7/13/15 7/13/15

2015 at dawn.com)

Entangled in the Greek debt crisis, few European policymakers had the time or interest this week to pay attention to the summit talks in the Russian city of Ufa between the leaders of Brazil, Russia, India, China and South Africa (BRICS).True, Europe has its hands full with Greece and the looming possibility of a Greek exit from the Eurozone. But the world doesn’t stop for Europe. And pretending that the BRICS and their self-confident leaders don’t matter — or matter little — is not an option.Discussions about the rapidly-transforming world, the role and influence of the BRICS and Europe’s relations with the emerging powers appear to be off the European Union agenda. For now, the focus is rightly on the existential threat posed by Grexit, the acrimony the Greek crisis has triggered across the EU and the worsening relationship among Eurozone leaders.Solving the Greek problem should of course take priority. But Europeans know that more is at stake. Italy’s Prime Minister Matteo Renzi has so far been most vocal in signalling his fears that the fury unleashed by the difficulties in Greece is damaging the very existence of the EU. But this thought is also in many other minds. If Europe can’t get its house in order, it really does run the risk of becoming irrelevant on an increasingly crowded global stage.For the moment, most Europeans seem to fall into two categories: those who fear the rapidly-changing world order and the increasingly long list of nations clamouring for a stronger role on the world stage and those who hope that if they look the other way, firm up their bonds with the United States, the world won’t change too much and the BRICS will gradually fade away.There are some, wiser, people in the middle: they may not be enthusiastic about the changes being made to the global status quo; but they also know that times are changing fast and that Europe needs to adapt, adjust and accommodate.It was on the advice of such people that despite strong pressure from the US not to do so, several EU countries decided to join the Asian Infrastructure Investment Bank (AIIB) set up by China.While many Europeans voice fear that China is “buying up” European assets, cooler heads are urging the EU to join forces with China’s ambitious ‘One Belt, One Road’ transport networks to boost domestic growth and jobs.Similar arguments for and against cooperating with emerging nations are likely to come to the fore as Europeans discuss membership of the New Development Bank (NDB) being set up by the BRICS to fund projects in member countries.Headquartered in Shanghai, the bank is expected to be operational by end of 2015. Once fully operational, it will become an alternative financing source for the BRICS nations and other emerging markets.Like the head of the AIIB, the first chief of the BRICS bank, India’s K. V. Kamath has been quoted as saying that the NDB sees other multilateral lending institutions such as the International Monetary Fund (IMF), World Bank and Asian Development Bank (ADB) as partners rather than rivals.And yet many continue to be suspicious. The US and Japan have not yet joined the AIIB and many EU policymakers continue to voice fears that the new banks will fall short of high Western standards of transparency and accountability.The BRICS have made clear that they don’t really care. The Old Guard is welcome to come on board, but the world is moving on and they won’t stop for the laggards.Russia, given its tense relations with the West following the crisis in Ukraine and the annexation of Crimea, has taken the toughest line in its dealing with Europe and America. As Foreign Minister Sergei Lavrov underlined in Ufa, emerging nations represent a “new polycentric system of international relations” and demonstrate new global centres of power.As he shook hands with his Chinese, Indian, South African and Brazilian counterparts, a beaming Russian President Vladimir Putin made clear that he was far from the sad and isolated man that the West wants him to be.And it’s not just about the BRICS. An array of newly-empowered nations and groupings are challenging Europe and America’s dominance of the post World War II order. Mexico, Indonesia, Korea, Turkey and Australia are part of MIKTA which claims to act as a bridge between old and new powers.New Zealand says it is the champion of “small nations” without whose support nothing can be achieved on the global stage. The Group of 20 remains relevant as a forum which brings together industrialised and emerging countries.And then there is also the Shanghai Cooperation Organisation (SCO) which EU and Nato policymakers also tend to shrug off as an impotent “paper tiger”.They shouldn’t. As India and Pakistan set out on the road to membership of the SCO, it is clear that while the security organisation does not see itself as a rival to Nato, it does intend to make its voice heard on global security challenges.Underlining just how significantly the world has changed, the five BRICS countries and the six SCO members which include China, Russia, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan — joined by India, Pakistan, Afghanistan, Iran and Mongolia which have observer status — held a joint summit in Ufa.The Greek crisis was on the BRICS agenda of course. While Europe may not like the new world out there, emerging nations know that in an interconnected and interdependent world, what happens in Europe affects them. And that a failed Europe is in nobody’s interest.

