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Foreign Relations of India: BRICS and India, BRICS in Africa

26-05-2011, 14:00

 

 

Since the 1990’s, India’s foreign policy has gone through a metamorphosis in tune with the changing global scenario. The disintegration of USSR, demise of the bipolar world and domestic economic problems prompted India to reassess its foreign policy and adjust its foreign relations of the earlier decades.  Serious domestic and international problems compelled India to reorganize its foreign policy on the basis of more pragmatic considerations. In today’s era of   globalization, it has improved its relations with United States and other western countries, established relations with Israel and embraced multilateralism, to solve its major problems on the economic front.  This is in sharp contrast to the earlier era of rigid bipolarity and East-West rivalry, which was marked by ambiguity among Indian foreign policy makers with regard to transnational cooperative arrangements.

Since the end of the Cold War and collapse of the Soviet Union, multilateralism has gained renewed salience in international relations as well as in Indian foreign policy. According to IR theory, multilateralism involves justice, obligations and a sort of international rule of law. For Keohane multilateralism is ‘the practice of co-ordinating national policies in groups of three or more states, through ad hoc arrangements or by means of institutions’1. Since 1990’s, India has actively engaged itself in several multilateral forum like ASEM (Asia-Europe Meeting), BIMSTEC (Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation), G-8-05, G-20, IBSA (India, Brazil and South Africa), IOR-ARC (Indian Ocean Rim Association for Regional Cooperation), ACD (Asia Cooperation Dialogue), etc. India’s active participation in the formation of Brazil, Russia, India and China (BRIC) forum with these emerging powers shows its willingness for multilateral cooperative arrangements to solve shared problems and challenges of globalization.

This article provides some initial perspectives on the evolution of multilateral forums like BRIC (Brazil, Russia, India and China) and also examines India’s recent cooperation with the BRIC countries, to better understand its emergence and implications. It also examines BRIC’s engagements with African countries and its implications.  

BRIC 
The acronym, BRIC, was coined by Jim O’Neill of Goldman Sachs way back in 2001. He predicted that by year 2050, Brazil, Russia, India and China would become bigger than the six most industrialized nations in dollar terms and would completely change the power dynamics of the last 300 years2. The first Summit of BRIC was held in Yekaterinburg, Russia in 2009, in the midst of the profound global crisis3. The Summit was intended to be a space to officially announce the creation of this loose block at a time when the G8, consisting of the advanced industrialised countries, was increasingly becoming bereft of legitimacy, with the foundation of their domination trembling. 

Despite a range of differences between the four countries, BRIC has outstripped most expectations in recent years, in forming a promising political grouping.  On the foundation of other meetings between newly-emerging powers, most importantly the trilateral Russia-India-China (RIC) arrangement, the BRIC foreign ministers met in 2006. Co-operation among BRIC countries was preceded by two finance ministers’ summits, leaders’ meetings, and a stand-alone BRIC leaders’ summit in June 2009, which was marked by a joint communiqué.  Russia and Brazil have together been the driving force that have transformed BRIC from an abstract financial notion into a genuine political grouping. 

 

Although there seems to be a broad consensus within BRIC about the probable changes in power dynamics, there is much less agreement about how the process will unfold. There is speculation and debate among scholars about the possible role of BRIC’s member states – whether the forum would like to challenge the existing world order or challenge the United States collectively. 
In fact, the BRIC countries are deeply concerned that USA’s dominant power position will allow it to behave as it pleases and damage their fundamental interests.  However, there is very little evidence that any of the BRIC members would prefer a hardline anti-USA coalition.4 As evident from the statements and deliberations of the BRIC Summit meetings, the purpose is not really to challenge the ‘hegemony’ or to emerge as the new “hegemons”, at least in the immediate future, but to protect and secure safe places within the current hegemonic order, which is, however, far from absolute.

 

Establishing an anti-hegemonic political front is not the main focus of BRIC countries. In fact, they accept the hegemonic stability theory which states that international system is more likely to remain stable “when a single nation state is the dominant world power, or hegemon”. They believe that when a hegemon exercises leadership, either through diplomacy, coercion or persuasion, it is actually deploying its "preponderance of power". Thus the dilemma of the BRIC countries is that, although they are the newly emerging powers and are becoming a powerful group in international politics, they are not questioning the fundamental global order of US supremacy. 5

 

Till now, co-operation and accommodation have been the strategic approach of BRIC. In the past couple of years, the member-states of BRIC have formed a more formal political pressure group from an abstract perception of Goldman

Sachs, regularly convene official BRIC Summits and issuing joint communiqués. According to the Chinese Foreign Ministry official, Wu Hailong, “Four-country [BRIC] co-operation is open and transparent co-operation, not aimed at third parties.”6  In fact, a previous attempt by Russia to form a strategic triangle between China, Russia and India in 1998, was rejected by both India and China, both of whom agreed only to trilateral co-operation, based on the principles of 
“no alliance, no confrontation, and not targeted at a third country.”

