”

“The tourism ministry has spoken strongly about the importance of opening the skies into Africa,” agreed Nzima. He added that making the visa application processes as easy as possible, and removing as many impediments as possible to visiting South Africa are crucial additional steps that are “receiving considerable Government priority”.

South Africa’s Tourism Minister Marthinus van Schalkwyk visited China in January to see how recent growth in tourism can be sustained, while emphasising the importance of this BRICS partner for tourism development.

“We are confident of continuing our exciting growth in a market set to become one of the world’s most important tourism markets in the future,” he said.

Van Schalkwyk has worked for a number of years to create a tourism component of the G20, called the Tourism-20 or T-20, a working group of the tourism ministers of the G20 nations.

“Similarly, we should work towards a T-5 grouping, to reflect the five partners in the BRICS,” suggested Tatalias. “This would focus on resolving bottlenecks and hindrances.”

Rau, meanwhile, warned that promoting tourism in South Africa faces some of the challenges as the promotion of the country itself.

“If tourism growth is to be sustained, it must be supported by strong redress of the inhibitors to tourism growth in South Africa, such as perceptions of rampant crime and widespread violent protest activity, as well as insufficient promotion of the facilities that South Africa has to offer,” he warned.

Now the challenge for the BRICS leaders is to move beyond the exchange of pleasantries – to a far greater exchange of tourists.

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African nations and other emerging countries are expected to soon outperform the developed world, and South Africa wants to take advantage.

South Africa is planning to improve business dynamics within the Brazil, Russia, India, China and South Africa (BRICS) club of emerging national economies, and also with other African nations, at the BRICS’ first African summit in Durban next month.

“Emerging and developing economies are already playing an important role in the global economy,” the chief executive officer of South Africa’s First National Bank (FNB), Michael Jordaan, told IPS.

“The Chinese economy is already the second largest in the world, with a nominal GDP above seven trillion dollars, (and) growing at between seven and eight percent,” he said. “There are also several emerging market economies that have GDP levels above one trillion dollars, including Brazil, Russia, India and Mexico.”

He added, “The outlook for advanced economies, in contrast, is mediocre, given that they are largely encumbered by high debt burdens.”

Jordaan said that there are opportunities at the summit for promoting some of the innovative banking products that South Africa has developed.

“For example, mobile cash and banking facilities, such as cell phone banking, have great potential in Africa and other developing countries – as this technology is most applicable in emerging markets,” he explained.

Preliminary meetings

Preparations for the summit are accelerating: Russian Foreign Minister Sergey Lavrov travelled to Pretoria earlier this week and met with Maite Nkoana-Mashabane, South Africa’s Minister of International Relations and Cooperation.

The two agreed that there are a number of important global issues in which the BRICS should co-operate, such as pushing for reforms in the United Nations, the International Monetary Fund and other global institutions.

Their Chinese counterpart, Foreign Minister Yang Jiechi, is slated to make a pre-summit trip to South Africa next week.

Nkoana-Mashabane has praised the Chinese for their decisive role in gaining South Africa membership to the BRICS club.

“I do believe that China’s key role in securing South Africa’s membership of the BRICS was the correct initiative to create a nexus between Africa and the BRICS,” she said.

“South Africa is deeply grateful for the role that China has played in this regard,” she added.

Taking Care of Business

When they attend the Durban summit, each of the BRICS leaders will be accompanied by a sizeable business delegation – and a lot of work is taking place behind the scenes to ensure that there will be productive business dialogues.

A big challenge for South African President Jacob Zuma and the other leaders will be to make it easier for business leaders, like Jordaan, to further shift their focus toward working with emerging nations.

Trade ministers from the five-nation club will hold a special joint session with business delegations from the member nations on the eve of the summit, and a permanent BRICS Business Council is due to launch after the summit.

“This business council will be a more permanent mechanism for business interaction,” Xavier Carim, deputy director general at the South African Department of Trade and Industry, told IPS.

But there has been concern in South Africa that many members of business delegations, who have in the past accompanied Zuma to BRICS gatherings, have been chosen because they are his close supporters, and not necessarily because their presence would help forge new business links.

Beijing-based South African business consultant and CEO of the Beijing Axis, Kobus van der Wath, has been part of the business delegations at two BRICS summits. However, he is not convinced that there has been enough value for the business delegates.

Business events staged on the fringes of past BRICS summits have not always been well prepared.

“I hope we can organise it well, to allow proper networking with a digital database of who is there, and then it could be very worthwhile,” he told IPS.

Jordaan said his bank and its parent Rand Merchant Bank (RMB) are already involved in India and China, but South Africa’s membership to the BRICS may help to strengthen these links. He welcomed efforts to give the BRICS a business backbone.

“We do believe that South Africa’s membership is important and will benefit our growing operations in these countries,” he said. “We support our government’s initiatives to create new avenues for growth via BRICS-related partnerships.”

However, Jordaan emphasised that while the BRICS relationship is important, Africa will remain his main external growth priority.

“We are strongly focused on growth opportunities across Africa as a primary strategy for the expansion of our banking services,” he stated.

Van der Wath suggested that China’s activities in Africa would be happening anyway – with or without the BRICS.

