south‐south co‐operation: the case for ibsa

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South‐South co‐operation: The case for IBSARefilwe MokoenaPublished online: 11 Nov 2009.

To cite this article: Refilwe Mokoena (2007) South‐South co‐operation: The case for IBSA, South African Journal of InternationalAffairs, 14:2, 125-145, DOI: 10.1080/10220460709545499

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125

South-South Co-operation:The Case for IBSA

Refilwe Mokoena1

Introduction

In June 2003, the foreign ministers of India, Brazil and South Africainaugurated the India-Brazil-South Africa (IBSA) Dialogue Forum.

Since then, this example of South-South co-operation has generatedsignificant interest. Central to the forum's mission has been the goalsof democratising global institutions such as the United Nations (UN)and Bretton Woods institutions, and giving concrete shape to the idealof promoting the economic and social interests of the South.

What began primarily as a political alliance, IBSA's agenda nowextends to trilateral co-operation on trade, security, bio-fuels, socialdevelopment, and research and development.2 Six memoranda ofunderstanding (MoUs) have been signed thus far on agriculture andallied fields, bio-fuels, merchant shipping and other maritime transport,trade facilitation, and a framework for co-operation on 'informationsociety' (sic).* Therefore, while IBSA may not yet pose a challenge tocurrent global power structures, this type of sectoral interaction has thepotential to bring real economic benefits to the countries involved andtheir respective regions. IBSA has the potential to be the first'South-South' initiative to translate diplomatic declarations into realresults.

Why IBSA?

The reasons given for IBSA's creation are many and varied. Whetheror not it is the product of deliberate trilateral strategising or nimblediplomatic opportunism remains an open question. Whatever the 'real'reason, it rapidly became clear that the three countries sharedcommon views on a range of global challenges and that workingtogether in multilateral forums, especially the UN and the World TradeOrganization (WTO), they could further their collective aims.

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126 South African Journal of International Affairs

Broadly speaking, therefore, the nebulous idea of a 'C-8 of theSouth' is the grand vision behind IBSA. To date, however, the IBSAcountries have met with most success within the confines of structuredmultilateral engagement, such as in the current Doha Round of theWTO negotiations.

As the IBSA agenda has evolved, however, two things havebecome clear. First, there are many trilateral issues of practicalimportance that can be, and are being, worked on at diplomatic andtechnical levels that have little to do with global politics and the'balance of power'. This should be welcomed as it provides the IBSAinitiative with a work programme that should underpin its relevanceand importance to the three governments involved, regardless of anysuccesses or failures that may occur in the realm of multilateralcoalition building. Details of these kinds of interactions are providedlater in this article.

Second, it seems that while all three countries have officiallyproclaimed that South-South co-operation and the IBSA DialogueForum are central to their foreign policies, IBSA's goals are forming butone subset of each country's long list of foreign policy priorities, andeach applies a differing degree of emphasis. Whether or not this willthreaten IBSA's raison d'etre or erode its relevance remains to be seen;for now simply assessing the importance each member places on IBSAmust suffice.

South Africa

Within Africa, South Africa has become a 'reluctant hegemon'. Thecountry's economic dominance has pushed it into a leadership role inAfrican politics, yet the willingness to fulfil this role is not clear,especially since many African elites perceive South Africa as a self-interested 'neo-imperialist'.actor. This is in part due to the obviousdifferences between South Africa and most (sub-Saharan) Africancountries, which often mean that South Africa's national interests,however broadly defined, are not always aligned with those of otherAfrican countries.

Nevertheless South Africa's key foreign policy objective underPresident Thabo Mbeki remains the promotion of the so-called 'Africanagenda', engineering the African renaissance and ensuring moremeaningful, beneficial integration with the global economy for the vastmajority of African countries. South Africa is an African country and itsfortunes remain firmly linked to those of the continent. Flanking this


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Mokoena: IBSA 127

imperative (and almost always subject to it) are South Africa's twinobjectives of promoting South-South co-operation (to further specificbilateral and multilateral objectives), and deepening and changingolder North-South relationships.

The IBSA Dialogue Forum clearly falls within South Africa'sSouth-South strategy; it offers a means of improving relations with twoimportant emerging democracies and an opportunity to work on the'grand project' of reforming and rebalancing current multilateral globalgovernance systems. Cultivating alliances oi this nature with broadly'like-minded' developing countries is perhaps more important to SouthAfrica than it is to India or Brazil, given that South Africa remains arelatively small middle-income economy (despite its tendency topunch above its weight in multilateral diplomacy).''