.

It may be recalled that in the first Summit of BRIC countries held in  Yekaterinburg in 2009,  the Group directly attacked Bretton Woods institutions  and talked about reform of international financial institutions in the backdrop of  changes in the international system. Russia had even called for developing new reserve currencies to complement the dollar, and also to explore the possibility of settling bilateral trade in local currency. However, all this did not find any reference in the final statement issued at the Summit. Instead, the cautious wording appeared to reflect China’s concerns that any anti-dollar statements could erode the value of its currency reserves, given that its dollar reserves had touched $2 trillion by the end of 2008 7.

 

The BRIC countries have proposed a greater role for IMF’s quasi-currency, Special Drawing Rights (SDR), as a multilateral substitute for the dollar. The joint communiqué called for the active participation of emerging market economies and developing countries in decision-making process of the financial institutions, in line with their relative weight in the world economy.8 These challenges have been significant, but they do not necessarily foreshadow more aggressive moves to undermine and destroy the existing international order. 

 

The other area in which BRIC has challenged the international order has been in drawing linkages between its willingness to provide more funds to the IMF to help other countries recover from the crisis and demand that the April G-20 summit endorse changes in IMF and World Bank voting shares.9 According to an Indian official,. BRIC countries are willing to contribute to the IMF, but they won't contribute heavily to longer-term fund resources until the world body increases their voting shares substantially. "They don't want to get locked into providing more money until they get their (shares) increased".  In this case, also although it seems to be a clear example of BRIC pressuring the western powers, it is far from the frontal assault on the existing order that others worry may come soon 

While the first BRIC Summit mainly concentrated on eliminating the negative effects of the financial crisis, the second Summit, held in BrasiliaBrazil, on April 16, 2010, stressed on the issues of enhancing the role of BRIC countries in IMF World Bank, and on co-ordinating energy and resource policies among the members states. The leaders of the 4 BRIC countries also discussed whether to toe the US line, although this issue is not much of a challenge to the United States.10

Under the circumstances, let us get an overview of India’s perception of the scope and role of BRIC.

India and BRIC
Recently, India’s Prime Minister, Dr. Manmohan Singh, was in Brazil to attend both the second Summit of BRIC and IBSA Summit, held in 2010. For India, these two groups are extremely important, considering that both aim to collectively boost bargaining power and clout on global issues, and also strengthen economic and political ties among the member-countries on the lines of South-South co-operation. In fact, India took the initiative to call for improving the importance of BRIC and IBSA as groups.11Dr. Manmohan Singh called for closer co-operation in the fields of energy and food security, as well as tapping into the potential of other sectors such as trade and investment, science and technology, and infrastructure. He added that pooling together each other’s experiences could lead to more inclusive growth. "We are four large countries with abundant resources, large populations and diverse societies. We aspire for rapid growth for ourselves and for an external environment that is conducive to our development goals”.12 

 

Co-operation on the economic front is one of the focus areas of India’s policy towards BRIC. It believes that global challenges can only be addressed by 
co-operative effort, with the full and equal participation of major and emerging powers and economies. For India, on the one hand, cooperation with other BRIC member-states provides an excellent opportunity to share its development experiences with them as well as learn from their experiences. This is more so since they share common challenges as developing countries and global challenges often affect them in a similar way. In addition to discussions about how to respond to the financial crisis, India exchanged ideas and experiences on food security, agriculture, disease, foreign aid, energy and global warming. 

 

Sharing these experiences not only helps the BRIC member-states themselves, it also allows them to share experiences and “best practices” with the developing world and thereby expand South-South cooperation.  

Moreover, India has also tried to use BRIC as a forum to engage China as the latter has become the largest market for the fast-industrializing countries of East Asia. The volume of China-India trade has soared in recent years, and is likely to reach $60 billion by the end of 2010.13 Not only that, India also wants to resolve the age-old mistrust and complicated relationship between the two countries since the 1962 war between them. India shares land border with China, Pakistan and Bangladesh and faces many potential threats. Although Sino-Indian relations have improved in recent years, India is threatened by China’s expanding presence through bases in Myanmar, Pakistan, Bangladesh and Sri Lanka, leading to a possible encirclement around the Indian subcontinent as well as potential competition in the Indian Ocean area. By improving relations with China

 

and by co-operating in a multilateral forum like BRIC, India would like to stabilize the regional environment by neutralizing China in the simmering issues between India and Pakistan.

