The Hindu Business Line : An emerging economic order

The coming together in Brasilia of the three key economies of Asia, South America and Africa signals the first step towards looking at sustainable and inclusive model of globalisation. A great leap forward for the emerging economies, the IBSA, says AJAY KHANNA, is likely to be beneficial for India Inc.

A new initiative to strengthen economic cooperation will take concrete shape today (September 13) when leaders of India, Brazil and South Africa (IBSA) Association, Dr Manmohan Singh, Mr Luiz Inacio Lula de Silva and Mr Thabo Mbeki, meet in Brasilia to discuss a possible trilateral free trade agreement. This involves the regional groupings of SACU — the South African Customs Union — and Mercosur — the South American free trade agreement. Once signed, this would mark the first agreement of this magnitude among developing countries. It brings together 11 countries — India, Brazil, South Africa, Botswana, Lesotho, Swaziland, Namibia, Argentina, Uruguay, Paraguay and Venezuela (with a 12th, Bolivia, expected to join shortly).

This will be a significant alliance in more ways that one. It marks the first step towards looking at a sustainable and inclusive model of globalisation. For developing countries, which account for 80 per cent of the world's population but only 23 per cent of the world economy, the IBSA and the spin-off trilateral agreements are a new beacon for economic development. A combined market of 1.3 billion people and an economy of $1.26 trillion, the IBSA aims to increase trilateral trade to $10 billion by 2007.

As Dr Manmohan Singh has observed, "... this forum can have a beneficial influence on subjects of topical importance as it develops."

Emerging powerhouse

As the leading economies of Asia, South America and Africa respectively, the IBSA demonstrates the power of emerging economies in the new global economic order. The IBSA first took shape during the 2003 UN General Assembly meeting when the three economic powerhouses of India, Brazil and South Africa came together to develop a novel approach to South-South cooperation. By strengthening the South-South partnership, the IBSA, which was finalised in Brasilia in June 2003, aimed to reduce dependence on the developed world. Determined to advance from being solely a forum for dialogue to creating real measurable impact globally, the IBSA is emerging as a network that aims to act as a stepping stone for developing countries to pursue mutual interests in an ever-globalising world. Over the last three years, IBSA Dialogue Forums have been held in New Delhi, Cape Town and Brasilia, and have covered discussions ranging from poverty alleviation, economic development and infrastructural advancements to the potential impact of the IBSA on the global political and economic scene.

Stronger links

The strong bridges that link the three nations have only been strengthened over time. Today, the Tatas and the Mahindras — two of the most influential names from the Indian business world — have an established presence in South Africa. Reciprocally, DeBeers, the jewel of the diamond world, and SAB Miller, the beverage group, have made significant investments in India.

With the three countries on the same trajectory of economic development, collaborative possibilities abound. IBSA countries all have vibrant democracies with multicultural and multiethnic populations and see globalisation and investment as sustainable solutions to poverty. Each also brings its own core competence to the table: India's information technology and human resource skills; Brazil's agricultural prowess; and South Africa's mining expertise.

Currently, the intra-IBSA trade accounts for only 2 per cent of the total trade volume of the IBSA countries. Yet, trade among the three countries, and regional groupings, has risen considerably in recent years. The two-way trade between India and Mercosur has more than doubled from $1 billion to $2.3 billion between 2001 and 2005.

The bilateral trade between India and South Africa has also increased by 133 per cent from $1.3 billion to $3.1 billion.

Opportunities for collaboration

The opportunities for the three to collaborate in the emerging fields of aerospace, atomic energy and the automotive industry are substantial. Additionally, Brazil and South Africa are both members of the Nuclear Suppliers Group and support India's stance on relaxing nuclear fuel supply rules. So, civilian nuclear energy could be another area of technical cooperation.

Steps are also being taken to foster closer trilateral cooperation in agriculture and allied areas, with India recently approving a five-year Memorandum of Understanding (MoU) which will be signed under the IBSA Dialogue Forum initiative.

As a collective body, the IBSA forms a unique negotiating group in multilateral discussions. It primarily attempts to leverage its size and power in the global economy to bring the core issues of developing economies to the negotiating table.

The IBSA is actively advocating the creation of a more equitable and representative UN through the increase in number of both permanent and temporary members of the Security Council. It has also been the forerunner in championing for a level-playing field at the World Trade Organisation.

However, the ISBA's raison d'etre is no longer merely UN reform, fair treatment at the WTO, or innovative free trade agreements.

The IBSA is likely to be a great leap forward for emerging economies. Indian industry and companies are looking for new markets, not only for trade but also for investment. Through the IBSA, Brazil and South Africa offer tremendous opportunities for Indian companies to invest.

As "India Everywhere" moves to Brasilia, the Prime Minister's visit and the first IBSA Business Summit should give greater momentum and focus to this effort. A large business delegation is in Brasilia to explore opportunities.

And `Incredible India' will make its impact with pop artist, Remo, set to perform at an exclusive India Evening. For the IBSA, this is a promising start.

(The author, CEO of India Brand Equity Foundation, is Deputy Director-General, Confederation of Indian Industry. The views are personal. He can be reached at ajay.khanna@ciionline.org)