9th BRICS Summit: Background; Highlights and Xiamen declaration

BRICS is an annual summit of five nations viz. Brazil, Russia, India, China and South Africa. First such formal summit was held at Yekaterinburg on June 16, 2009. The BRIC nations formally invited South Africa to join the group and on December 24, 2010, the group was renamed as BRICS. So far, nine BRICS annual summits have taken place. The 9th BRICS summit was held in Xiamen, China from September 3 to 5, 2017. BRICS has been a moderately successful summit.

BRICS Members: Common Threads

The five members of BRICS represent 41% of world’s population and 22% of global GDP. Though they are highly diverse from each other, yet there are some common threads among them such as all of them:

• are among biggest beneficiaries of globalisation.
• are strongly in favour of an open and inclusive world economy.
• champion inclusive globalisation and a rules-based, transparent and multilateral trading system.
• are recognized for their influence in regional matters
• are members of G-20
• are major economies in their individual capacity.

Further, all of them have made strong pitch for reforms in Brettonwoods Institutions (IMF/World Bank) and when failed, created their own mechanism in the form of New Development Bank.

BRICS Summits

BRICS is not an organization but is basically an annual summit between the supreme leaders of five nations. The progress of BRICS has to be gauged from the success or failure of the initiatives launched in these summits. So far, nine summits have taken place as follows:

The key notable points for these summits are as follows:

• In the first summit itself in 2009, Russia, these countries made a call for a new “global reserve currency”.
• In 2010, the development banks from each of these countries signed MoU to help each other out of any contingency arising out of global financial depression.
• In 2012, idea for a New Development Bank was mooted by India. In the same year, they had also pledged US$ 75 million to IMF conditional on IMF voting reforms.
• In 2013, the BRICS countries declared creation of a New Development Bank (NDB), a Contingent Reserve Arrangement (CRA), setting up of a BRICS Business Council and the establishment of a BRICS Think Tank Council via the eThekwini Declaration.
• In 2014, the countries pledged $100 billion seed fund for the NDB and CRA under the Fortaleza declaration.
• In 2015, they have adopted a comprehensive ‘Strategy for BRICS Economic Partnership‘. In the same summit they also initiated consultations for a payment system that would be an alternative to the SWIFT Work towards BRICS Model E-Port Network  was also initiated.
• From 2015 till date these countries are discussing to establish BRICS Institute of Future networks; BRICS Joint Taskforce on Disaster Risk Management etc.

9th BRICS Summit: Highlights

The 9th BRICS summit was held in Xiamen, China from September 3 to 5, 2017. BRICS has been a moderately successful summit. The summit was themed as: “BRICS: Stronger Partnership for a Brighter Future.” The key outcome of the summit was “Xiamen declaration”.

Key Highlights

Terrorism- Pakistan based Terror groups named for first time

The Xiamen declaration has named Taliban, ISIL/DAISH, Al-Qaida and its affiliates, including Eastern Turkistan Islamic Movement (ETIM), Islamic Movement of Uzbekistan, the Haqqani network, Lashkar-e-Taiba, Jaish-e-Mohammad, TTP and Hizb ut-Tahrir as terror groups.  The naming of Pakistan-based LeT and the JeM is a first by the forum.

4 Documents signed for commercial ties

In the summit, 4 documents were signed by the BRICS countries to deepen commercial ties among themselves. The four documents signed were:

• Action agenda on economic and trade cooperation,
• Action plan for innovation cooperation (2017-2020),
• Strategic framework of BRICS customs cooperation, and
• MoU between the BRICS Business Council and the New Development Bank on Strategic Cooperation.

Bilateral Meetings

Following bilateral meetings were held:

India-China

At the sidelines of the BRICS summit, Prime Minister Narendra Modi and Chinese President Xi Jinping had held their first bilateral meeting post the 73-day Dokalam standoff. During the meeting the two sides agreed that peace should be maintained on the mutual border.

