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Nov 09, 2007

Southern powerhouses home in on trade and technology cooperation

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Although largely unheralded, the second India, Brazil, South Africa Dialogue Forum (Ibsa) summit saw further development of functional cooperation between the three major developing powers.

Energy, climate change, science and technology, innovation, health, intellectual property, and trade were all issues covered by the summit and its asso- ciated specialised forums. Memoradums of understanding (MoUs) were signed on wind energy, education, customs and excise, health, public administration, social issues, and culture.

“There is no doubt at all that this summit was a significant advance for Ibsa,” asserts Indian High Commissioner to South Africa Rajiv Bhatia. “It represents an important milestone in the evolution of Ibsa.”

“Ibsa is a process,” highlights Brazilian Foreign Ministry undersecretary-general for Africa, Asia, the Pacific and the Middle East Roberto Jaguaribe. “It is dynamic, not static.”

Ibsa was created in June 2003 and its first summit was held in September last year, in Brasilia (see Engineering News August 1, 2003, and September 29, 2006). The second summit took place on October 17, in Pretoria, preceded by meetings of specialist forums – parliamentary, business, academic, and women’s – in Sandton on October 15 and 16.

The formal outcome of the summit was the Tshwane Summit Declaration issued by the three leaders, South African President Thabo Mbeki, Indian Prime Minister Dr Manmohan Singh, and Brazilian President Luis Inacio Lula da Silva. They “recommitted themselves to vigorously pursue the deepening of South–South cooperation for sustainable development,” states the declaration. “They reaffirmed their shared commitment to the eradication of poverty through sustained and inclusive economic growth.”

Economic growth, of course, involves business and trade. Back in 2004, the three countries announced their desire to double trilateral trade from the then level of $4,6-billion to $10-billion by this year. “We’re on track to achieve this target,” assures Bhatia. “I believe that this target will be reached,” agrees Jaguaribe.

“So the leaders decided to set a new target, for $15-billion, by 2010,” points out Bhatia.

“I believe that this new goal will be achieved,” affirms Jaguaribe. This would represent a trebling of trilateral trade in just six years.

“This growth has been important,” argues Jaguaribe. “Brazil’s global foreign trade has grown at about 20% annually for the past four or five years, and now totals some $250-billion. This growth has been faster in nontraditional areas, such as Africa, Asia and the Middle East. Concerning Africa, our trade with the continent has grown by three times over the past five years. Our trade with India has also grown strongly. But we need to understand each other’s markets and regulatory frameworks – hence, the importance of the Business Council.”

The Ibsa Business Council was founded last year and is composed of five organisations – the Associated Chambers of Commerce and Industry of India, Business Unity South Africa (Busa), the Confederation of Indian Industries (CII), the Federation of Indian Chambers of Commerce and Industry, and the National Confederation of Industry of Brazil. Meeting on October 16, the Business Council had working groups on energy and climate change, mining, information and communications technology, health-care and pharmaceuticals, agriculture and food processing, infrastructure and logistics, and financial services.

“Since the first Business Council meeting, there have been developments,” says CII delegation leader, and TCE Consulting Engineers executive director and CEO A P Mull. “The countries have moved closer, and trade has picked up – this forum built on the first one and we want to take it further.”

“This was only the second council meeting, so we are refining it for next year,” points out Busa trade policy director Catherine Grant. The meeting was hampered by the fact that most of the Brazilian business delegation was travelling with Lula da Silva, whose visit to South Africa for the summit was part of a longer African trip, and so only arrived in this country late on October 16.

“Also, there was no time to feed the outcomes of the Business Council into the deliberations of the summit,” she points out, because the council met on the day immediately before the summit. “We’re looking, next year, to decouple the council from the summit, and hold it in advance of the summit, so as to be able to feed the results into the summit.” Even so, “we had some very good sectoral discussions, which will definitely be taken forward by the council”, she states.

“I feel that South–South cooperation is a very good thing that has happened,” avers Mull. “As it matures and grows, it is not just these three countries that will benefit, but their whole regions – the countries around them, because they are all developing countries, and their requirements, their poverty issues, are quite different from those of developed countries.”

A key agreement reached at the Business Council was that it should, henceforth, be driven by a steering committee, composed of 12 representatives of each country, appointed by the five business organisations for a term of one year with the option of renewal. The steering committee will be responsible for guiding and overseeing the activities of the Business Council, and it will comprise both leaders of organised business and captains of industry from a range of key sectors. It will also create, as required, working groups to look into specific issues, including the exploration of financing Business Council projects.

“Trade is undoubtedly one of the most important facets of Ibsa,” asserts Bhatia. “The three leaders are committed to the creation of a trilateral free trade area (FTA).” This is complicated by the fact that South Africa and Brazil already belong to regional trade blocs – the Southern African Customs Union (Sacu) and the Common Market of the South (Mercosur) respectively – which must be involved in these FTA talks. Nevertheless, in the Tshwane Declaration the “leaders reaffirmed their commitment to the envisaged India-Mercosur-Sacu trilateral free trade agreement . . . They urged the need for sustained efforts to realise early an India-Mercosur-Sacu FTA”.

“We’re very happy that a meeting of senior officials of these three parties (India, Mercosur, and Sacu) took place shortly before the Ibsa summit and they have agreed to study the trilateral FTA project,” reports Bhatia. “Dialolgue has started.” This meeting was ‘welcomed’ by the three leaders in the declaration. “All three sides (India, Sacu and Mercosur) are following this FTA path,” confirms Jaguaribe.

