Institutionalizing BRICS – Republica

PRADHYUMNA B SHAH

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Economic liberalization has been turning the whole world into a borderless market, and countries are becoming more interdependent for business than ever before. Consequently, influential regional groupings and economic integrations have emerged, one such being BRICS—the economies of Brazil, Russia, India, China and South Africa. BRICS is among the latest and fastest growing cross-continental emerging economics with an increasingly greater role in global economy. Home to 43 percent of world population and accounting for close to 30 percent of global GDP combined, the group has the demographic and economic potential to rank among the world’s largest and most influential economies in the 21st century.

South Africa formally joining the group as full member in Sanya summit 2011 has provided the other members of this block an advantageous gateway to the larger African continent. The summit held in Durban last week was the fifth annual summit. The spectacular and smart growth trend of BRICS marks a significant change in the global economic, political and business landscape. Once noted primarily for their natural resources, low-cost manpower and manufacturing bases, sustained economic development, technologies and build-up of innovative capabilities have turned BRICS into economic powerhouses. Forecasts indicate their share in global GDP will exceed 50 percent by 2030. The economies of five BRICS countries are more and more interconnected, with internal trade of around US $350 billion. BRICS economies are currently worth around US $14.9 trillion, with US $ 4.5 trillion foreign exchange reserves.

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China and India are becoming the world’s dominant suppliers of manufactured goods and services respectively, while Brazil and Russia are principal suppliers of raw materials like crude oil, bio-fuel and iron ore. Due to lower labor and production costs, many companies cite BRICS as offering foreign expansion opportunity. Russia is one of the largest producers of hydro carbons and Brazil of biofuel, while China and India are major importers of energy resources for their growing economics. South Africa has a huge mineral base and is a gateway for the markets of entire Africa.

The combined population of India and China is over 2.5 billion, which is more than one-third of global population. The peoples are producers as well as consumers. Land and human resources are two of the four main factors of production which are comparatively cheap in Nepal. Nepali business is connected to over one-third of the world’s population, which lies just across its border. Furthermore, Nepal could also eventually serve as a gateway to South East and Central Asian markets.

To make trade an engine of economic growth, Nepal looks forward to a closer and intensive collaboration and partnership with emerging economics like Brazil, Russia, India, China and South Africa. Nepal has residential missions in all BRICS member countries and also maintains friendly and cooperative relations with them. There are sufficient prospects of cooperation from BRICS initiatives, individually and collectively, for mutual benefit between the group and Nepal.

The policies and programs of the Government of Nepal emphasize foreign direct investment and public private partnership for economic development. This policy has encouraged private and foreign investors to invest in bigger infrastructure and mega power projects. The government has opened up almost all sectors for investment. Furthermore, the diversity of natural resources, low labor cost and viable climate zones are incentives for international investors. Nepal remains committed to adopting every possible measure to provide necessary securities to investors, including repatriation of their capital and profit earned.

Nepal-Brazil relation

Brazil being an important BRICS member, its close, cooperative and friendly relations with Nepal offers a huge prospect for economic cooperation. Although geographically apart and asymmetrical in size, the two have many common features. Both are gifted with forest, water, natural beauties and natural resources. Nepal is right next to Brazil in terms of water resources. Agriculture and agro-based industries predominate both countries. Peacekeeping and climate change are their common agendas in international forums. With a view to widen areas of cooperation, the two countries had recently signed an agreement for technical cooperation and formed a consultative mechanism which will help identify new avenues of cooperation for mutual benefit.

Hydropower is one of the major areas where Nepal and Brazil can work together for mutual benefit. Brazil has high power generating rivers and water deposits, while Nepal can generate over 85,000 MW of hydropower. The growing scarcity of hydrocarbon and other fossil fuels calls for a paradigm shift in the development of renewable energy like hydro power. It is high time Brazil worked with Nepal in hydro power sector and ensured sustainable and reliable clean energy, which is crucial to any country’s development.

Being situated between two big emerging economics, India and China, is an added advantage for such power projects, as both immediate neighbors of Nepal are in dire need of power to meet their developmental needs. Brazil’s experience of harnessing 100,000 MW of hydro energy hints at great prospect of engagement in this sector in Nepal. The hydropower generated in Nepal through joint ventures with Brazil would find easy markets both in India and China with whom Brazil maintains excellent relations, bilaterally as well as in its capacity as a member of BRICS. Brazil’s Engineering Company Brass Power is already working in Nepal with a view to develop Lower Arun hydro project with a capacity of 400 MW. Brazil’s state-owned power conglomerate Electro Brass has also shown keen interest in Nepal’s huge water energy potential.

Tourism could be another area of investment in Nepal. Nepal is popularly known as the land of Mount Everest—the highest peak in the world and birthplace of Lord Buddha, an apostle of peace. As a tourist destination, Nepal is endowed with an extraordinary blend of amazing natural beauty and rich tradition and culture. These features offer opportunities for tourism related industries such as hotels, resorts, golf courses, cable cars, and many other adventure related projects.

Europe is the biggest export market for Nepali handmade products. The quality of hand-knotted woolen carpets has made Nepal a brand name in the world of carpets, particularly in Germany. Handmade Nepali woolen carpets, including those made of bamboo, have started reaching Brazilian markets. There are ample prospects of selling Nepali products in Latin American countries.

Currently, Nepal is developing as a center of herb production. Silverware and jewellery, pashmina goods, readymade garments, Nepali paper, tea and handicrafts are among the products Nepal exports on a sizable scale. Agriculture and agro-processing, tourism and hydropower generation are areas of priority for the development of Nepal. Additional opportunities may also be found in IT-related services, health services, pharmaceuticals, and light manufacturing. Abundant reserves of limestone and a number of other minerals in various parts of the country offer prospects for cement and other mineral-based industries.

Brazil is one of the fastest growing economies having an abundance of resources and raw materials. From coffee, livestock, sugar, timber, ethanol, to soya beans, it also leads the world in supplying tin, iron ore and many other products. Brazilian soya bean oil reaches Nepali markets after being bottled in Singapore. Any industry setup in Nepal for such items will have a vast market at home and across the border. Prospects of direct import of iron ore, sugar, and soya oil from Brazil and export of carpets, pashmina and handicraft from Nepal to Brazil, among many others, are promising.

The author is Nepal’s ambassador to Brazil. The views are extracted from his keynote address to the BRICS-Chamber for Economic Promotion–PED, Brasilia on the theme ‘Nepal and BRICS’