South Africa's commitment to IBSA, at the diplomatic level atleast, therefore must be considered genuine and does not appear toconflict with the country's overall foreign policy agenda. However,South Africa's involvement has caused it some problems, principally inthe form of suspicion and criticism from several African countries,which are, by definition, excluded. Critics say South Africa'scommitment to African solidarity is eroded by its attraction to 'clubs'of this nature.

Some argue that the nascent IBSA Development Fund, which hascommitted resources to an agriculture project in Guinea-Bissau(among others) may help to ameliorate this problem, which appearspotentially most difficult to manage in Africa. It may of course alsodeepen it, as it casts South Africa and its IBSA partners as donorcountries in Africa. Much will depend on how the funds areadministered and, crucially, how effective they will be in achievingtheir goals. China's aid to Africa appears to be a good example tofollow, at least from the perspective that few African governmentshave seriously criticised it.

Brazil .

Brazil has adopted an especially aggressive foreign policy promotingSouth-South co-operation, and although South Africa is often creditedwith conceptualising the IBSA Dialogue Forums Brazil is currently its mostenthusiastic proponent. This is due in part to the elevated and energeticrole Brazil plays in the Doha Round, occupying a privileged position inthe new G-4 where, along with India, it champions the developingcountry cause through direct interaction with the US and EU.6 It is also


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because Brazil embraces opportunities to further its claim as a championof the developing South's economic and political interests on the globalstage, which helps it to consolidate its regional leadership.

No IBSA country enjoys unquestioned legitimacy as a leader in itsregion and so must co-operate with other regional powers. Brazil,Argentina and Mexico, at least officially, have bolstered their ties asreflected in Brazil's recent approval of Mexico's future inclusion inMercosur7 and an agreement to deepen co-operation in bio-fuels,deep-sea oil exploration, science, technology and education.Venezuela, under controversial President Hugo Chavez, has alsoentered Mercosur as a full member.

However, in the midst of this increased co-operation it is not clearthat any of the countries concerned agree on how best to advance theregion's internal integration process, or how best to approach externalissues, such as relations with the US. Venezuela represents Brazil's mostsignificant challenge in this regard, as Chavez's oil-backed nationalistbelligerence towards the US both harms the region's relations with theworld's superpower and complicates regional politics.

It should be noted that although regional matters are ever-present inBrazilian foreign policy, the drive to build relationships with non-regionalemerging powers is a product of President Lula da Silva's presidency. Hispredecessor, President Cardoso, maintained a clear focus on improvingties with the US to the exclusion of almost everything else (except theregion).8 Within this broadened scope, Lula has repeatedly emphasisedthe need to 'democratise' international relations.

I BSA's objectives thus fall neatly into Brazil's broad foreign policyprogramme. IBSA also assists Brazil in promoting its narrower nationalinterests, most prominently in the Doha Round — Brazil's offensiveinterests in the agricultural market access negotiations are thestrongest of the three IBSA countries. IBSA's critics are quick to warnthat should Brazil reach a favourable agricultural agreement with theUS and the EU, it may abandon its stance in IBSA, which would haveimplications for solidarity within the body. However, IBSA seeminglyoccupies an important enough place in Brazil's foreign policy to makethis potential trade-off unattractive to Lula or his successor.

India

India's foreign policy objectives of 'coalition building and creating co-operative synergies' may also align well with promoting South-Southco-operation, but of the three countries India appears to have placed


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less emphasis on IBSA and on South-South co-operation in general.This is perhaps because IBSA does not offer any obvious benefits forIndia in addressing its foreign policy priorities. Examples include:India's difficulties with Pakistan (primarily over the 'Kashmir issue');pursuing a 'new era' of relations with a traditionally frosty US; howbest to manage a rising China; and how to re-configure once closerelations with a resurgent Russia.

To be sure, India has a strong interest in the democratisation ofglobal governance structures, but, not unlike China, has less need forpartnerships and alliances simply by virtue of its (growing) size andimportance and attendant greater ability to pursue unilateral methodsof achieving diplomatic goals. However, within defined multilateralengagements such as the Doha Round, India does place strongemphasis on trilateral co-operation with the IBSA countries and playsa leadership role equal to that of Brazil's.9

But even here India offers more problems than solutions. It is byfar the most defensive of the three IBSA countries, especially inagriculture, and has arguably proved to be the least flexible on a rangeof issues. Furthermore, developed nations have adopted a moredefensive stance on issues important to India's economy — such as themovement of people as part of the services agreement — furtherdecreasing its appetite for co-operation and compromise.10

Overall, India certainly places value in building ties with emergingdemocracies that share some of its global interests. But India's rise toprominence, which is more significant than Brazil's or South Africa'sever will be, will necessarily create foreign policy challenges, interestsand tensions that the other two IBSA countries will not share. If Indiais to successfully manage its relations with the world's great powers,the countries in its region, and nations such as Brazil and South Africa,its foreign policy must become more pragmatic than principled. Thiswill make India's actions more difficult to predict, and its willingness tocommit over the longer term to principled coalitions and alliances suchas IBSA more doubtful.

