GLOBAL CRASH, OR NEW SYSTEM / Rachel Douglas
BRICS summit looks ahead, ‘as old order falls apart’
The BRICS leaders’ speeches alone were refreshing, as the one given by Chinese President Xi Jinping at the BRICS Business Forum on 25 July exemplified.2 “Science and technology”, Xi said, “as the primary production forces, have provided inexhaustible power, driving the progress of human civilisation…. The world today has once again reached a critical historical juncture. In the unfolding new round of scientific and technological revolution and industrial transformation, … if countries succeed in seizing opportunities that present themselves, they will be able to achieve new dynamic growth and deliver better lives to their people.”
China is already bringing those principles to life, both at home and in its Belt and Road Initiative infrastructure-building abroad, and BRICS provides a venue for their broader application. “BRICS is not a talk shop”, promised South African President Cyril Ramaphosa, the host. “We draw up specific proposals that result in action.”
In the past, BRICS leaders used careful diplomatic language in saying that BRICS was not intended to replace existing international financial institutions. As the reign of neoliberal economics through those institutions, like the International Monetary Fund and the Bank for International Settlements, becomes more and more destructive, but also impotent, BRICS leaders are speaking more forthrightly about BRICS as an alternative system, one based on mutually beneficial international cooperation.
Prof. Georgy Toloraya, executive director of the Russian National Committee for BRICS Research, laid out the importance of BRICS at the present historical juncture, in a 20 July interview with the official news agency TASS. The Johannesburg agenda would include traditional issues like energy cooperation and denominating trade in national currencies rather than the US dollar, he said, “But the importance of the summit is not its agenda; rather, it is that the leaders of the BRICS countries are meeting in unique circumstances, as the old world order falls apart.”
Citing the deep disagreements in the G7 over trade, economic policy, and security, Toloraya told TASS that BRICS should take over a coordinating role in the world: “BRICS as merely an ordinary integration group would now be useless, not effective; what’s needed now is a revision of the system of global governance. It is time to state that openly.” In a 25 July English-language article for the Valdai Discussion Club,3 Toloraya urged that BRICS “offer the world an alternative model of socio-economic development, based on the market and new technologies, but different from the current system that assumes the dominance of the West” with its preference for “mechanisms of a liberal market or profit-gaining” instead of the interests of human beings.
The Russian diplomat dismissed the anti-BRICS line that the organisation is “only a platform to promote China’s interests and its project to reconstruct the entire world.” BRICS has already built ties among all five of its members in many areas of government policy and public life, so the progress of BRICS is multi-faceted, he said. Toloraya told TASS that Russian leaders should develop proposals for its turn as BRICS chairman in 2020, aimed at making the group an even stronger political and economic force in the world.
BRICS-Plus
BRICS originated from dialogue among the leaders of three major Eurasian powers—China, India, and Russia. Thanks to former Russian PM Yevgeni Primakov’s encouragement of their alignment back in 1998, it was known at first as the Eurasian “strategic triangle”. Brazil joined in 2009, followed by the Republic of South Africa the next year.
Since then BRICS has adopted an outreach program, under which each year the host nation invites a number of other countries from their geographical region. This year the heads of state or government from eight other African countries— Angola, Botswana, Gabon, Malawi, Rwanda, Uganda, Zambia, and Zimbabwe—participated at South Africa’s invitation. Rwanda currently chairs the African Union. Six smaller African economic blocs of nations also attended.
China, as BRICS chairman in 2017, initiated a further expansion of what it termed this “BRICS-Plus” process.4 Beyond promoting regional cooperation through talks with the host country’s neighbours and partners in regional economic blocs, the core BRICS members would also invite selected bilateral trading partners to participate in the BRICS deliberations. “We will widen the circle of friends of the BRICS and turn it into the most influential platform for South-South cooperation”, Chinese Foreign Minister Wang Yi declared at the time. Attending in 2018 were representatives from Argentina, Egypt, Indonesia, Jamaica, and Turkey. In all, this year’s participants represented over half the world’s population and economy.
A July 2017 Valdai Discussion Club paper by Yaroslav Lissovolik, a Russian economist who is vice president of the Eurasian Development Bank (a six-nation bank founded by Kazakhstan and Russia in 2006), was titled “BRICS-Plus: Alternative Globalisation in the Making?”5 Lissovolik wrote that the two phases of BRICS-Plus, which he called BRICS+ and BRICS++, could overcome sceptics’ view that the BRICS members were too diverse for lasting cooperation: “Both BRICS+ and BRICS++ expand the set of alliances for all the countries included into this wider circle, whereby existing trade or investment agreements can provide the basis for multilateralising such deals with other members of the enlarged group. If successful in building its economic weight, the enlarged BRICS network may exert significant impact on trade and investment flows in the world economy and become a focal point of attracting these flows”.
Besides the state-to-state contacts, the BRICS Business Forum held 25 July at the summit’s opening included company CEOs among its more than 1,000 delegates from all five BRICS members. South African Minister of Trade and Industry Rob Davies told the BRICS Post that the focus was on advanced manufacturing, energy, technology, rail, aviation, information and communication technology, financial services, agro-processing and mining. He said the Forum sought to increase foreign direct investment in Africa, especially for manufacturing, addressing “deficiencies within productive sectors” on the continent. Ways to utilise the financing packages offered by the BRICS New Development Bank (NDB) would be explored, he added.
