The BRICS celebration comes to Goa this month, with India facilitating the Eighth summit of group members which has developed into geopolitical engagement of constrained significant. Jim O'Neill, an analyst at Goldman Sachs, coined this term "BRICs" a decade back and then after this term turned out to be more than only a Economic term as emerging markets as Brazil, Russia, India, and China began arranging the terms for the new world order. The first ever summit of BRIC was held in 2009 and soon after South Africa joined the group a year later, making it formally the BRICS. The last summit India had facilitated was in 2012 in New Delhi.
The financial basis for the gathering today is fairly speculative. The BRICS member countries Russia, Brazil, and South Africa are no more extended what they were 10 years back. India remains the main splendid spot, being the world's quickest developing significant economy in a generally desolate worldwide economic environment and China can recapture its past development direction in the event that it prevails with regards to handling its obligation issue. Essentially, there are to be sure a few mergings in the perspectives of the BRICS nations and they keep on having an imperative part to play in handling the most squeezing universal difficulties.
They have likewise effectively underscored the point that the worldwide economical and administrative governance needs a careful update in light of a transformative move in the world economic power. They have set up the New Development Bank, with an underlying approved capital of $100 billion, half of which will be at first guaranteed by the BRICS part states with every advancing equivalent commitments of $10 billion.
BRICS GOA SUMMIT 2016
The Eighth BRICS Summit, which was held under the theme "Building Responsive, Inclusive and Collective Solutions in Goa, India.
The key topics which were discussed in the summit were:
1. On Terrorism: The main topic of this BRICS summit revolved around terrorism. More specifically, the cross-border terrorism, a catchphrase for Pakistan-sponsored terrorism was in Focus. In the intensified sentiments after the terrorist attack at the Uri army base and India’s retributory surgical strikes on Pakistan supported terrorist centers it was natural that issue of terrorism would draw the most attention in India.
While the summit declaration called for action against all UN designated terrorist organisations, it named only the Islamic State and the Al-Nusra. These two organizations were responsible for threatening Chinese and Russian interests in Afghanistan and Syria. But The declaration had no mentioning of Pakistan-based Lashkar-e-Taiba and Jaish-e-Mohammad. The only indirect reference to cross-border terrorism came in the leaders agreeing on the “responsibility of all states to prevent terrorist actions from their territories”. After the summit it can be suggested that India needs to work more on the strengthening its grouping, especially China, so that India could manage to get China to mention Pakistan-based groups such as the JEM, which too has been sanctioned by the UN.
2. On NSG Bids: The BRICS Summit declaration accepted that nuclear energy forms an important part of India’s efforts to fight climate change, and that New Delhi will be in a better position with a stable government that guides nuclear trade. These two arguments were advocated by India to support its efforts making itself eligible to get entry into the NSG, an elite club of countries that controls trade in nuclear technology and fissile materials. This is significant development but what is crucial now is how India approaches China for getting its support since NSG works by consensus.
3. On Trade and Economic Growth: The total trade among BRICS countries is merely 5 percent of whole grouping’s global trade. BRICS took eight summits to agree to a customs agreement to encourage trade among members. Talks are yet to take place for a free trade pact. The countries in BRICS are disparate politically but that shouldn’t come in the way of speeding up the economic cooperation.
4. Russia’s idea of an energy cooperation agency: The decline in oil prices and increased production of oil and gas by Iran, Iraq and African countries and the increase in production of US shale gas, made Russia to look for strong energy partnerships. China and India also have similar needs as they will need more energy resources to fuel their growth. Though it is an idea by Putin, it is worthwhile to follow up and a win-win situation for both sellers and buyers.
5. Environment: BRICS members agreed that environment is an important issue. The bloc welcomed the Paris Agreement and advised countries to apply it by providing financial resources, technology and capacity building assistance to support developing countries.
The leaders also pointed out that the comprehensive, balanced and ambitious nature of the Paris Agreement proclaimed the principles of the UN Framework Convention on Climate Change,. It also included the principle of equity and common but distinguished responsibilities and respective capabilities.
6. On 2030 agenda: The adoption of landmark 2030 Agenda for Sustainable Development and its Sustainable Development Goals during the UN Summit on Sustainable Development on 25 September 2015 and the Addis Ababa Action Agenda at the Third International Conference on Financing for Development was given support at the summit. The leaders welcomed the people-centered and holistic approach to sustainable development enshrined in the 2030 Agenda and its emphasis on equality, equity and quality-life to all. The reaffirmation of the guiding principles of the implementation of the 2030 Agenda, including the principle of Common but Differentiated Responsibilities (CBDR) was also supported by the leaders.
