Urvashi Sarkar

Thoughts, stories and ideas.

Tag: World Bank

  • India-China rivalries overshadow the larger purpose of BRICS

    Published in Asia Dialogue (University of Nottingham-Asia Research Institute). 11 September 2017

    Photo: The Kremlin

    The ninth BRICS summit in China began on September 3, 2017 in the shadow of tense relations between India and China. The summit came in the wake of border tensions on the Doklam plateau, with the two countries agreeing to end the stalemate just days before the summit.  The BRICS Summit concluded on September 5. For India, the main takeaway was that the summit declaration contained a reference to Pakistan-based terror groups Jaish-e-Mohammad (JeM) and Lashkar-e-Taiba as posing a threat to the security of the region. While Pakistan was not specifically mentioned, the names of the terror groups it supports were explicitly mentioned.

    This was interpreted as a victory by India which had unsuccessfully tried to insert a reference to cross-border terrorism by Pakistan in the previous year’s Goa summit declaration.

    Issues prior to Doklam

    Prior to the Doklam tensions, the India-China relationship was already tenuous on several counts. China’s refusal to back India’s membership at the Nuclear Supplier’s Group and opposition to including JeM chief Masood Azhar on a list of UN-designated terrorists caused resentment in India. India’s decision to stay out of the China’s Belt and Road Initiative (BRI) has not pleased China either.  Longstanding and unresolved matters like the border dispute, trade imbalance, China’s cultivation of India’s neighbours (which the latter perceives as encirclement), and India’s support to Tibetan leader Dalai Lama have continued to dog the relationship.

    The most recent and significant setback to ties was when China started road construction activities in the Doklam plateau, an area over which China and Bhutan have contesting claims, and which is a tri-junction of sorts between China, Bhutan and India. India intervened to fulfil its security obligations to Bhutan, in an area that is close to India’s borders. Tensions escalated between the two countries to new levels with the Chinese People’s Liberation Army (PLA) spokesperson Wu Qian warning India that it should learn lessons from its defeat in the 1962 war between the two countries.

    The two month stand-off came to an end days before the BRICS summit began in Xiamen. There was speculation about whether India’s Prime Minister Narendra Modi would attend the summit. Eventually, he did attend.

    The 9th BRICS summit declaration specifically mentions the names of Pakistan-based terror groups.  But whether China will actually agree to designate JeM Masood Azhar as a global terrorist group at the UN Security Council remains to be seen.  As the Indian newspaper The Hindu pointed out, this was not the first time China had agreed to name JeM and LeT in a declaration. At the Heart of Asia conference in Amritsar last year, 14 countries including India and China signed a declaration specially naming Pakistan-based terror groups.

    BRICS defuses tensions

    It is not entirely clear why China conceded to the reference in the declaration, especially since Beijing had already communicated to India that ‘Pakistan’s counter-terrorism’ was not an appropriate topic to be discussed at the BRICS summit.  However, the BRICS summit certainly succeeded in defusing tensions between the two countries.

    Analysing the role of BRICS in defusing tensions, Oliver Stuenkel, Assistant Professor of International Relations at the Getúlio Vargas Foundation (FGV) in Sao Paulo writes: “Asia is the region with the world’s lowest institutional density, and opportunities such as the BRICS’ National Security Advisors’ meetings are less frequent than most would assume. Particularly when nationalist fervour runs high, merely inviting the other side for a meeting to discuss the matter can be interpreted as a sign of weakness. In such instances, there is nothing better than a long-scheduled meeting that offers a low-cost opportunity to continue talking. In addition, the BRICS grouping is one of the few outfits that forces Indian and Chinese policy makers to work together on numerous issues, thus creating personal relationships that can matter greatly in moments of tension.”

    Narendra Modi and Chinese President Xi Jinping also participated in a bilateral meeting, the first after the Doklam standoff.  There were two gains for India: the mention of terror groups in the declaration and the bilateral meeting with Xi.

    Original purpose of BRICS

    While this is well and good, strangely, the bigger questions about BRICS are not being asked.  Other than having a role in defusing the Doklam tensions, what are the other takeaways from the summit? No doubt, the issue of terror needs to be dealt with strongly and countries need to act unitedly. But the tensions between India and China appear to be taking over the multilateral goals and original purposes of the BRICS.

    The BRICS was formed, taking cognisance of the need for reform of international financial institutions like the World Bank and International Monetary Fund, which continue to be dominated by the United States and Europe. It was meant to be an alternative to – if not a replacement of  – Western hegemony.  However, the recent actions of BRICS have not lived up to the intent.