IBSA plus?

Despite its broad agenda, IBSA has remained stubbornly committed toits limited membership. Analysts find this the most attractive aspect ofthis new alliance, arguing that the numerous and amorphous Southerngroupings (Non-Aligned Movement, C-77) have, in the past, been toolarge and diverse in membership and ideology to be effective.


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Yet discussions of an expanded membership persist. As notedearlier, all three IBSA countries experience problems with neighbours'attitudes towards the initiative and broader complications related totheir regional 'leadership' roles. This makes expansion to includecountries such as Argentina, Pakistan or Nigeria highly unlikely. ButIBSA leaders have made passing references to closer ties betweenIBSA and China and Russia over the longer term. Of these, China is themore realistic; even though IBSA's membership is based on shareddemocratic values, China's economic, political and diplomaticimportance makes it an essential partner for all three countries.

But China is also a source of concern for the IBSA countries. Allare struggling to manage China's exporting prowess, and some haveexpressed disappointment over other aspects of the growingcommercial relationship. President da Silva, for example, welcomedChina's promises of increased foreign direct investment and in turnsupported China's bid to become part of the UN Human RightsCouncil. Much to Brazil's disappointment, China did not fulfil itsunspoken end of the bargain by backing Brazil's bid for a seat on theUN Security Council, nor have foreign direct investment inflows livedup to expectations.

India and China share a long, often troubled history, highlightedby a brief border conflict in 1962. Today the two giants of thedeveloping world are often cast as natural competitors, fighting forinfluence, markets and resources according to crude zero-sum logic.The reality is of course far less alarming and more complex, but no lessdifficult to manage for either country. Regarding IBSA membership,India may have the most to lose from China's inclusion and is quickestto argue that IBSA should remain an alliance of democracies only.

IBSA's progress

General

By and large, the IBSA Dialogue Forum functions as a round table toidentify issues of interest and concern and holds regular consultationsbetween heads of state and/or government at the summit level,between ministers at the joint commission level, and between seniorofficials as focal points. In addition, meetings among business leaders,academics and other members of civil society should ideally take placethroughout the year so that the Forum's function extends beyond inter-governmental co-operation. Thus far, the IBSA forum has established


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Mokoena: IBSA 131

working groups, signed co-operation agreements, fosteredcollaboration on research issues of common interest, and helped tobuild business partnerships.

Of the 16 working groups currently operating within the forum,those responsible for science and technology, bio-fuels andcommunications have made the most progress. The transport workinggroup has recently signed agreements to establish direct and frequentair links between IBSA countries and is looking at ways to improveshipping routes. The group on health has identified HIV/Aids as anarea of mutual interest and members are exchanging experiences ofbest practice. The working groups on education, culture, tourism andthe 'information society' have also made notable progress through avariety of collaborative projects and events — including the launch ofan official IBSA website." The working group on trade and investmentwill continue to discuss the possibility of a trilateral free trade zoneleading up to the 2008 Summit in New Delhi.12 Two new workinggroups, covering correctional services and customs co-operation, arebeing established. The latter will improve trade facilitation among thethree countries.

At the 2007 Ministerial in New Delhi, the members renewed theircommitment to increased co-operation in already established sectors,including co-operation at the International Atomic Energy Agency soas to ensure the peaceful use of atomic energy. India, however, is notparty to the Nuclear Non-proliferation Treaty (NPT) and does possessnuclear weapons, but it is committed to universal disarmament. The2007 New Delhi meeting also formalised an additional sectoralworking group on revenue administration, and South Africa's proposalto organise a coal/gas-to-liquids seminar was accepted. Among someof the new issues raised at the ministerial meeting was theestablishment of a Union of South American Nations.

Commerce

Developing countries' frustrations with the lack of progress of theDoha Development Round prompted the formation of the Group of20 (G-20) coalition, of which IBSA constitutes the core.13 Potentially,the IBSA countries could have a significant impact on the fate of otherdeveloping economies if they can break the deadlock in theagriculture and industrial goods negotiations. But judging from the G-4 meeting, at Potsdam in 2007, no one seems willing to alter theirpositions substantially.14 However, even if no conclusion to the Doha


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132 South African Journal of Internationa/ Affairs

Round is forthcoming, the G-20 represents a major diplomatic successand an irreversible departure from previous, highly imbalancednegotiating dynamics.