7. Women empowerment: The leaders appreciated the deliberations of the BRICS Women Parliamentarians’ Forum in Jaipur on 20-21 August, 2016 and the adoption of Jaipur Declaration, centered on Sustainable development goals. The emphasis was given to the commitment to strengthen parliamentary strategic partnerships on all the three dimensions of sustainable development, fostering gender equality and women empowerment.
BRICS Credit Rating Agency: A shift to investor-pays model from issuer-pays model
In the BRICS Goa summit 2016, member countries agreed to establish a credit rating agency based on market oriented principles. The BRICS gathering of the five biggest rising economies Brazil, Russia, India, China and South African wants to challenge the current credit rating framework through another credit rating agency where it is the forthcoming financial specialist that will pay for the rating of an issuer of a debt instrument.
Under the present estimating model of rating organizations known as Issuer-pays Model, the organization or foundation issuing securities pays the rating agency to be appraised. Whereas in new BRICS rating agency, the speculator wants to put resources into the organization that will pay for the rating of the organization an investor- pays display.
It was argued that it would further consolidate the global governance architecture. It is much required change happening where the experts exploring the possibility of setting up an independent BRICS Credit Rating Agency entirely based on market-oriented principles, in order to further strengthen the world wide economic governance.
What is the need of BRICS Credit Rating Agency?
It is said that this a shift to investor-pays model from issuer-pays model, because there is a moral hazard in the existing model. There is a moral issue. Before 1970s, ratings were supported by the financial specialists, not the issuer.
In planning for the BRICS rating agency, Exim Bank had arranged an idea paper and rating agency Crisil Ltd had led a study for India. Later, the idea paper was imparted to the next four individuals from BRICS. "There was an information workshop in Mumbai where Securities and Exchange Board of India (Sebi) which is the controller of rating organizations in India, was there. Other members too presented their ideas.
Pretty much as the BRICS New Development Bank (NDB) contributes new financing to existing financing accessible through other multilateral organizations, the new rating agency will likewise add to existing information of rating frameworks.
Presently, the rating is from one viewpoint, which is not a developing market point of view. The granularity is not there. For instance, SBI (State Bank of India) is an AAA evaluated organisation, yet when it brings securities up in the international market, it is capped at India's sovereign rating, which is BBB short. India has never at any point defaulted how would you give India a BBB short rating?
Therefore, the need of an independent credit agency was realized because it was observed that the methodologies adopted by other top three global credit ratings were compelling growth in emerging economies. The purpose of creating a new credit agency was to challenge the hegemony of western credit rating agencies such as Moody’s, Fitch and Standard & Poor’s.
These three agencies together account for 90 percent of the global credit rating market. Emerging economies have been pointing out the double standards of the global rating agencies and have partly blamed them to be responsible for the high cost of borrowings in developing countries. In the methods of these credit rating agencies developing countries were rated lower compared to western countries with poor macro-economic indicators. The new credit rating agency would assess the economic growth in Asia and in non Western countries. With its own credit agency BRICS would also be able to raise bonds in many countries.
Challenges with BRICS Credit Rating Agency:
Amidst all the talk and some exciting efforts from the member countries, it seems pretty certain that the talk to establish the Credit rating agency is on and being discussed between members. However, there are some issues with this agency. The reputation of credit rating agency is massively hit by the event unfolded after Lehman Brothers collapse which was the first sign of global financial crisis emerged in 2008-09.
Another challenge is that if established, in which member countries it will be located? The law of the land will be applicable or not? To answer this some experts are of the opinion that it should be located outside of the five member countries.
What is a credit rating agency?
A credit rating agency (CRA, also called a ratings service) is a company/firm/organisation which assigns credit ratings, by rating a debtor's ability to pay back debt, making timely interest payments and the likelihood of default.
An agency may rate the creditworthiness of issuers of debt obligations, of debt instruments, and in some cases, of the servicers of the underlying debt, but not of individual consumer.
Issues within BRICS
Apart from annual meetings on presidential and ministerial level, BRICS’ cooperation is not organized in a formal way. Other multilateral meetings as well as bilateral negotiations are showing existing asymmetries and differences within BRICS and are to some extent eroding the basic idea of BRICS. India, Brazil and South Africa (IBSA) try to coordinate more closely through launching the IBSA-initiative, targeting trilateral cooperation in energy supply, trade and other sectors Since 2003.