New institutions
Creation of the NDB in 2014-15 was a milestone in moving BRICS activity from talk to action. The Bank is co-owned by the five countries and was initially capitalised at US$100 billion. To date, Russian President Vladimir Putin reported in Johannesburg, the NDB has approved 21 projects. Its investments in Russia, for example, include a $320 million loan to upgrade water and sanitation systems in Russian cities. Putin called on businesses from BRICS countries, when investing in Africa, to “conduct these activities in close cooperation with the New Development Bank”, adding, “It is important that the business community help enhance the Bank’s loan portfolio.”
The summit agreed to open a regional branch of the NDB in Sao Paulo, Brazil, to serve as the NDB’s Regional Centre for the Americas. Its first regional office, a Regional Centre for Africa, opened in Johannesburg in 2016.
Putin also hailed the establishment of the BRICS Contingent Reserve Arrangement, initiated in 2015, which is a mechanism for the mutual provision of liquidity in the event of balance of payments pressures; and last year’s decision to establish a BRICS Local Currency Bond Fund by 2019. Russian Minister of Economics Maxim Oreshkin told TASS on the sidelines of the summit that “the volume of transactions denominated in national currencies is quietly increasing”, but its further advancement requires “deep integration of the fi-nancial systems of [the BRICS] countries”.
NDB Vice President Leslie Maasdorp of South Africa (formerly at Merrill Lynch) told RIA Novosti on 26 July that the Bank is studying an issue of ruble-denominated bonds—“if we can find ruble-denominated projects” needing investment. The NDB has already made one yuan-denominated bond issue and will do another in October-November of this year, to attract investments in yuan.
Against the backdrop of US President Donald Trump’s rapid-fire imposition of punitive tariffs against an array of countries, and the danger that they will lead to competitive currency devaluations affecting the dollar, these BRICS financial arrangements offer stability for real economic development, to BRICS and the broader BRICS-Plus circle of nations. They are of special interest to Russia, as it moves to protect itself from US and European sanctions. US Treasury figures for April-
May revealed that Russia has abruptly escalated the diversifi-cation of its reserves out of the US dollar, selling US$80 billion in US Treasuries (85 per cent of its holdings) in those two months. “Russia does not renounce the dollar as a universal reserve currency”, Putin told his 27 July press conference in Johannesburg, but “we must minimise risks”. Among the fi-nancial warfare measures against Russia, openly discussed in Washington and London in recent months, have been excluding Russia from bank-to-bank payment systems and freezing Russian assets, including even sovereign debt like Treasuries.
BRICS cooperation in Africa
Xi Jinping said in his speech that Africa “has more development potential than any other region in the world.” Echoing last year’s words of his foreign minister about the BRICSPlus process as a whole, he continued, “We should strengthen cooperation with Africa, support its development, and make BRICS-Africa cooperation a model for South-South cooperation.” Key areas would be “poverty reduction, food security, innovation, infrastructure development, and industrialisation”. In September Beijing will host a summit of the Forum on China-African Cooperation, titled “China and Africa: Towards an Even Stronger Community with a Shared Future through Win-Win Cooperation”.
The Chinese President visited Senegal on Africa’s west coast and Rwanda ahead of the summit, arriving in South Africa on 24 July for a state visit, during which US$14.7 billion in Chinese investment in the country was pledged. Also touring Africa was Prime Minister Narendra Modi of India, who went to Rwanda, Uganda, and South Africa. During his lightning stop in Uganda on 24 July, Modi pledged US$205 million for development of its agriculture sector and electricity distribution infrastructure. Between the visits of Xi and Modi to Rwanda, a total of more than US$300 million in loans was announced for development of agriculture, roads, and special economic zones in this small East African nation, CNBC reported.
In recent years China and India have both brought to African nations their focus on all-round development, investing to improve infrastructure, agriculture, education, and technological skills, among other areas. Despite their bilateral disputes, which are often treated in the West as unsolvable, China and India have chosen to cooperate in Africa’s development. Both Beijing and New Delhi believe that providing Africa the ability to develop will bring about a sea-change in the direction and volume of global trade. The better understanding developed between Xi and Modi since their informal summit in Wuhan, China in April of this year enables them to work in tandem to improve the living conditions in Africa.
For Russia’s part, Putin in remarks to the BRICS Africa Outreach session on 27 July noted that Russia is planning oil and gas project with Angola, Mozambique, and Gabon, but he especially emphasised nuclear power. “In the field of nuclear energy, where Russia is a technological leader”, said the Russian President, “we offer African partners to build a [nuclear power] industry from scratch.” Around 600 million Africans live without electricity, he pointed out. Rosatom, the state-owned nuclear power company, has memoranda of understanding on nuclear power plant construction with Egypt, Kenya, Nigeria, Sudan, Uganda, and Zambia.
The Johannesburg BRICS summit was dedicated to the memory of Nelson Mandela, the fighter for social justice and first black President of South Africa, the centennial of whose birth is this year.
This article used reporting by Ramtanu Maitra on Chinese and Indian economic activity in Africa.