Related to EU market access is the Registration, Evaluation andAuthorisation of Chemicals (REACH) regulation that went into effect inJune 2007. At the 2006 IBSA Ministerial meeting, delegates raisedconcerns about the potential for increased protectionism derived fromenvironmental regulations and the high cost of REACH compliance fordeveloping countries. South Africa's Foreign Affairs MinisterNkosazana Dlamini-Zuma highlighted the fact that these costs wouldamount to more than annual development aid from the EU to Africancountries.'5 Affected sectors are likely to include textiles,Pharmaceuticals, electronics, automobiles and advanced materials.Since then the REACH regulations have been modified to allowcompanies, especially small and medium-sized enterprises (SMEs) fromdeveloping countries, an additional six months to ensure that allproducts they export to Europe are included on a list of permittedsubstances.16

Additionally, reports from the European Parliament insist that theeffects of REACH on developing countries will be manageable and willnot differ much from those of existing trade agreements. The reporthighlighted technical assistance, capacity building and increasedaccess to information for governments in developing countries as away of cushioning the transition.17 However, there is still a goodchance that the EU's adoption of these new regulations will deliver ablow to IBSA's aim of improving market access for developing countryexports.

Prospects may be brighter for intra-IBSA trade.18 India's trade withBrazil has grown rapidly since IBSA's inception in 2003, from $589million to $2.5 billion in 2006. According to the New Delhi Plan ofAction, it is expected that two-way trade between these countries willincrease to between $5 billion and $10 billion within the next two tofour years.19 At the 2007 IBSA Summit, all three countries proposedthat intra-IBSA trade should be increased to $15 billion by 2010.20

Table 1 illustrates the value of total trade between the IBSA countriescompared to their trade with the rest of the world from 2000 to 2006.

As expected, trade between IBSA countries has increased since2003. India has been experiencing high and sustained growth ratesthat have resulted in increased demand for minerals, in which Brazilpossesses strong comparative advantage. South Africa benefits insimilar ways, but to a lesser degree, reflecting South Africa's supply


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Table 1: Total Imports (US$ millions), 2000-2006

Import-

ing

country

Brazil

India

South

Africa

Partner

India

SA

World

Brazil

SA

World

Brazil

India

World

2000

294

245

55,851

148

1,039

51,377

294

253

26,785

2001

594

302

55,602

311

1,456

51,908

324

248

24,188

2002

621

195

47,243

315

2,084

61,118

467

280

26,212

2003

531

215

48,326

310

1,876

77,202

715

418

34,543

2004

591

281

62,836

770

2,145

108,248

1,000

708

47,603

2005

1,264

350

73,600

897

2,482

149,750

1,310

1,103

55,033

2006

1,474

435

91,343

992

2,472

185,385

1,396

1,630

69,185

Trade

growth

2000-

06

30.8

10

8.5

37.4

15.5

23.8

29.6

36.4

17.1

Trade

growth

2003-

•06

40.6

26.5

13.3

47.4

9.6

19.6

25

57.4

13.3

Source; United Nations Commodity Trade Statistics Database

problems relative to Brazil. South Africa runs a trade surplus with India,but this is largely due to South African exports of gold. Excluding gold,the most important products India imports from South Africa aremineral fuels, manufactured goods and chemical products. India'sexports to both countries are more diversified, including a range ofmiscellaneous manufactured items (including clothing and textiles),chemical products and mineral fuel products.

Table 1 shows clearly that intra-lBSA trade does not yet accountfor a significant share of each country's total trade with the world,implying plenty of scope for improvement in the future. But this isunlikely to happen rapidly; the US, EU and Japan will remain thelargest export markets for the IBSA countries for decades to come.2'Trilateral investment is arguably progressing more swiftly than trade.This is both welcome and expected: less-developed economies lackingextensive complementarities or potential for intra-industry trade tendto invest in each other more than they trade with each other.

Historically, South African investment in India has beenconcentrated in mining; Indian investment into South Africa hastended to cluster in the pharmaceutical sector. Recently, South African


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investment has moved towards machinery and equipment and a rangeof services such as banking, insurance and retail. Indian investment isalso diversifying rapidly into motor vehicles, hotels, tele-communications, software services, miscellaneous manufacturing andmining.