India was Russia’s close ally in the Cold War years, with the latter even helping India in its war with Pakistan in 1971. India wants to strengthen its ties with  Russia within the multiple co-operative networks, given that it depends on its support in its efforts to counter terrorism emanating from Pakistan. India believes that Russia being a great power can influence the conduct of Pakistan. According to India’s Prime Minister, Dr. Manmohan Singh, “Russia’s influence will be utilised to convince Pakistan that the strategy of using terror as an instrument of state policy is counter-productive.”14 India seeks co-operation with Russia to devise effective counter-terror strategies by co-ordinating intelligence and information gathering systems between the two countries. On the other hand, there are immense opportunities to expand trade, investment and technology flow between the two countries. Co-operation in the fields of energy, nuclear energy program and defence are the other important aspects of co-operation between the two countries, besides shared views on issues like economic slowdown, climate change and global governance.

 

With Brazil, India has a unique partnership arrangement that has attracted international attention. Both countries have directly challenged Western nations over free trade during various rounds of WTO negotiations, most notably at the 2003 Cancun meeting.15

 

BRIC and Africa

Even though trade and investment remain the principal driving force behind BRIC’s relations with African nations, factors like age-long historical ties and diaspora networks have also strengthened diplomatic ties between African countries and Brazil, China and India. Over the last decade, all four BRIC member-states have established themselves as increasingly influential players across Africa. Given the large scope of their engagement, this may turn out to be one of the most significant developments for the region in recent years[1] According to Standard Bank of South Africa, BRIC member-states, and not the developed economies, are redefining Africa's role in the global economy, 
a direction driven by solid commercial needs and shared interests. Between 2000 and 2008, BRIC-Africa trade has snowballed almost ten-fold, from around $20 billion to over $180 billion - a 34 % compounded annual growth rate. Collectively, the BRICs are now easily Africa’s largest trading partners, with African trade constituting around 2.9%, 6.4% and 6.3% of China, India and Brazil’s total trade, respectively. 16

Although BRICs have immediate interests in Africa’s natural resources, specially oil, they are also motivated by individual aspirations. For example, Brazil wants to create a new “Southern Axis” with itself at the forefront. Russia’s desire is to reframe its image in a new perspective because of its sullied reputation in Africa during the Cold War years. For India, Africa is seen politically as a key ally in the pursuit of a competitive advantage over its Asian competitor, China. For China, African countries are seen as long-term partners in its ongoing bid to gain global economic ascendancy.

The importance of Africa to BRICs is reflected in the frequent visit of Presidents and Prime Ministers of these countries to Africa. For example, Chinese President Hu Jintao is the most frequent flyer to Africa since 2002, followed by Brazil’s President Lula. India’s Prime Minister and high powered delegates also paid several visits to Africa since 2003. In June 2009, in the midst of the worst recession in almost a century, Russia’s President Medvedev paid the most comprehensive visit ever by any Russian head of state to Africa. More often than not, these high-level visits have been marked by the signing of a raft of bilateral trade and economic co-operation agreements between the African countries and BRICs.

The diplomatic efforts of BRICs in Africa are further complemented by the presence of official embassies throughout the continent. In this regard, China is the most represented in Africa, with Chinese embassies in 47 African countries. In return, 40 African countries have official embassies in China. For its part, India maintains embassies in 30 African countries, with 37 African countries having embassies in India, while Russia has a strong official infrastructure across Africa, serviced by embassies in 37 African countries. In turn, 29 African countries are represented in Russia. Brazil had embassies in 28 African countries, up significantly from the 13 countries it was officially represented in when President Lula cam to power in 2003.16

Among the African countries, South Africa was admitted to the exclusive BRIC Forum at its second Summit held in Brazil on 16th April 2010. BRICs, especially China, India and Brazil, have strong economic relations with South Africa – for  them, South Africa has been a gateway hub of BRIC’s spread to other parts of the continent. In fact, the Goldman Sachs Report of 2003 has highlighted the economic importance of South Africa, stating that with its enormous potential consumer market with larger middle-income group, abundant supply of natural resources, well developed financial parameters, good communication and network, and effective energy and transport sectors, South Africa plays an important economic and political role in the African continent. 18

It may also be noted that, beside BRIC, India has a unique trilateral partnership arrangement with Brazil and South Africa that has attracted international attention. The partnership’s aim is to boost their bargaining power and clout on global issues and to strengthen economic and political ties among the three countries.

