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NORTH-SOUTH: China, India, Brazil, South Africa Tilt Global Power Balance

Linus Atarah

HELSINKI, Sep 13 2007 (IPS) - Four developing countries – China, India, Brazil and South Africa (CIBS) – are poised to become new southern engines of global economic growth with increasing potential to provide prosperity to other developing countries, said prominent economics researchers here.

The economic clout of these four countries will also create new realignments in the international governance architecture providing policy space for developing countries to pursue economic development, they said.

"India, China, Brazil and South Africa have a potential collective voice in the world of multilateral institutions and rules and an enormous potential for exercising influence in these institutions and rules which might shape policy space for countries that are late comers to development," predicted Deepak Nayyar, economics professor at the well-known Jawaharlal Nehru University in New Delhi.

"Recent economic growth in Latin America and in Africa has been coming in large part from a very positive terms of trade shock due to rise in price of export commodities from these four countries, especially from China," said Elian Cardoso, professor of economics at Sao Paulo School of Economics in Brazil in an interview with IPS.

The growth in CIBS, led by China and India has brought prosperity to many developing countries in the last three years, she said.

Economic growth in CIBS and its implications for the global economy was the focus of a two-day international economic research conference here in the Finnish capital Helsinki over the weekend.

The conference brought about 150 economic researchers from various parts of the world, and was organised by the Helsinki-based World Institute for Development Economic Research (WIDER), part of the United Nations University.

The four CIBS countries together account for 40 percent of the world&#39s population and 60 percent of that of the developing countries. They account for about 10 percent of the world’s GDP and more than 40 percent of that of the developing world.

"These countries represent a beginning in the shift in the balance of economic power and also a shift in the balance in political power," Nayyar told IPS

Rapid economic growth in lead economies drives growth elsewhere in the world by providing markets for exports, resources for investments, finances for development and technologies for productivity, economic experts say.

Already China constitutes a significant source of foreign direct investment (FDI) outflow providing 80 percent of FDI mainly in primary commodities to developing countries. In contrast 80 percent of India’s FDI flows to the industrialised countries and mainly in manufactures, said Nayyar.

However, China&#39s rapid economic growth and its impact on other developing countries has been a mixed blessing. Protests broke out in Zambia in July last year about the alleged ill-treatment of workers at a Chinese-owned mine, and there have been reports of pay disputes in Namibia.

The four countries could serve as source of finance for the rest of the world because they have large reserve assets. In the last 10 years, said Nayyar, the total reserves of these countries held in the world economy has grown from 20 percent to more than 30 percent.

However, corruption and huge inequalities within their populations are risk factors faced by all the four countries and unless these are tackled sustained economic growth will be scuttled, said Guanhua Wan, a senior research fellow at WIDER and organiser of the research project on CIBS.

"Their engines of growth will sputter to a stop," he told IPS.

In the case of China and India risks of sustained economic growth is exacerbated by the issue of energy insecurity, said Wan.

China imports up to 50 percent of its energy needs while India imports 80 percent of its energy needs.

"What will happen if the pipelines stop flowing or something happens to the sea lanes?" he asked. "Their economies will collapse."

"The significance of CIBS in the world will be shaped not by economics alone. It will be shaped even more in politics," said Nayyar.

Given their economic rise and size CIBS will become more important and that will in turn affect the global context partly through bilateralism and pluralateralism, he said, providing them an increasing clout in the governance of multilateral institutions.

There was a time when the Quad group of countries in the World Trade Organisation (WTO) was made up of the U.S., the European Union, Canada and Japan but now Canada and Japan have been replaced by India and Brazil, Nayyar pointed out, referring to recent events in the Doha round of trade talks where the developing countries have demonstrated an unwillingness to be steam-rolled by powerful countries.

While not yet major donors compared to the Development Assistance Committee (DAC) of the European Union, CIBS will serve as catalysts in coaxing western aid donors in moving towards achieving their aid targets of 0.7 per cent of GDP that has been set over 30 years ago by the United Nations, said Nayyar.

"Aid from developed countries will also come in better terms," he added.