|Less BRIC-bats now|
|Friday, 30 March 2012 03:37|
Access to markets, our own Bank … if only it holds
Given two of the BRICS nations are among the world’s top five economies (in PPP terms) and four in the top ten, and the group is all set to overtake the G6 by 2030 (in real dollars!), it’s surprising that the group that Goldman Sachs’ Jim O’Neill christened a decade ago hasn’t come together more forcefully till now. Which is why the promises made by BRICS chiefs at the 4th BRICS Summit offer hope, especially in an environment where no progress is being made, or can be expected, on liberalisation of global trade rules. The decision to increase trading in each others currencies is a good one, more so when the target is to double trade in 3 years, and will help current account deficit countries like India; there’s BRICSMART, an initiative that allows investors to access the other country’s stock markets and even the possibility of cross-listing of stocks—were Bharti to be talking to MTN right now, the deal would have gone through since dual-listing would no longer be a problem! Given the kind of money China has, and its investment appetite, this opens up a large window of opportunity and, since it is under the rubric of BRICS, it will help quell anti-China feeling in countries like India. Also talked about is the possibility of setting up a BRICS version of the World Bank, to lend money to members but without, the argument goes, the kind of strings that come attached with a World Bank loan.
That’s the theory, the reality will be shaped by the dramatically different positions of the BRICS constituents. Apart from India and China’s long-standing disputes, the group was unable to, last year, come up with a consensus candidate for the IMF chief’s job; the same seems to apply to the World Bank chief’s job. Which is why, at an Express Adda, Time’s editor-at-large Fareed Zakaria said that, while travelling across Asia, he found that if there was to be one superpower, people preferred it be the US and not China. Outgoing World Bank president Robert Zoellick echoed this on Thursday when he said the BRICS would have a hard time getting a BRICS-version of the World Bank off the ground. Apart from the difficulty in finding spare cash to fund a BRICS Bank, with India being the largest recipient of World Bank aid and with few strings, why does it want this anyway? That said, even if the BRICS process isn’t going to be as smooth as the summiteers would have us believe, growing commercial ties will ensure the integration can only rise. When Indian firms needed funds to set up power plants, the Chinese obliged with cheap loans and low-cost equipment; when Indian firms had a problem with redeeming FCCBs, the Chinese were there. That’s why, despite the hectic lobbying by BHEL and L&T, an import duty hasn’t got slapped on Chinese power equipment. Commercial ties have to count for something.