“China has certain objectives in global markets in terms of investment, trade and alliances – and the investments I have seen so far in Africa are not BRICS-related,” Van der Wath said.

“However, BRICS is helpful in networking, in government-to-government linkages,” he added.

According to experts, the Durban summit will be judged on its success in strengthening ties between the BRICS club and Africa.

However, the politicians will not be able to fully capitalise on these closer political ties unless they can also add a practical dimension to the relationship, by bringing BRICS business on board – something the South African hosts are working hard to achieve.

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Trade and Industry Minister  Rob Davies spoke to IPS in Pretoria about the current trade landscape and the challenges the country will face in 2013.

He recently announced plans to increase tariffs where there is scope for this on chicken imported from Brazil and other countries, a move that was questioned by some South African trade experts, who had expected measures just against Brazil.

Excerpts of the interview follow.

Q: South Africa is to host the BRICS (Brazil, Russia, India and China) Summit in Durban in March, and you have been preparing for this through meetings with some other BRICS Trade Ministers at the World Economic Forum in Davos? What are the big issues on which you are focusing?

A: There will be a World Trade Organization (WTO) ministerial meeting in Bali at the end of the year.

A process is going on about a small package of issues for agreement at Bali, starting with trade facilitation, which will be easier for developed countries to meet. Many developing countries have resource issues. There is concern in the BRICS group that this is not self-balancing – many developing countries may have to take measures, but what are the benefits to them in other areas?

There is also the Doha Round (a wide-ranging WTO negotiation which has been going on without conclusion for over a decade). The BRICS say the Doha mandate is still valid, while some forces see that agenda being surpassed by an agenda on trade facilitation.[related_articles]

Q:  Given the slow progress to date on the Doha Round, do you still see the WTO as relevant?

A: Through the WTO, there is a set of rules which are in place which are very important, and which set the parameters for any member country. As the negotiation of the Doha Round remains a slow task, the (WTO’s) dispute mechanism is becoming rather over-loaded.

I think there is an attempt to get developing countries to remove the space between their applied (actual) tariffs and bound rates (the higher tariffs which could be applied). The gap allows us space for implementing policy, and is something which was not in place in the 1930s.

Q: You recently announced that instead of imposing targeted anti-dumping measures against chicken imports from Brazil, you would apply a general tariff increase which would mostly impact those countries which do not have a specific free trade agreement with South Africa. Why this approach?

A:  This is an issue which is covered by WTO rules and there are quite tight rules. We imposed provisional anti-dumping measures and then did an investigation. Brazil indicated they had concerns, which seemed enough for them to go to a (WTO) dispute settlement mechanism. We put a team in place to look at this.

We were well aware the Brazilians were going to fight this all the way through, as they do not have any anti-dumping duties against their chicken exports and this could have become a precedent.

Who knows if we would have won or not? We looked at the impact of the provisional duty (which South Africa imposed early in 2012 against chicken imports from Brazil). It was not that local production took the place of allegedly dumped Brazilian chicken. It was other imports (that filled the gap). The issue is imported chicken from all parts of the world. There is space to increase (the general tariff) and this will probably deliver better results for South Africa.

Chicken on sale in a South African supermarket. South Africa’s major current trade spat is with Brazil and other nations over cheap chicken imports which local producers claim are threatening their livelihood. Credit: John Fraser/IPS

Q: Aside from the issue of Brazilian chicken, South African trade officials have said recently that tariffs may be increased on other imports. This is been interpreted as a move towards protectionism. How do you respond?

A: What we are saying is common sense. We haven’t set zero tariffs for everything across the world. We say there are ceilings on tariffs, but we never said tariffs can’t increase. With the onset of the recession, there are calls that we should use that space (between actual tariffs and the ceiling). We say protectionism is when you act against the rules, because the rules govern the status quo.

We haven’t seen a breaking of the rules, which has been a contribution to seeing that the crisis didn’t end in a great depression. We have seen a triple-dip recession in parts of the world – but that has little to do with tariffs.

Q: South Africa is hosting the BRICS Summit at the end of March.  What can we expect?

A: This is the first time we will have hosted a BRICS Summit in Africa, and we are building a relationship between BRICS and Africa. Our ambition is to take the establishment of the BRICS Development Bank further forward.

There will also be a Trade Ministers’ meeting, linked to a business forum.  There will be the launch of a BRICS Business Council to strengthen inter-BRICS relations. There will also be a BRICS’ co-operatives meetings. We are starting to define a programme of inter-BRICS cooperation.

We will use this as a platform for building cooperation with other countries, for example the African countries. The BRICS Development Bank isn’t just for the BRICS countries, but we also have an ambition to see it play a role in financing infrastructure in Africa, outside our borders.

Q: There is an overlapping organisation to the BRICS, known as IBSA (India, Brazil, and South Africa). Does the BRICS grouping make this smaller grouping irrelevant?

A: IBSA continues – there are some very important programmes. We have, for example, a strong set of co-operative agreements between small business agencies. These have been very valuable. The IBSA partnership was the basis on which we engaged in serious learning about industrial policy from Brazil, which was the basis of our own industrial policy action plan. This is not replicated in the BRICS.

(END/2013)