Birds R In Clear Sky (BRICS)???

Birds R In Clear Sky (BRICS)???
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  B irds R    I n C lear S ky (BRICS)???  by Bikash Dhar Brazil has always been blamed to lose its social and economical agendas to its excessive love for football. In this regards, 2014 is going to be a tough call for the country. The land of Aficionados of football will host not only the FIFA World Cup, but will also host the sixth BRICS summit. After a notional fifth BRICS summit recently held in Durban, where they(all the leaders of five countries) accepted to establish a BRICS bank but unfortunately/fortunately couldn’t come up with the total money to be con tributed, the next summit is definitely going to be a decisive factors for the next ‘to -  be’ global force.  When Goldman Sachs first coined the term BRICs in 2001, they desired ‘The World Needs Better Economic BRICs’.  But has their dream got a reality so far  ? Let’s see.   Global competitive landscape has become highly dynamic due to globalization. ‘Global Competitive Index (GCI)’, a measure of the factors that set a current or medium term sustainability in economic prosperity, has consistently degraded the rank of US since 2008. Once considered as a super power of the World due to its competitive economy and sophistication in business, US economy is currently suffering from low saving rates of the citizens, high rate of organized crime, lack of public trust on politics (Current rank 48 th *), and lack of macro-economic stability (Rank 111 th ). But a major shift has been observed for the BRICS nations in GCI rankings. Over the  past few years their ranking is as given in the figure. Brazil, and China has shown a consistent improvement in their rankings since 2007, though in 2012 due to a speculation of major property burst the ranking of China has been affected. The other BRICS nations have not shown a consistent improvement in the ranking though. But the potential they have in terms of demographic or natural resources, is strong enough to consider them as part of the next big super power.   China, being the most powerful among the BRICS nations, is known as the ‘World’s Factory’.  It has the largest pool of workforce and is very extensively into manufacturing. It also has a high savings rate among its citizens (above 50 percent of GDP).It also focuses very highly on health care and basic education. It is one of the largest attracter of FDI. Its budget deficit is also moderate and debt-to-GDP ratio is also low (26 percent). Despite a prolonged high inflation chapter, its macroeconomic situation is also very stable. Due to huge  population and infrastructural reforms, China is one of the most lucrative markets in the world and is estimated to be the second largest consumer market of the World by 2015. According to Global Competitiveness report 2012-2013, China’s development is mainly efficiency driven. The major enhancers for this efficiency are higher education and training; goods market efficiency, technological readiness, financial market development, and huge market size. In spite of the economy getting stronger day by day, China has some major challenges in its road ahead. Major of these roadblocks are policy financing, inflation, inefficient government  bureaucracy, foreign currency regulations, and poor work ethics in national labor force. Pollution is also a major concern for China. If China is called world’s factory, India certainly deserves the title of World’s office, mainly ‘back office’. With the liberalization of economy, Indian service industry has surpassed its agriculture by a huge margin. More than 50 percent of Indian GDP is contributed by service, a figure similar to many developed nations.  It uses highly skilled technology intensive industries in services. India always puts more emphasis on meeting domestic demands than exports, a strategy that makes it more resistant to the effects of globalization. After 1991 when India opened its economy for foreign investments, exports have increased by more than 1400 percent. Since then its average tax rate also decreased significantly. Its capital market is improving fast and stock market is continued to rise over years. India is having the largest force of demographic dividend. It holds very large population with low average age of around 30. It also maps large cultivatable lands. But over in spite of having huge potential India’s WCI rank is consistently degrading from 49 th  in 2009 to 59 th  in 2012. Its supply of transport, ICT, and energy infrastructure remains a pain point for its economy. Adding to the misery of corruption and bureaucracy, infrastructure is a single big hindrance to doing business in India. The pillar of health and basic education is also weak. Public trust to politics and government is weakening over past few years drastically. It bears a large and repeated public deficit and its debt-to-GDP ratio is highest among BRICS. If you look at the comparative analysis of the BRICS nations, you will find Brazil is having the smallest economy. But in long term it has a huge potential growth. It has a large foreign currency reserve, larger than other Latin American countries, and even larger than Singapore or Hong Kong . It has one of the world’s sophisticated business community, and world’s 7 th  largest internal market where financing access to its investment projects are fairly easy, and it also provides economies of scales. Its economic development is