Indian multinationals operating in South Africa include the TataGroup (vehicles, IT, ferrochrome), Mahindra (utility vehicles) and anumber of pharmaceutical companies including Dr Reddy's, Ranbaxyand Cipla Medpro.22 Tata Iron and Steel (Tisco) is currentlyconstructing a $103 million ferrochrome plant in Richards Bay,KwaZulu-Natal, that will be fully operational in 2008 and it hasannounced its intention to build two $40 million hotels in Cape Townand Johannesburg by 2010.23 The group's most significant investmentto date probably lies in the telecommunications sector where Tata hasa 26% stake in VSNL, the former state-owned telecommunicationscompany that is operating South Africa's second national fixed-lineoperator to compete with Telkom, the fixed-line monopoly. The initialinvestment is expected to total $200 million.24

South African companies have also increased their presence inIndia, along with the rest of the world. According to the UNCTAD2007 World Investment Report, India is the world's second mostattractive location for foreign direct investment.25 Some of SouthAfrica's leading companies such as SAB Miller (breweries), OldMutual, Sanlam and Hollard (financial services) have establishedoperations there. SAB Miller has been on a particularly aggressiveacquisition drive, acquiring interests in Mysore Breweries and Foster'sIndia.26 Recently, the Airports Company of South Africa won a tenderto upgrade Mumbai's international airport. (See related article by PhilAlves on South Africa-India business and investment trends.)

Investment to and from Brazil is much less advanced than it isbetween India and South Africa. India has a presence in thePharmaceuticals and automotive sectors. Brazilian firms such asPetrobras (energy), Marco Polo (vehicles) and Ode Brecht(construction) have the potential to increase their investments in Indiaand South Africa.27 However, few Brazilian firms have made majorinvestments in either country. While Brazil ranked as the fifth mostattractive investment location in the 2007 World Investment Report,India and South Africa are both conspicuous by their lack of activity inthat country.

As with trade, intra-IBSA investment is dwarfed by the threecountries' investment elsewhere. This is focused primarily on their


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developing country neighbours — or their developed country partners.According to the World Investment Report 2007, India ranked as oneof the top 10 sources of FDl flows from South, South-East and East Asiain 2005 and 2006. FDl outflows from India increased from $2.5 billionin 2005 to $9.6 billion in 2006.28 As may be expected, the bulk ofIndia's FDl goes to the US and the EU in the IT, pharmaceutical andautomobile sectors.29 Brazil led the rise in FDl outflows from LatinAmerica with $28 billion in outward investments in 2006, marking thefirst time Brazilian FDl outflows were higher than its inflows.30 LikeIndia, Brazilian firms primarily target the US, Europe and other LatinAmerican countries for outward investment. According to the BrazilDevelopment Bank, only 2% of Brazilian firms identified India as atarget market for future FDl.3'

In selecting these locations, Brazil and India have sought taxhavens for their investments. According to a 2001 survey by theCentral Bank of Brazil, a large portion of outward capital movementfrom Brazil has taken place for financial reasons.32 While no bilateralinvestment treaties exist between the IBSA countries, India has signeddouble taxation treaties with both Brazil and South Africa. Additionally,in 2006 the three countries agreed to share information on tax —especially abusive tax avoidance arrangements and schemes — usingthe Avoidance of Double Taxation Agreements already in place.33

Investment encourages trade, which in 2006 reached roughly $8.4billion in total across the three countries. It is increasingly diverse,mainly due to India's broad range of exports to South Africa and Brazil.The most dynamic sectors are mineral fuels, miscellaneousmanufactured goods, machinery and transport equipment; and to alesser extent food and live animals, as well as beverages and tobacco.

It is difficult to attribute post-2003 growth in trade and investmentto IBSA alone. Certainly, it is too soon for the MoU on TradeFacilitation to have had an impact. Similarly, the bilateral tradeagreements between India and Brazil and th.e Southern AfricanCustoms Union (SACU) and Brazil are not yet in effect or lack seriousdepth, or both. Negotiations between India and SACU are yet tobegin. Intra-IBSA trade and investment has most likely benefitedprimarily from strong growth in India and Brazil, with increasingawareness about the emerging partnership being a secondary factor.

Surveys of companies operating in the three countries showedthat up to 80% of businesses were still not aware of the IBSA Forum34

and that IBSA trade represented only 2% of each country's totaltrade.35 This seeming failure to exploit the potential created by the


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linkages has attracted the most criticism from sceptics who argue thatnatural complementarity between the IBSA economies is low and thatthey compete for the same export markets.