The involvement of BRICs in Africa is fast changing the dynamics of the continent’s relationship with the rest of the world. According to the Goldman Sachs Report, “BRICs’ engagement with Africa is not a unilateral act of goodwill; it makes perfect economic and strategic sense”. Once branded as a marginalized and hopeless continent in the 1990’s, African economies have recorded 5.16% rate of growth in 2009. In this regard, it is interesting to note that the strong economic growth performance observed in the region between the second half of the 1990s and the onset of the financial crisis in 2008 was accompanied by a spectacular increase in trade.

 

Africa’s total merchandise trade increased from US $217 billion in 1995 to US $986 billion in 2008. Its share of global trade also increased from 2.2 per cent in 2000 to 3.3 per cent in 2008. This means that Africa currently has a share of world trade that is higher than its share of world gross domestic product (GDP) (2.5%), but much less than its share of world population (14.6%). Their abundant natural resources, expanding consumer markets and growing clout in the global affairs provide BRICs an opportunity to gain a firm foothold in countries which, coming from a low base, are likely to grow much higher than average rates. 19

 

The most interesting aspect of BRICs’ engagement in Africa is the speed with which they have expanded relations with African countries. China-Africa trade increased from US $3.5 billion in 1990 to over US$100 billion in 2010. China is

 


 
now Africa’s second most prodigious trade partner (behind the US). India’s trade with African countries, which is currently valued at US $ 36 billion, is expected to increase to US $150 billion by 2013. Brazil has also shown a significant increase in its trade with Africa, especially after President Lula came to power in 2003.  
In 2008, Brazil’s trade with African countries accounted for US $ 26 billion. With regard to Russia, following a stagnant period during the 1990s, it began to revive its ties with African states in the latter stages of former Prime Minister Vladimir Putin’s leadership. It took several initiatives to boost its trade, which stood at  US $ 6 billion in 2008. 20

 

To promote trade and investment across a broad spectrum, BRIC banks are making a strong foothold in Africa. The first and significant BRIC investment in Africa’s banking industry came in 2008 when Industrial and Commercial Bank of China (ICBC) bought a 20% stake in South Africa’s Standard Bank in 2007, paying US $5.5 billion. Among other Chinese banks exerting influence in Africa is  Bank of China, the country’s most international bank, which entered into a pact with Ecobank, which operates in 31 African countries. Export-Import Bank of China, a state entity which promotes trade and investment, has approved loans worth US $20 billion in Africa (including north Africa). 21

 

In 2008, Brazil’s Bradesco and state-controlled Banco de Brasil announced a new African holding company with Banco Espirito Santo (BES), a Portuguese firm active in Angola. In 2009, the State Bank of India (SBI) announced that was  looking to spend US $1 billion to purchase a bank in Africa, to service a growing number of Indian companies doing business across the continent. SBI has existing joint ventures with banks in Mauritius and Nigeria. India’s ICICI Bank, Bank of India, and Export-Import Bank of India also have representative offices in South Africa. 22


Broad macroeconomic reforms across Africa have inspired increased levels of FDI from traditional and emerging commercial partners throughout the continent. While trade figures provide the most compelling indicator of BRIC-Africa ties, FDI from BRICs is increasing in volume. According to the FDI Markets3, India was the largest of BRICs to establish overseas investment projects in Africa between 2003 and 2009. 23

 

The Tata Group, India’s largest multinational group, was the second most active investor during 2003-2009, investing in a total of 23 projects, second only to Kenya Commercial Bank. While India may have invested in a greater number of projects, the cumulative value of these investments (US $25 billion) trails China (US $28.7 billion). Brazil (US $10 billion) and Russia (US $9.3 billion) are a distant third and fourth, respectively. In addition, the average annual growth of Chinese FDI projects in Africa between 2003 and 2009 stood at 58.2% compared to 42.7% recorded by India. The average capital investment of each BRIC between 2003 and 2009 was US $400 million (Brazil), US $330 million (China), US $197 million (Russia) and US $192 million (India). Thus, India may be the most active investor in Africa, but in terms of size of capital investments China leads. 24.