largely based on its sizable  reserve of natural resources and focus on aerospace, agriculture, and developing new technologies in the energy sector, mainly bio-ethanol, and bio-diesel. It has huge reserve of iron ore, and oil. It is also one of the largest exporters of agricultural products and has a trade surplus. Brazil’s outward FDI is also highe r than other emerging countries except China. Its capital market is growing dramatically over past few years with the growth rate reaching almost 1000 percent. Along with so much positive attributes, Brazil has some severe pain areas to recover. Its continuous high inflation is one of them. Though it encourages entrepreneurship, its long  procedures of approvals, regulations, and complex tax structures make the time to start a  business very lengthy. Its quality of education also doesn’t seem to be matches with the requirement of skilled labour. Russian economy is mainly dependent on its natural resources, in particular oil. With the increase of oil prices, its economy is gaining pace. Recently it has seen a sharp improvement in macroeconomic environment- from 49 th  to 22 nd . It is mainly due to its low government debt (before Putin’s leadership it was 160 percent) and a budget with surplus. Its Central Bank has forei gn reserve of US$518 billion, larger than China. Country’s current inflation rate is 7.40, significantly less than 125 percent experienced in mid 1990s. Due to large dependence on oil and natural gas industries, its export has not increased by large. Currently it is focusing on industrial modernization because of which the imports of high technology equipments have grown largely. Russia’s capital market has also increased significantly.  These huge potentials are not enough for compensating its weak institutions, and innovation capacity of the country. Goods, labor, and financial market efficiencies are on the deteriorating side for the second consecutive year. Weak anti-monopoly policies and high restriction on trade ownerships along with the inefficient allocation of resources make the competition very weak. Other major challenges are reluctance in adopting technology and lack of business sophistication. High centralized structure also is a hindrance to long term growth. It creates uncertainty of foreign investors. Country’s living of standard is very low having very few percentages of people belonging to the middle class. Russian government has set a goal of increasing this figure to 50 percent by 2020. But it requires a lot of work and investments. South Africa is rising, and its entry into BRICS club is its biggest symbol. South Africa is  placed third among the BRICS nations according to GCI 2012. By regional standards it is a  large economy. Institutional factors like intellectual property protection, property rights, accountability of its private institutions, and goods market efficiency have been very well managed by the country. It will be having the largest pool of working population that will surpass even China and India by 2035. Country’s financial market efficiency is also very impressive. It has boosted up the confidence of investors. It has also done well in business sophistication, innovation, collaboration between industries and universities, and scientific research areas. However the country needs huge improvements in some weak points. Its labor market is suffering from rigid hiring and firing process, weak employer-employee relationship, and lack of control in wage determination by companies. Country’s unemployment rate is also high (25 percent in the second quarter of 2012). High rate of crime and violence makes  people feel that police is unable to provide sufficient protection. Another major concern for the country is poor health of workforce. Communicable diseases are very common in the country. In general if we talk about the overall sustainability of the BRICS nations, Brazil performs much stronger than others. India is in worst condition among BRICS. In social sustainability  part it is unable to provide basic amenities to many of its people. Only 34 percent have access to sanitation. Unemployment among youth is also very high. Significant air pollution and high agricultural water intensity make the country a poor performer in environmental sustainability. China is also suffering by a high emission rate of CO 2 . Inequality is also a major concern in China making it socially unsustainable.  N ow let’s come back to the global perspective where these nations were thought to play a  pivotal role in the global leadership. But in most of the meetings, that take place between the heads of these states, the discussions only revolve around financial and economical issues, “Currency dumping”, market protection from unfair competition, protectionism being the main focus areas. Political issues remain neglected most of the times. I think the expectation of BRICS acting as a group is itself an over-expectation. Each nation has its own agenda in BRICS. As an example, for Brazil BRICS summit is an opportunity for lobbying for a  permanent seat in UN Security Council and hence increasing the international prestige. We should always keep in mind that BRICS are widely heterogeneous in terms of their  political organization, adherence to democratic values, and foreign or domestic trade policies. The desired objective is long term and can be achieved only in unison. But currently it is
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