India-Russia Meet

Prime Minister Narendra Modi and President Vladimir Putin met on the sidelines of the BRICS Summit. The two leaders discussed ways for boosting bilateral trade and investment between the two countries. They also reviewed several other issues like the security situation in Afghanistan, cooperation in the oil and natural gas sector etc.

India-Egypt Meet

On the sidelines of the BRICS summit, Prime Minister Narendra Modi and President of Egypt, Abdel Fattah el-Sisi met to discuss issues of mutual cooperation to strengthen the bilateral ties between the two countries.

PM Modi’s 10 Noble Commitments

Prime Minister Modi in his address spoke about development agenda ‘Sabka saath, sabka vikaas’, Counter Terrorism, Cyber Security and Disaster Management. He suggested “10 noble commitments” for the BRICS bloc to play a role in global transformation. They are:

• Creating a safer world by organised and coordinated action on issues like counter-terrorism, cyber security and disaster management.
• Creating a greener world by countering climate change by taking initiatives such as the india-initiated international solar alliance.
• Creating an enabled work by sharing and deploying suitable technologies
• Creating an inclusive world “by economic mainstreaming of people including in the banking and financial system”.
• Creating a digital world by bridging the digital divide.
• Creating a skilled world by offering future-ready skills to youth.
• Creating a healthier world by cooperating in research and enabling affordable health care for all.
• Creating an equitable world by providing equality of opportunity to all, particularly gender equality.
• Creating a connected world by enabling free flow of goods, persons and services.
• Creating a harmonious world by promoting ideologies that are focussed on peaceful coexistence and harmonious living with nature.

Dialogue of Emerging Market & Developing Countries

At the sidelines of the summit, China also chaired the ‘Dialogue of Emerging Markets and Developing Countries’. The Dialogue saw the participation of the leaders from the five BRICS countries, as well as the leaders of Egypt, Mexico, Tajikistan, Guinea and Thailand.

Significance of Xiamen declaration

Xiamen declaration is reverse of such declaration in previous BRICS Summit held at Goa. In the Goa Summit, China and Russia were not willing to allow India to highlight about the issues revolving terrorism. It was a huge blow to India at that time. However, this time India has executed a laudable course correction to accommodate its interest. Some of the laudable achievements of India were to make China acknowledge Pakistan-based terror outfits, despite its rigid stance on Maulana Masood Azhar. It is to be noted that the declaration had bracketed Pakistan-based Lashkar-e-Taiba and Jaish-e-Mohammed with global terror groups Islamic State and al-Qaeda. In fact the 43-page Xiamen declaration had 17 references to terrorism. This shows that India was successful in convincing the BRICS nations about the threat posed by Pakistan-based organisations.

Another achievement is the Xiamen declaration had no further mention of Tawang in Arunachal Pradesh, or about freedom fighters in Balochistan or Gilgit. However, it is yet to be seen whether the naming of JeM as a terror outfit by the BRICS grouping would result in sanctioning its chief, Masood Azhar by the UN Security Council. Notably, China has repeatedly blocked India’s attempts to designate Azhar as a terrorist.

Pakistan’s reaction

Pakistan has rejected the Xiamen declaration as the declaration condemned Pakistan for providing safe havens for terrorist based groups like LeT and JeM, both of which primarily target India.  Recently, the US had warned Pakistan that it could stop giving military aid if it doesn’t take necessary steps to stop activities of terror sanctuaries on the Pakistani side of the Afghan border. Similarly, China is also deeply concerned about the spread of Islamist influence from Pakistan into its Xinjiang region.

GS Questions for Mains

Differentiate between New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB). How will the role of the two Banks be different? Discuss the strategic significance of these two Banks for India.

In order to mobilize financial resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies, New Development Bank was announced as part of Fortaleza declaration. The initial authorized capital will be US$ 100 billion, with an initial subscribed capital of US$ 50 billion, which is to be equally shared among founding members.