    A report by the INGO ActionAid ‘Reclaiming Relevance: BRICS and the new multipolarity’ says:  “the BRICS  seem to be too deeply subsumed within the existing global capitalist development paradigm to pose a frontal challenge”.  For example, the BRICS nations allied with the Washington-led Copenhagen Accord, a strategy that allowed them to avoid binding emission cuts, and weakens the Paris Agreement on Climate Change. This allows developed countries and the BRICS governments to continue pursuing an extractive, high carbon economic model. Second, while the BRICS succeeded in achieving a quota-shift in favour of large emerging economies at the IMF, the BRICS still require borrowing countries to have an agreement with the IMF if they want to draw more than 30 per cent of funds from the CRA.

    The BRICS countries are also against the unipolarity of  the United States. However, India continues to seek closer relations with the US. Indian commentator and analyst C. Raja Mohan writes: “Indian leaders would stand up in Washington and talk of a “natural alliance” with the sole super power, America. At the same time, India would sit down with Russia and China to call for a “multipolar world.” According to Raja Mohan, this is not hypocrisy but India’s need to manage multiple contradictions after the Cold War. One might disagree about whether this constitutes hypocrisy or not, but it certainly indicates a lack of coherence in policy as far as BRICS is concerned.

    The BRICS have also repeatedly endorsed a multipolar world order. However, China’s efforts in the Belt and Road Initiative (BRI) and CPEC (China Pakistan Economic Corridor) have been interpreted as an effort to bring about Chinese unipolarity in Asia.

    These contradictions weaken the BRICS, while the internal rivalries of its members also divert it from its purposes. In this regard, the South Asian Association for Regional Cooperation (SAARC) comes to mind. The SAARC was established to forge unity and cooperation among South Asian nations. But the prolonged rivalry between members India and Pakistan has resulted in the erosion of SAARC over time.

    Of course, the BRICS have the signature New Development Bank (NDB) and Contingency Reserve Arrangement to show for it, since the first BRICS summit in 2009. However, the unique selling proposition (USP) of the NDB is still not clear. The bank has not shown how it will treat loan conditionality differently from the major international financial institutions that the BRICS repeatedly criticise. Despite being a development bank, its policy documents are silent on concerns of poverty and inequality, major challenges of the BRICS countries.  The NDB will fund largescale infrastructure projects — but how it will deal with social and environmental concerns any differently from existing development banks? These are important questions that the NDB will have to address, in order to stay true to the original intent with which the BRICS was formed.

    More of a decisive role in world affairs

    On the political front too, BRICS could take a lead in addressing some of the major crises which confront the world today — whether it is the burgeoning global refugee crisis, the challenges from a Trump administration, the rise of xenophobia and hatred or the growing resource conflicts in the world. It is a well-known fact that Indian and Chinese companies are themselves competitors in Africa for access to resources. It should step up peace-making efforts in Syria and participate in international actions to free Palestine from Israeli occupation. In a little noted section of the Xiamen declaration, the BRICS called for direct dialogue with North Korea as opposed to the United States which called for a military response to North Korea’s testing of a hydrogen bomb.

    Such responses from the BRICS are welcome and more interventions needed. It is high time that the BRICS becomes a more decisive force in world affairs.

    Read the original article: https://theasiadialogue.com/2017/09/11/india-china-rivalries-overshadow-the-larger-purpose-of-brics/

  • Brics’ New Development Bank may be new only in name – it’s yet to lay the ground for sweeping change

    Photo: Reuters

    Published in Scroll.in. 16 October 2016

    As leaders of Brasil, Russia, India, China and South Africa meet for the 8th Brics Summit in Goa on Saturday and Sunday, one of the key agendas is to take forward the New Development Bank. President KV Kamath, will attend the summit and bank’s management will look to hobnob with senior officials and business leaders at the two-day event.

    Comprising the five Brics member-countries, the New Development Bank, first proposed in the 2012 summit and signed into agreement last year, at the seventh summit, has been hailed as an alternative to US-dominated institutions such as the World Bank and International Monetary Fund.

    The bank formally opened in July in Shanghai, China – but within months, questions about its functioning have been raised.

    What’s new?

    The biggest concern is that the New Development Bank has tied up with the very institutions to which it was projected as an alternative. Rather than presenting a different framework, the New Development Bank has signed agreements of cooperation with the World Bank as well Asian Development Bank. In a recent press release, the bank reiterated that it would complement the efforts of other existing financial institutions “to realise the common goal of global growth.”

    While the World Bank has been criticised for imposing loan conditionalities, such as liberalisation, deregulation and privatisation, on borrowing countries, some of the Asian Development Bank’s projects have had an adverse impact on vulnerable populations such as those in Cambodia and Indonesia.