Currently, Mercosur has limited preferential trade agreements (PTA) with both Sacu and India, but Sacu has, as yet, no PTA with India. The Sacu-Mercosur talks were held on October 5 and 6 in Pretoria, and, according to the Tshwane Declaration, made ‘significant progress.’ The same two days saw the start of the Sacu-India trade negotiations, also in Pretoria. As part of their initiatives to further promote trilateral trade, the three countries are reaching a common understanding of tariff lines, and important trilateral cooperation is developing between the three countries’ national revenue authorities.

The Business Council, in its October 16 declaration, called on the three governments to consult with the private sector “and other stakeholders” on the planned trilateral FTA, including “during the preliminary discussions on its feasibility”.

“The governments have taken very serious note of the suggestions by the business leaders that we need to encourage easier flow of people, goods, and capital, to promote greater cooperation,” assures Bhatia.

In this regard, a key factor is ‘connectivity’ – the Business Council urges the three governments to improve the transport links between the three countries and ensure more efficient access to business visas, as well as speeding up the issuing of work permits.

“Air connectivity is not good,” admits Jaguaribe. “Between Brazil and South Africa, and South Africa and India, it is not good enough, while between Brazil and India connectivity is almost zero. Sea connectivity is better, but still not good enough, and connectivity is a basic requirement for growing trade.”

“The issue of connectivity between the three countries is engaging the attention of the three governments, and it is agreed that we need better air and maritime links,” reports Bhatia. “The relevant ministries in the three countries have been tasked to look at this, taking into account constraints, including resource constraints – the matter is engaging our attention.” It was noted in the Tshwane Declaration as well, in which the three leaders expressed the hope that by the time of the third summit in India (scheduled for next year), effective and innovative solutions would have been put in place to mitigate this problem.”

Another matter which has caught their attention is the need to develop cooperation in science and technology to stimulate innovation and apply it to industry. To this end, the leaders “emphasised the need for immediate action to start implement-ation of joint research projects”. They welcomed the creation of a seed fund of $1-million in each country for collaborative activities.

“This $3-million is over and above existing research funding,” explains South African Department of Science and Technology group executive: international relations Dhesigen Naidoo. “It is to promote innovation in industry. Financially, it’s not very significant – it’s really the pilot of a pilot, but the potential is huge.”

There will be a joint call for research proposals, and bidders must take the form of trilateral partnerships or consortia, with at least one member from each Ibsa country.

“Ideally, there should be two from each country, to allow for one public-sector and one private-sector partner each,” he elucidates. “The aim is to develop relationships with the private sectors of the three countries and develop new products.” The proposals should be, ideally, in one of the six research areas already identified by Ibsa – biotechnology, information and communications technology, HIV/Aids, nanotechnology, ocean-ography, and tuberculosis – although proposals in other areas, especially energy and climate change, may also be considered.

“The logistics are now being worked out between the countries, and it is most probable that the first call for proposals will be made in the first quarter of next year,” he reveals. “South Africa has a lot to gain from this – the high-tech sectors in Brazil and India are very significant, whereas ours is relatively small, although we do have areas in which we are advanced.”

Although not one of the six agreed joint Ibsa research areas, energy and climate change certainly attracted significant attention from both the political and business leaders at this year’s summit. The Tshwane Declaration states, the “The leaders strongly emphasised the need for ensuring the supply of safe, sustainable and nonpolluting sources of energy . . . they agreed to explore approaches to cooperation in the peaceful uses of nuclear energy . . . The leaders urged an agreement on innovative modalities for the development, transfer and commercialisation of technologies, including clean coal technologies, at affordable costs to developing countries . . . They also urged the international community to work in a collaborative manner for the development and deployment of renewables, biofuels and biomass . . . The leaders called for the establishment of joint projects and collaboration for the increased usage of alternative sources of energy such as biofuels, synthetic fuels, and wind and solar energy to help achieve the objective of energy security which can bring significant reduction in GHG (greenhouse-gas) emissions.

“The Ibsa Business Council,” it states in its own declaration, “acknowledged the significance of climate change for the global economy. It called upon the governments of the three countries to work with the private sector in the development of renewable energy sources. Innovative thinking is required . . . The use of biofuels will expand in the world . . . Biofuels represent an important opportunity for developing countires, in particular for India, Brazil and South Africa.”

“Concerning energy, each country is strong in a particular area,” points out Bhatia. “Brazil’s expertise is very clear: biofuel technology; South Africa’s expertise is also very clear – synthetic fuel technology; and India has done a lot of work on alternative energy: solar, and wind, power – one of the MoUs signed at the summit was on wind energy.”

“Energy has always been important but clean energy is one of the basic, major issues of the twenty-first century,” highlights Jaguaribe. “It is essential for sustainable development in the full meaning of both these words. Brazil is [quite] involved in biofuels, South Africa in coal, and India is a leader in wind power. Biofuels are not just ethanol, and Brazil is now going into biodiesel, which is based on palm oil, jatropha, and other plants, not on sugar cane, and we believe that Africa can play a major role in biofuels in the future.” Jatropha is drought resistant and so potentially could form the basis of biodiesel industries in all three Ibsa countries.

One of the factors underlying the interest in biofuels is, of course, climate change. “The Ibsa summit was a success with regard to climate change,” stresses Naidoo. The three countries have their own approaches to the political negotiations on climate change, but we were able to agree on a climate change programme, and this is very significant – it means we now have a platform for technical cooperation between the three countries. It opens the way for South Africa to participate in the development of climate change mitigation technologies and services, and the opportunities are great as there are currently only a few companies operating in this sector, mostly European, and significant niches are available.”

Thus, under Ibsa, trilateral trade is growing rapidly and becoming significant, while tech- nological and functional cooperation is beginning to develop. Obscured, perhaps, by the more political pronouncements of the three leaders, focused on global affairs, this loose and often misunderstood grouping is beginning to deliver concrete benefits to the member nations.

Edited by: Martin Zhuwakinyu
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