3/9/15 3/9/15

View from Abroad: New development paradigm (Originally published 08/03/2015 at dawn.com)

It used to be so simple: the world was divided into rich and poor countries. The rich provided aid and trade concessions to the poor ones. It was called Official Development Assistance (ODA) and often seen as a panacea for all problems facing “third world” countries. Rich nations promised to spend 0.7 per cent of their GDP as ODA. Developing nations were grateful for the help. It was neat and tidy. Orderly even.Only of course it wasn’t. It was messy, patronising and based on the notion of charity. Nothing wrong with charity — only that it begins at home. And as the going got tougher at home, growth rates dipped and jobs became scarcer, richer countries were less and less anxious to help the poorer ones.And then the world turned on its head as poor countries — or at least some of them — stopped being really poor. China, India, South Africa, Brazil began to rise, becoming more self confident and assertive by the day. They asked for stronger representation in international financial institutions, set up their own bank, started investing in and assisting their less well-off friends.In 2000 amid all the change and shift in power from North to South, the talk turned to achieving the Millennium Development Goals (MDGs) and eradicating poverty. However, it was still about the rich helping the poor, putting conditions on their aid, making sure that there was no wastage, no human rights abuses.Fast forward to 2015 and the world is a dramatically different place. The talk is of a post-2015 agenda which is about sustainable development in both the North and the South. There is a focus on governance, gender balance, and moving “beyond ODA”.There is agreement that the 17 Sustainable Development Goals (SDGs) will not be met by ODA alone. Their achievement will require the mobilisation of the private sector, a better use of remittances and philanthropy and more creative thinking about “blending” private and public funds.And above all there will be a focus on the mobilisation of additional resources by developing countries through domestic resource mobilisation, including through more thorough and efficient national tax collection.Yes, finally after years of beating around the bush, global attention is turning to tackling tax evasion, by companies and individuals. The question will be high up on the agenda of the third International Conference on Financing for Development which will be held in Addis Ababa, Ethiopia, from July 13 to 16, 2015.The reason for the focus on domestic revenue mobilisation in developing countries is clearly linked to the fact that ODA is on its way down and traditional donors are getting tougher.There is good talk about the potential benefits of taxation for state-building and the long-term independence from foreign assistance. It is also of course a question of governance.Revenue from taxation and customs provides governments with the funds needed to invest in development, relieve poverty and deliver public services directed towards the physical and social infrastructure required to enhance long-term growth.Strengthening domestic resource mobilisation is not just a question of raising revenues: it is also about designing a revenue system that promotes inclusiveness, encourages good governance, improves accountability of governments to their citizens, and cultivates social justice.Non-governmental agencies such as Christian Aid have estimated that developing countries, including lower- and middle-income countries, could be losing out on as much as $160bn a year in potential tax revenue because companies are dodging taxes. This was one and a half times the combined overseas aid budget of the whole rich world at the time, and there’s no reason to think the problem has got smaller since then.In 2011, the United Nations Economic Commission for Africa established a high-level panel to write a report on illicit financial flows (IFFs) in Africa and to come up with ways to combat them.The panel, presided by the former South African head of state Thabo Mbeki, warned that the cost of IFFs to the continent was around $50 billion each year.The report states: “Some have estimated that Africa’s capital stock would have expanded by more than 60 per cent if funds leaving Africa illicitly had remained on the continent, while GDP per capita would be up to 15 per cent more.”Worse still, this sum is even greater than the total official development assistance received by African countries, which was $46.1 billion in 2012.At a recent conference in Brussels, participants underlined that there was no dearth of money in the world and that in fact Africa was a rich continent. The money was just not in Africa, but hidden and hoarded in tax havens, most of them in rich countries.