These remain valid concerns. But tariff and non-tariff barriers arealso significant deterrents to increased trilateral trade. The SACU-Mercosur Preferential Trade Agreement signed in 2004 has had littleimpact on trade between Brazil and South Africa, for instance, forthese very reasons. To begin with, tariff preferences in the agreementwere minimal and have only resulted in a 0.84% increase in importsand a reduction on import duties from 13.82% to 13.15%.36 This hasresulted in ongoing broad discussions about a trilateral tradeagreement and the recently announced Action Plan on TradeFacilitation for Standards, Technical Regulations and ConformityAssessment. In terms of the Action Plan, a Business Forum was createdthat will work to raise awareness within the three countries aboutbusiness opportunities.

Sectoral co-operation

While trade and investment are obvious areas for co-operation, if IBSAhopes to achieve tangible results, a focus on specific sectors in whichat least one country has experience and strong capabilities isnecessary.

As mentioned above, thus far six MoUs have been signed inagriculture, energy, information society, trade and investment,transport, and social development. Sixteen working groups have beenestablished in sectors ranging from human settlement developmentand climate change to social development and health. In the future,groups dealing with correctional services, customs co-operation, localgovernment and housing will be established.

Unsurprisingly, those sectors most often identified as having highpotential for co-operation — Pharmaceuticals and health, transport,communications, energy, and science and technology — are those inwhich at least one of the countries has a history of expertise.

Transport and communications

Numerous studies have recognised that transportation links among thecountries are currently inadequate and have acted as a barrier totrade.37 To this end, the MoU on Transport aims to improve transportlinks among the three.


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India can share its capabilities in automation with Brazil and SouthAfrica, while India and South Africa can learn from Brazil's experiencein improving railway efficiency with private investment. Alreadydiscussions are under way to improve airline links between the threecountries and South African Airways has announced its intention toexpand its route network by adding more flights to and from Brazil.Beyond increasing the number of flights between the countries,Nagesh Kumar of the Research and Information System (RIS) forDeveloping Countries argues that the three major airlines should jointogether to promote trade and tourism and to exchange technicalexperiences.38 India has a strong record of maritime training and SouthAfrica's knowledge of port management can be transferred to theIndian port authority.

Policymakers and researchers have also been optimistic about thestrategic role Durban or Cape Town could potentially play as the hubof trans-shipment ports for IBSA trade.39 While South Africa's ports arealready well developed, hosting a major shipping port will allow thecountry to improve its infrastructure and influence within the IBSAForum. Currently the bulk of South America-South Asia traffic travelsthrough the Suez Canal. However, before real progress can be madethe three countries need to improve the operations and efficiency oftheir transport sectors.40 South African Airways and Air India, bothnational airlines, are inefficient and unprofitable and currently facefinancial difficulties.41 While Brazil has privatised its national airline,42

the question regarding the feasibility of greater intra-IBSA transportdue to high costs resulting from inefficiencies remains critical.

Similarly, India and Brazil can share important lessons with SouthAfrica in increasing the outreach and efficiency of its tele-communications sector. According to the World Economic Forum'sNetworked Readiness Index, South Africa dropped 10 places downthe list of the world's most technologically advanced countriesprimarily because of Telkom's continued monopoly and the slow paceof regulatory change.43 Brazil and India both privatised their telecomsystems in the late 1990s and have seen high growth rates in thesesectors since then.

Energy

Of the IBSA countries, Brazil is clearly the leader in energy productionfrom renewable sources. In fact, approximately 62% of the country'senergy requirements are met by renewable sources such as ethanol,


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made from sugar cane.44 South Africa has recently finalised its bio-fuelsstrategy, which has excluded the use of maize on food securitygrounds. Cane and beet sugar will be used to produce bio-ethanol,while soya, canola and sunflower seeds form the basis for bio-diesel.45

The extent to which South Africa's bio-fuels plan included elements ofBrazil's experience is unclear, but bio-energy has been identified bygovernment and practitioners as a real strength of IBSA.46 At the 2007Summit, bio-energy featured high on the agenda. It was the focus ofone of the MoUs signed and was one of the main reasons for DaSilva's tour of Africa.

Recently, the Indian Oil Corporation (IOC), India's major marketerof petroleum products, announced that it may collaborate with Brazil'sPetrobras to import ethanol. India's petroleum ministry is alsoencouraging ethanol imports to be blended with petroleum asopposed to relying on local production.47 While this may increase IBSAco-operation, the Ministry of New and Renewable Energy maintainsthat the primary objective of the country's renewable energy policyshould be indigenous production.

Interest in coal/gas-to-liquids technology, especially in India, is alsoincreasing. India has significant coal resources and currently relies onimported crude for almost all of its oil requirements, so it has aparticular interest in South Africa's coal-to-liquids technology. Sasol,the South African-based world leader in this field, recently announcedits interest in investing about $6 billion in a coal liquefaction project inIndia.

