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IBSA: Connectivity will ensure the way forward

Financial Express, India

IBSA: Connectivity will ensure the way forward

By C Jayanthi

22 October 2008

Can India, Brazil and South Africa (IBSA) together make more money than they can spend? This was the fervent of the South African High Commissioner Francis Moloi at the third IBSA Business Summit 2008 that recently took place in New Delhi. Considering the three countries lie in different continents, connectivity is a major issue. In fact, integrating the three economies may be the ideal way to combat the global downturn.

As with countries in South Asia, intra-nation connectivity is a major impediment to furthering trade between India, South Africa and Brazil, and “I hope the governments of these three countries would take active measures to correct this,” said union commerce minister Kamal Nath, while addressing the summit.

Nath expressed the hope that the business leaders from these three countries would join hands with their respective governments to bring about early improvements in both air and maritime connectivity. “This is especially important for boosting trilateral trade between our emerging economies,” he said.

The closer relations between Brazil, South Africa and India have made it possible for their tri-lateral trade to more than double between 2003 and 2007, from $4.6 billion to $10.1 billion, which corresponds to an average annual growth rate of 21.8%, according to the National Confederation of Industry (CNI), Brazil (2008) report on IBSA. This is no minor achievement considering the huge geographical distances and cultural divisions that the three countries have to overcome.

“While intra-IBSA trade is on the upswing, the focus of attention is on attaining the level of $30 billion trade flow by 2015. This would be achieved if the current trend is sustained and facilitated by greater South-South cooperation and sharing of knowledge and technology,” said KV Kamath, president, CII, presenting the report of the IBSA Business Summit to the three heads of state Manmohan Singh, Luis Inacio Lula Da Silva, president of Brazil and Kgalena Motlanthe, president of South Africa, at the summit. He outlined the recommendations that had been jointly agreed by the industry associations of the three countries-CNI, BUSA, FICCI, Assocham and CII.

To promote intra-IBSA trade, it has been recommended that the three governments could consider reducing both tariff and non-tariff barriers on imports from each other. Improved shipping and air links between the three countries will not only increase intra-IBSA trade, but also have a beneficial effect on inter-regional economic exchanges. Importantly, the focus has to be on reducing the cost of doing business in the three countries by making available affordable transportation and logistics support. IBSA could enhance information sharing on business opportunities in the three countries.

The IBSA countries possess strong financial institutions, which have guaranteed a high degree of financial stability in these economies. The economies have thus shown a high degree of resilience to the new challenges. Energy is another area of focus for business and we believe that IBSA could work towards establishing a global market for ethanol, wherein ethanol becomes a global commodity.

The IBSA governments should seek to strengthen energy security in the three countries. This becomes particularly important in view of the recent increase in crude oil prices. There could be greater exchange of know-how on alternative sources of energy and technologies including inexpensive photo-voltaic chips. There should be greater facilitation for the adoption of clean coal technologies, particularly in India.

Trade among the IBSA nations increased gradually. In 2007, the main items of the Brazilian exports to India were copper sulphides, involving $235.7 million and crude soyabean oil, amounting to $181.5 million, followed by petrochemical products involving $51.9 million. All these products accounted for 48.9% of all Brazilian exports to India. During the same period, Brazil imported manufactured goods from India including chemicals, non-petrochemicals amounting to $142 million, gasoline and fuel oils amounting to $905.4 million and synthetic fibres amounting to 113 million.

These items accounted for 74.9% of all Brazilian imports from India between 2006 and 2007. A lot more needs to be done and increasing connectivity can only help both countries. Meanwhile, CNI mentions that trade between India and South Africa has been important within the IBSA forum as it has jumped more than five-fold from $814.3 million to $4.7 billion, amounting to an average annual growth rate of 21.5%. The main exports from India to South Africa happen to be automotive vehicles, fuels, grains, organic chemical products, aircraft, iron, steel, precious stones and fuels.

Improving transport remains a key issue among IBSA countries and a lot needs to be done in this direction. In terms of technical cooperation, the areas are: tele medicines, consulting and radiology; alliance focused on healthcare informatics; developing health insurance for the poor and prevention care including hygiene, nutrition, prevention of environmental health hazards, mentions CII.

According to a CII report, IBSA: Redefining South-South Cooperation, brought out for the summit, “Like in education, the quality of health sector support to large sections of IBSA populations who are poor, especially in rural areas, remains of extremely low quality.” Creating public-private partnerships towards providing high-quality, but low-cost, healthcare to its citizens should be a high priority for all three countries, it mentions. In the ITeS sector, there is a great deal to look forward to. Chairing one of the sessions Jayant Pendharkar, vice-president and head, Global Marketing, Tata Consultancy Services, said that India offered a unique combination of cost reduction and skills and experience in many business and technological domains, which could be utilised by both Brazil and South Africa.

The Indian IT sector, he said had a global presence and accounted for 76% of the $135 billion worth offshore market. While IBSA nations could capitalise on the falling world markets and global gloom. Mandisi Mpahlwa, South Africa’s minister of trade & industry, said that as the IBSA nations share common values and challenges, it was important that they collaborate in various multilateral fora, including at the Doha Round. He said that the Doha Round saw a conflict between development needs and commercial interests and “that’s why South-South cooperation is very important”. He said that given the current ‘global gloom’, it was important the IBSA nations integrate their economies more closely.