They also initiated a fund for development cooperation, financing programmes of waste collection in Port-au-Prince, agricultural support in Guinea Bissau, HIV-workshops in Burundi and others. The fund was aimed at supporting viable and replicable projects that, based on the efficiency available in the IBSA countries and in their internal best practices, subscribe to the national priorities of other developing countries.
Moreover, Brazil, South Africa, India and China are meeting within the BASIC group. They established BASIC group in 2009 in order to develop common strategies in the foreground of the Copenhagen climate summit and also cooperated in following international climate conferences.
The Convergence of BRICS and BIMSTEC At Goa Summit
In order to reach out and enrich the understanding and engagement with fellow developing and emerging economies, BRICS leaders hold a meeting with the Leaders of BIMSTEC member countries Bay of Bengal Initiative for Multi-sectoral Technical and Economic Cooperation comprising of Bangladesh, Bhutan, India, Myanmar, Nepal, Sri Lanka and Thailand. The meeting was considered an opportunity to renew the friendship with BIMSTEC countries as well as to jointly explore possibilities of expanding trade and commercial ties, and investment cooperation between BRICS and BIMSTEC countries, while advancing common goals of peace, development, democracy and prosperity.
The Bimstec region averages 6.5% growth and represents a flourishing consumer market. It is an ideal lookout area for the BRICS Bank to invest in infrastructure. And all these countries, except perhaps Bhutan, seek greater economic ties with China. The geographic location of these countries makes them important for strategic and economic reasons for India. Over a period of time the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC) has certainly gone beyond its initial idea of securing technological and economic cooperation among nations in the coast of Bengal.
In 2004 Nepal and Bhutan included into BIMSTEC, along with SAARC and BRICS membership, which gave India an extra hand to engage with all its immediate neighbors such as China, Sri Lanka, Bhutan, Nepal, Burma and kept Pakistan at an arm’s length. Apart from all the stresses and emphasis on the structure of BRICS, the bright spot for India as a host may come from the BIMSTEC outreach.
A Brief Introduction to BIMSTEC.
The seven-country gathering of Bangladesh, Bhutan, India, Sri Lanka, Thailand, was established in 1997 as BIMSTEC, and after that renovated as the Bay of Bengal activity for Multi-sectoral specialized and monetary collaboration (BIMSTEC), however the progress did not take place as a result of absence of financing. It didn't have an office, and meetings were held at the Thai external ministry office in Bangkok until it was given central station in Dhaka in 2011 and a secretary general, Sri Lankan ambassador Sumith Nakandala, in 2014.
A lot of BIMSTEC's prosperity will rely on upon keeping the meeting far from politics issues that tormented SAARC. India must prevent itself from falling in the trap of putting geopolitics over financial aspects, and lessening BIMSTEC into simply one more geopolitical weapon for confining Pakistan. Rather, India must show aims to lead BIMSTEC emphatically with a much exhaustive , and comprehensive vision driven by financial benefits of collaboration.
BRICS member countries were content with the acknowledgment of the first bunch of credits by the New Development Bank (NDB), especially in renewable energy projects in BRICS nations. As indicated by the UN's 2030 Agenda for Sustainable Development, the assertion supported developed nations to respect their commitment to reserve 0.7% of gross national income for governmental development help to developing nations.
As indicated by the Goa Declaration the members would keep on working intimately with G20 individuals to macro-economic co-operation, promote advancement, investment to boost global growth, sustainable development and enhance worldwide economic governance, help developing countries to improve financial condition, enhance industrialization in Africa and LDC.
Challenges Ahead for BRICS
Numerous difficulties lie ahead for the BRICS. Each of these developing economies are instantly on dissimilar development ways, which thus convert into varying needs and therefore lack of single agenda.
Since these five nations in total hold significant weight in worldwide financial and political aspects, their proceeding with engagement serves well for stable development prospects in the regions they include. This is the reason why these countries need to come out of their individual agenda, which is very essential if the patterns toward extending through organization (by means of the year-old New Development Bank to support feasible developmental works and the proposed BRICS credit rating agency) are to really materialize.
In that sense, it bodes well for the BRICS quintet to subscribe to an all around characterized financial extension to abstain from getting got in the entanglement of geopolitical talk. In spite of the fact that such an order would be essentially restricted, looking for solely to advance speculations and business joint effort, they would likewise perpetually mirror the dynamism of these five intense economies.