One man?s meat is another man?s poison. The failure of the Doha round has proved that an effective coalition among major developing countries can thwart efforts of the developed nations to push policy that are beneficial only for the industrialised north. The need to build a coalition of large, industrialised and increasingly sophisticated emerging economies was felt with greater urgency.
The IBSA (India, Brazil and South Africa) came into being in the middle of 2003. A meeting of the foreign ministers of the three countries at Brasilia in early June of 2003 quickly followed this. Given this scenario, there is strong convergence among the three on most economic and a large diversity of political issues. The IBSA can serve as the role model for the collaboration between diverse emerging powers by building a sustainable dialogue on major policy issues on the lines of the present G-8, build business to business contacts and collaborate on technology.
This October, India will host the third IBSA summit. While the heads of the states will meet on October 15, the business leaders from the three countries will meet on October 13-14, to discuss trilateral cooperation in business.
Meanwhile, in the year 2005, the three governments decided to bring together the business groups of the three countries to formally include business in the trilateral cooperation. An agreement was signed between the business organisations from India, Brazil and South Africa and formally, the IBSA business council was launched.
Building on this, the first IBSA business summit took place in Brasilia, in September 2006. From India, CII as the lead coordinator, organised the business participation. The success of the first IBSA business summit, attended by more than 300 business leaders highlighted the growing importance of these three economies in the South-South Cooperation. The second business summit was held in Johannesburg, South Africa in October 2007. Over the last few years, the intra-IBSA trade has increased from just $3.9 billion to more than $10 billion.
Huge opportunities exist in agri-business, pharmaceuticals-biotech and healthcare, energy, biofuels; IT&ITeS, infrastructure, mining, tourism and skills development. At the meeting held in Cape Town in May 2008, the business leaders from India, Brazil and South Africa highlighted key issues: connectivity has been the main bone of contention between the IBSA countries for increasing trilateral business; limitations on direct-air links and shipping between the three countries have an impact on tourism as well as the potential for growing trade and investment. Constraints identified include the shortage of aircraft, high fuel costs, strong competition on indirect flights, low traffic, low-freight demands, limited landing rights and other regulations.
The potential for tourism between India, Brazil and South Africa is huge and the sector has the ability to make an important contribution to job creation and development. Specific marketing and promotional activities are needed in order to improve the understanding of the benefits offered by the three destinations; technologies for the generation and transmission of renewable energy are being developed in all three countries. The three countries can cooperate to contribute towards energy security for each other especially by way of transfer of technology.
Mining is a key sector in all IBSA countries. The appropriate infrastructure, including ports and railways, is necessary to ensure that trade and investment increases. The business council welcomed steps taken by IBSA governments to improve infrastructure and requested on going consultation with the private sector; it reiterated the importance of competitive financial services sectors; skills are desperately needed in all sectors and there are opportunities to exchange and learn from each other to build skills.
There is already a relatively active trade and investment relationship between IBSA countries in the automotives sector. There are natural constraints with regard to the different preferences of consumers in the three markets, however, some steps could be taken with regards to the reduction of tariffs and the removal of non-tariff barriers that would encourage greater linkages.
The IBSA governments need to work towards greater harmonisation of trade structure between the three countries. The business council called on IBSA governments to continue to negotiate and ratify trade agreements that will make real contributions to the economic relationships between the three countries. The business council proposed consideration of an IBSA business travel pass scheme on the Asia-Pacific Economic Cooperation (Apec) model.
The expectations are large. The governments now look forward to the greater involvement of business in strengthening the IBSA trilateral and taking the grouping higher on the world economic map.
At a time when the global economy is facing recession, the IBSA countries are still showing high growth rates with growth rates for India at 8.4%, Brazil at 5.5% and South Africa at 6% expected in 2008.
Three essential factors will combine to make the IBSA countries the primary drivers of global growth. High rates of economic growth as the IBSA countries mature into industrial economies; large investment into higher education in previous decades bear fruit to create a huge critical mass of highly developed human resources; demographic shift in IBSA towards a relatively more ?young? society, while the opposite happens in the EU, the US and Japan.
?The author is principle adviser, Trade and Globalisation Research, CII