The 2007 Tshwane Summit declaration,48 which came out of the2nd IBSA Dialogue Forum, also made mention of nuclear issues whichare traditionally a complicated matter due to India's nuclear weaponsprogramme. South Africa, having voluntarily relinquished its weaponscapabilities, has since disagreed strongly with India regarding thevirtues of signing the Nuclear Non-Proliferation Treaty and theComplete Test Ban Treaty.49 However, in the declaration, all threecountries reiterated their commitment to universal disarmament, anissue that has received mention only once before — in the Rio deJaneiro Ministerial communique of 2006.

There is good scope for co-operation on civilian nuclear issues,and this has been discussed frequently in IBSA meetings. South Africais pioneering the so-called pebble-bed technology and producessignificant amounts of uranium, mainly as a by-product of gold mining.India is committed to expanding greatly its use of nuclear power forcivilian purposes, and a historic partnership with the US on these


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issues is currently being discussed. Meanwhile South Africa hasrecently developed concrete plans to do the same.

Health and Pharmaceuticals

All IBSA countries face similar development challenges relating tohealth, such as HIV/Aids, tuberculosis and malaria. Collaboration inresearch and development of medicines is therefore critical and holdsgood potential for future business. Co-operation among the threecountries began under the WTO negotiations in intellectual property(TRIPS) concerning the local production of anti-retrovirals (ARVs) inIndia and Brazil. Even though India and Brazil were eventually able toproduce generic AIDS drugs, the debate on incorporating thedevelopment dimension of intellectual property rights into the WTOcontinues. Even so, and perhaps more importantly, practitioners in thePharmaceuticals sector have shown interest in closer collaborationbetween the three countries.

The 2007 Summit saw the signing of the Health and MedicinesMoU, which should cement the Heads of State commitment to jointresearch and development of AIDS, malaria and tuberculosisdiagnostic tools.so Additionally, both the Academic Seminar andBusiness Council highlighted the need for collaboration inepidemiological research and recommended graduate exchangeprogrammes as a means of enhancing research collaboration.51 Of thethree countries, India is the clear leader in the development ofvaccines and low cost treatments for non-communicable diseases,providing an opportunity for technology transfer. However, there isstill a need for increased funding and stronger public-privatepartnerships in research.

Development finance

Poverty alleviation and economic reform remain priorities for IBSA, asdoes maintaining good relations with countries in their respectiveregions. Therefore the IBSA Facility Fund for the Alleviation of Povertyand Hunger will not only act as a way of disseminating best practicein the alleviation of poverty and hunger, but may also begin to addressthe criticism that IBSA is simply an 'exclusive club' of relatively wealthydeveloping countries.

Though the fund was established as an example of South-Southco-operation and aid, it does also signal that the IBSA countries are


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140 South African lournal of International Affairs

aware of the need to target aid to struggling countries in theirregions.52

Currently, development projects are under way in Guinea-Bissau.A project on waste collection is being considered in Haiti, as are otherinitiatives in Palestine and Laos. The IBSA Facility Fund was given theSouth-South Partnership Award by the UN earlier this year. Still, therehave been problems with managing these projects and it is not clearhow this aid will differ from more traditional development assistance.But it is encouraging that the three countries were able to overcomepolitical differences and decide upon which countries to support andhow." What remains now is for the roles of the UNDP Special Unit forSouth-South Co-operation and local UNDP offices to be clarified andfor the Development Fund to form closer linkages with other IBSAbodies such as the Business Forum.

Other sectors

Progress on other working groups has been more mixed. Tourism,which should be advancing well given its importance to all threeeconomies, has not seen much of an increase in growth between thecountries. This could be partially addressed by improved transportlinks and cultural exchanges between the three countries. Knowledgesharing on SME development also offers potential for greatercollaboration, especially given India's and Brazil's experience in SMEpromotion. Unfortunately, little progress has been made to date in thisarea as well.

Similarly, all three IBSA countries need to balance their economicliberalisation programmes with establishing safety nets for thesegments of their populations that 'lose' from such processes. India'ssocial security system, with its emphasis on Occupation Pension Fundsand micro pension plans, adopts a rights-based approach andrepresents the most democratic process of the three countries. Brazil'spoverty reduction and adjustment assistance programmes have beeneffective in reducing poverty even during periods of low economicgrowth. Similarly, South Africa's social grants are beginning to have apositive impact on the country's poorest. All three countries are inrelatively strong fiscal positions at present, making an expansion ofthese programmes possible.