 

Conclusion

India has made progress toward participating in regional multilateral arrangements in both the economic and security realms. It has also expressed support for some major principles of multilateral cooperation. BRICs have come together in a political grouping in a way that has far exceeded most expectations. For India, co-operation with the BRICs is more important in terms of addressing its food and energy security issues, and combating terrorism. Engaging China has been one of the important components of India’s foreign policy in recent years, considering that co-operation and negotiations with China is imperative to

clearing the mistrust between the two countries. This is where BRIC offers an effective forum.


In analyzing the implications of BRIC-Africa economic engagement, it appears that both sides have benefited much from the co-operation. Many African countries are enjoying rapidly rising earnings due to BRIC countries demand for their exports. India and China’s involvement in Africa is also leading to investments in infrastructure, financial services, manufacturing and retail, and in specialized market niches that have been ignored by investors from developed countries. Agricultural development and other technical assistance are also increasing, and Africa’s access to cheap credit and diverse, inexpensive consumer goods is growing. Infrastructure construction is widely seen as one of the most positive benefits of the Chinese and Indian investments in Africa, given the widespread lack or poor condition of such facilities in Africa till now. Similarly, to the extent that China and India provide credit to Africa without conditions, such resources may help African governments to autonomously fulfill their sovereign, self-defined development goals.

 

 

 

Footnotes

 

1. Robert Keohane, “Multilateralism: An Agenda for Research”, International Journal vol. 45, Autumn 1990, p731

2.  Dreaming with BRICs, Global Economics Paper No. 99 http://www2.goldmansachs.com/ideas/brics/book/99-dreaming.pdf

3. http://en.wikipedia.org/wiki/BRIC

4.  Hurell, “Hegemony, Liberalism and Global Order: What Space Would be Great Powers” International Affairs, Volume 82, January, 2006, p18.

5. Keohane, Robert, “The Theory of Hegemonic Stability and Changes in International Economic Regimes, 1967-1977,” in Change in the Internationa System, edited by O. Holsti et al.,, 1980, pp. 131-62. Boulder, CO: Westview.

6. Liu Xinyu, “Jinzhuan Fenghui shouxiu Mouhua Hezuo Zouxiang” [BRIC Summit Plans the Future Trend of Cooperation], Huanqiu, June 15, 2009. cf. Michael A. Glosny, China and the BRICs: A Real (butLimited) Partnership in a Unipolar World

 7.Deutsche Bank Research, ‘China’s financial markets: a future global force?

Current Issues, March 16,( 2009) available at

http://www.dbresearch.com/PROD/DBR_INTERNET_ENPROD/

8. Councils on Foreign Relations,  ‘BRIC Summit Joint Statement’,

http://www.cfr.org/publication/21927/bric_summit_joint_statement_april_2010.html

 published in April, 2010

9. ‘ BRIC Nations Say No IMF Cash without Representations’, Reuters, March, 2010

10. ibid

11.” PM pitches for close cooperation among BRIC nations, “ The Times Of India, April, 16, 2010

12. ibid

13. “China-India to realize 60 bln USD trade target in 2010”, http://english.peopledaily.com.cn/90001/90778/90857/90862/6679516.html, June 16, 2009

14. ‘Russia could convince Pak to stop terror’http://www.indianexpress.com/news/russia-could-convince-pak-to-stop-terror-pm/550231/1, Dec 05 2009

15. Andrew Hurrell and Amrita Narlikar, “A New Politics of Confrontation? Brazil and India in Multilateral Trade Negotiations,” Global Society 20 ,2006 pp.  415-33.

16. Simon Freemantle Jeremy Stevens, ‘Africa: BRIC and Africa: Tectonic shifts tie BRIC and Africa’s economic destinies, Standard Bank, 14th October, 2010 

17.ibid

18, Dreaming with BRICs, Global Economics Paper No. 99 http://www2.goldmansachs.com/ideas/brics/book/99-dreaming.pdf

19.  UNCTAD, Economic Development of Africa, 2010, UN. N.Y., 2010

20. Jedi Ramalapa,( AFRICA) “Grasp the Benefits of Trade with BRIC Emerging Markets", http://ww.ipsnews.net/africa/nota.asp?idnews=48870

21. BRIC banks http://www.asianbankerpublication.com/A556C5/update.nsf/0/7C4EFD8491CDD64148257776000EDA94?opendocument

22. Simon Freemantle Jeremy Stevens, ‘Africa: BRIC and Africa: Tectonic shifts tie BRIC and Africa’s economic destinies, Standard Bank, 14th October, 2010 

23.ibid

 

The opinion of the author may not coincide with the position of editorial

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