    According to Rathin Roy, director of the National Institute for Public Finance and Policy, a research institute under India’s Ministry of Finance, the New Development Bank has so far failed to show how it will be different from existing global financial institutions. “The bank has not said how it will deal with loan conditionality differently, nor articulated how it will be different from the World Bank and Asian Development Bank,” he said. “If it does not replicate the World Bank or Asian Development Bank, then what is the New Development Bank going to be? So far the bank has not provided any answers or even a policy paper that addresses this.”

    To its credit, the bank, by assigning equal voting rights to its five founding members, has tried to be different from the World Bank and IMF, where voting rights are skewed in favour of developed countries. But this is a piecemeal measure, and the bank has not shown any inclination to bring about larger changes in the functioning and landscape of international financial institutions.

    Who’s accountable?

    One of the aims of the New Development Bank is to fund infrastructure projects in developing countries, and support public as well as private projects.

    However, the impact of the major projects it is expected to fund, such as ports, dams, industrial corridors and smart cities, is a cause of concern as such projects tend to displace populations, undermine local livelihoods, and cause damage to the environment. Though the bank has published its social and environmental framework, there is little evidence that aspects of equity and justice have been considered in the context of mass-scale development.

    Similar concerns have also been voiced about the China-led Asian Infrastructure Investment Bank, of which India is the second-largest shareholder and which opened for business in January.

    The New Development Bank and the Asian Infrastructure Investment Bank together represent the changing landscape of international financial institutions, most of which were established after the end of the World War II, during the ’90s.

    However, the inauguration of the two was not preceded by substantive debates in Parliament about India’s role or monetary commitments to institutions, which stands at $10 billion for the New Development Bank and $8 billion for the Asian Infrastructure Investment Bank.

    A briefing paper of the Centre for Financial Accountability, which monitors financial institutions and their investments in development projects, noted that the Parliament had remained silent and uninvolved, and called discussions on it a problem from the public accountability and transparency viewpoint.

    The huge gaps in finances for infrastructure projects, especially in emerging economies, mean that the two entities are likely to have many takers for their funds, and need not vie with one another.

    According to a G20 estimate, $1 trillion to $1.5 trillion will be required annually for over the next 15 years to fund infrastructure in the developing world. Nevertheless, there is broad agreement that the China-led bank with 57 members, including major Asian economies and European countries, has overshadowed the New Development Bank.

    Poverty, inequality and development

    Talk on this competition is further fuelled by the rivalry between India and China, two of Asia’s largest economies. However, there are more pressing concerns for the New Development Bank – which it has not addressed so far.

    For instance, despite being a development bank, its policy documents remain curiously silent on poverty and inequality – two major challenges facing India and other growing countries.

    The People’s Forum on Brics – which represents social movements, trade unions, civil society and the like from the member countries that analyse the functioning and policies of Brics – has already called the bank out for mainly serving private interests. The forum met ahead of the summit in Goa on October 13 and 14.

    A growing perception among policy analysts is that Brics countries are unsure of which direction to take the bank. The bank website states that it will not just fund infrastructure, but also promote sustainable development. But how it defines development is not clear. While the bank emphasises on economic growth, it says nothing about jobless growth, rural poverty, or those marginalised from the benefits of economic growth.

    Kamath’s claims about the New Development Bank symbolising political sovereignty and the “rise of the South” – of developing countries in the Southern Hemisphere – already appear hollow, and it appears far-fetched that the bank can produce a paradigm shift.

    Read the original article: https://scroll.in/article/819119/brics-new-development-bank-may-be-new-only-in-name-its-yet-to-lay-the-ground-for-sweeping-change

  • BRICS may not replace the old world order – but it could still make a difference

    Photo:Reuters/Sergei Karpukhin

    Article published in Scroll.in. 4 October 2016

    Since its first summit in 2009, the BRICS group of nations has done what it takes to be noticed – carved out a multilateral bank with an initial authorised capital of $100 billion and created a Contingency Reserve Arrangement to tackle financial crises. However, as the group of emerging economies gears up for its eighth summit that will be held in Goa on October 15-16, in a year India assumed the BRICS presidency, questions remain about its credibility.

    BRICS first started with Brazil, Russia, India and China as its constituents, and was joined by South Africa in 2010. It was envisaged as an alternative to dominant Western financial institutions like the World Bank and International Monetary Fund, which, 70-odd years after they were set up, continue to be dominated by the United States and Europe.