On the other hand, AIIB is China led multilateral development bank to fund the infrastructure projects in Asia. The maximum share of Non-Asian members is restricted to 30 percent.

Though both NDB & AIIB intends to provide an alternative to west dominated financial institutions, there are certain fundamental differences between these two.  In case of membership, the difference is that AIIB members are predominantly countries of  Asia-pacific region, on the other hand, BRICS nations are the members of NDB. Also, there is the difference regarding voting rights. In case of AIIB, China and India are largest shareholders. Since China is majority shareholder(around 30 %), China will have veto power in decision-making. On the other hand, In case of NDB, each member has equal voting rights and decision-making is more democratic.

Similarly, the roles of two banks are different, where the AIIB’s objective is to provide financial resources for China’s OBOR and projects in Asia Pacific. NDB will provide support to members and emerging and developing economies.

Finance is one of the major bottlenecks in infrastructure projects. Both NDB and AIIB  can provide much needed financial support for the infrastructural projects. India can develop good transportation corridors that will not only help in economic growth and development but it will also provide more regional stability. Also rise of entities like AIIB, NDB will put pressure on west dominated financial institutions to reform.

What is BRICS Contingent Reserve Arrangement? How does it work?

Considering the increasing instances of global financial crisis, BRICS nations announced BRICS Contingent Reserve Arrangement (BCRA) as a part of Fortaleza deceleration. The objective of CRA is to provide additional liquidity to BRICS nations in the period of economic crisis. Along with that CRA will also support BRICS countries through precautionary instruments in response to the short-term balance of payments issues.

The CRA will have 100 billion dollars reserve with contribution commitment of $41bn from China, $18 bn each from India, Brazil, Russia and South Africa ($5 billion). However despite unequal contributions from BRICS members, the voting rights are independent of contribution and the vote of China, Brazil, India or Russia can authorize the fund transfer, however, South Africa does not have full control over the fund.

At any time BRICS members can make a request to access committed resources. Once the application of Requesting Party is acceded to by the other Member Parties to be known as Providing Parties, then resource transfer is facilitated through a currency swap.

CRA will complement existing financial institutions and therefore it will strengthen the safety net in global financial market. Institutions like NDB and BRICS CRA are the reflection of increasing South-South cooperation. In fact, the initiation of BRICS CRA has sowed the seeds of an alternate financial structure for developing countries. CRA is being viewed as challenge the West’s hegemony in global financial institutions.

Critically discuss significance of BRICS and IBSA in context of India’s multilateral diplomacy.

IBSA forum is a development initiative started by India, South Africa, and Brazil, the three dynamic democracies of different continents, representing a south-south co-operation. There are three core areas of  Cooperation: first, to be a forum for coordination on global and regional political issues, such as issues related to political and economic governance like UNSC reforms, climate change, trade negotiations, terrorism etc. Second to collaborate for developmental projects and third,  to assist other developing countries through IBSA Fund support. Also, IBSA Fund is also utilized for poverty eradication in developing nations through development projects. Similarly IBSA Business Forum provides an opportunity to co-operate for various business initiatives.

On the other hand, BRICS is association of five major emerging economies. Apart from IBSA members Russia and China are members of BRICS. This multilateral forum provides opportunities for commercial, political and cultural cooperation co-operation and interaction among BRICS countries. With the establishment of New Development and Contingency reserve arrangement, BRICS is trying to challenge the dominance of west in financial institutions. Apart from that BRICS members are co-operating for R&D and innovation in Information and telecommunication technology, agricultural research platform and to counter terrorism. Also members are collaborating for promotion of clean energy.

Two of BRICS members, who are veto powers, are not enthusiastic about UNSC reforms, which are the core component of IBSA Platform.

Over the past few years, IBSA has been overshadowed by BRICS. Both BRICS and IBSA provide opportunity for multilateral cooperation and collaboration. India should provide greater energy to revive IBSA keeping in view the potential of  IBSA and the inadequacies of BRICS.