    However, links with the International Monetary Fund remain in place. A BRICS country, when in need, still requires an agreement with the financial body to withdraw more than 30% of its quota from the Contingency Reserve Arrangement. Also, the growing ties of India and Brazil with the United States further undermines the grouping’s credibility.

    BRICS nations – comprising 43% of the world population, 31% of global GDP (purchasing power parity basis) and 17% of world trade – also face other serious problems. High levels of poverty and great inequality mark their societies. The faltering of their economies, barring India, is a concern. Critics also draw attention to a renewed scramble for Africa by BRICS countries, resulting in natural resources extraction and impoverishment of locals.

    Different political structures, varied economic trajectories and inter-rivalries such as between member nations India and China, make it difficult to accept that BRICS can have a cohesive position on anything.

    Great expectations

    Despite such problems, ahead of the eighth summit, different constituencies have their expectations. For instance, business-related groups want it to be easier to do business with each other and seek increased trade, and civil society groups hope to be consulted in policy making.

    “The BRICS countries could have better levels of intra-BRICS trade,” said Onkar Kanwar, chairman of BRICS Business Council (India). “This can be done through harmonisation of customs regulations, easier visa regime, uniformity in technical standards and easier access to information on trade and investment.”

    The BRICS Business Council will also press for a travel card, or special business visa, which will make it easier for people doing business in these five countries to travel across BRICS.

    The Indian government’s expectations from BRICS is best expressed in terms of what not to expect. Contrary to popular and media perceptions, issues like the Kashmir dispute or India’s Nuclear Suppliers Group membership cannot be pursued.

    “If these issues are pursued, BRICS would only be occupied with India-China border problems or Brazil-China anti-dumping disputes,” said former Ambassador HHS Viswanathan, who works with the Observer Research Foundation and heads the BRICS Academic Forum from India. “Bilateral issues are off the agenda. Even if international issues relating to third countries crop up in discussions, we try not to enter them. And if we do need to mention them, references are watered down.”

    India and BRICS

    So, how does India gain from BRICS?

    BRICS wants to alter institutions such as the World Bank and International Monetary Fund and pushes for reform of the United Nations Security Council, and India is keen on both processes.

    Further, by being a founding and contributing member of the New Development Bank and Contingency Reserve Arrangement, India has come a long way since it had to request food aid from the United States in the 1970s, and negotiate assistance from the International Monetary Fund in 1991, during the balance of payments crisis.

    BRICS also provides a space for India and China, which share thorny ties, to find areas of cooperation such as in railways, industrial parks, tourism, urbanisation and agriculture. The group can be a source of investment for initiatives like Make in India and smart cities, and facilitate investments by Indian companies in BRICS countries.

    As far as civil society in India goes, the belief is that the legitimacy of BRICS can increase if civil society organisations that are attuned to people’s concerns are also consulted for inputs into policy making.

    While the government-approved civil BRICS with a focus on Sustainable Development Goals will take place in Delhi, a separate gathering, People’s Forum on BRICS, will be held in Goa later this month. The forum will focus on BRICS from a relatively critical lens, with discussions on public services, natural resource governance and human rights.

    While civil society organisations have demanded that their participation be formally recognised in BRICS summits, as in the case of academia and business participation at present. But though the Indian government will facilitate a gathering of such organisations, or civil BRICS, it still does not mean institutional recognition. Further, the recommendations from the gathering may not be accepted in the final summit outcomes since there is no formal mechanism for accepting recommendations.

    Concerns about the New Development Bank have also been raised by civil society groups.

    Joe Athialy of the Centre for Financial Accountability said: “If the NDB [New Development Bank] cannot show transparency and accountability and evades environmental and social concerns, it won’t be any different from multilateral development banks like World Bank and Asian Development Bank.”

    BRICS and the world order

    BRICS remains a young institution still in the process of contact building among member countries. Existing areas of cooperation include attempts to provide an alternative to dominant financial institutions, reducing international financial market risks and concerns about disruptive monetary policies of advanced countries. Further grounds of cooperation are being identified with each summit.

    BRICS cannot be the new world order and perhaps does not intend to be, given its differences and continued cooperation with existing institutions of power. The attempt will not be to replace these institutions, but to occupy space within them, and gain a share of global governance through arrangements like the BRICS bank, Contingency Reserve Arrangement, and trading in local country currencies. But more importantly, global governance entities like the World Bank, International Monetary Fund and the UN Security Council are in serious need of a shake up to reflect current global realities, and BRICS might just be able to deliver this. It is therefore premature to write it off, just yet.

    Read the original article: https://scroll.in/article/817619/brics-may-not-replace-the-old-world-order-but-it-could-still-make-a-difference

Urvashi Sarkar

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