Finally, the 2007 Summit saw the creation of the Women's Forum,a working group to better incorporate women's rights and genderequality into IBSA's function and goals. The Summit also highlighted


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the fact that co-operation in sectors such as mining, ICT and financialservices has high potential for growth.54

Conclusion: Where to from here?

By and large, the experience of other attempts at South-South co-operation has shown that alliances without a specific mandate and toobroad a membership have neither advocated the interests ofdeveloping countries nor challenged the global power balance. Itfollows that much of the interest surrounding IBSA stems from its morefocused approach to co-operation.

The IBSA Forum's most likely areas of success, therefore, will lie inspecific sectors such as energy, transport, health and the DevelopmentFund. Within each of these sectors at least one of the IBSA countrieshas a comparative advantage or, as is the case with ICT technologies,the ability to harness technology for economic growth in developingcountry situations.

Following on from the 2007 Summit, the three countries willprepare an integrated IBSA Social Development Strategy to serve as ablueprint for their common socio-economic problems. As previouslydescribed, the IBSA Fund Facility has already received acclaim fromthe UN and a second round oif projects is currently being launched. Intheory this should demonstrate developing countries' capability to useSouth-South co-operation for the benefit of the least developedcountries.

IBSA's more ambitious initiatives, such as UN reform and a re-balanced multilateral trading system, present far greater challengesand necessarily will show slower progress. To date, traditional divisionsbetween countries of the North and South in these organisationsremain chiefly responsible; however, the IBSA countries themselvesstill have to reconcile their standpoints on issues such as nucleardisarmament and the WTO negotiations. Critics argue that whenpressure mounts to reach a compromise, these differences will proveIBSA's undoing. WTO activity since 2003 suggests otherwise, and theForum's narrow, sector-based co-operation initiatives have onlyintensified. As long as things remain this way, IBSA stands a far greaterchance of achieving some or all of its aims than like-mindeddeveloping country coalitions of the past.


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Endnotes

1 REFILWE MOKOENA is the Research and Development Coordinator for the SmallEnterprise Foundation, a microfinance institution in South Africa.

2 Landsberg C, 'IBSA's Political Origins, Significance and Challenges', Policy StudiesBulletin, 8, 2, 2006, p.4.

3 Brasilia Declaration (2003). Available at http://www.ibsa-trilateral.org/brasil_declaration.htm.

4 White L, 'South Africa in the post-apartheid era: Converging foreign policy and tradestrategy priorities to meet the challenges of economic growth and equity', in VillaresF (ed.), India, Brazil and South Africa: perspectives and alliances. Sao Paulo:Universidade Estadual Paulista (UNESP) and Institute for Strategic and InternationalStudies, 2006. See also The Metamorphosis of the Butterfly: 'From a South-SouthTrade Strategy to Trilateral Coalition Building', South African Yearbook ofInternational Affairs, 2003/04. Johannesburg: South African Institute of InternationalAffairs, 2004. Dlamini K, 'South Africa's Foreign Policy Since 1994', South Africanjournal of International Affairs, 11, 1, Summer/Autumn 2004.

5 Landsberg C, op. cit.6 In previous trade rounds the C-4 comprised the US, EU, Canada and Japan. In the

Doha Round Canada and Japan have been supplanted by Brazil and India, reflectingchanging global realities. The C-4 often drives the core of the negotiations; if thecountries involved can reach a compromise on the basic contours of an agreement,concluding a broader deal involving the entire membership becomes more likely.'

7 'Brazil says Mexico may join Mercosur', Houston Chronicle, 7 August 2006.Available at http://www.bilaterals.org/article.php3?id_article=5462.

8 Vizenti PF, 'South American Integration and Brazilian Foreign Policy', South AfricanYearbook of International Affairs 2006/7. Johannesburg: SANA. Brazil's approach tothe region, primarily through Mercosur, has had to be adapted in recent years toaccommodate Venezuela's rise to prominence and its full membership of Mercosur.Given Venezuelan president Hugo Chavez's maverick approach to foreign policyand his emphasis on socialism at home, some have questioned the rationale for andvalue in agreeing to Venezuela's inclusion. Brazil, however, sees little point inattempting to keep Venezuela out.

9 Ray AS, 'Going global: India's economic aspirations and apprehensions in the newmillennium. In Viallares F (ed.), op. cit.

10 Dupas G, 'South Africa, Brazil and India', in Villares F (ed.), ibid.11 See http://www.ibsa-trilateral.org/index.html.12 This information is taken from a presentation made by Ambassador Pedro Motta

Pinto Coelho, the Under Secretary-General for Africa, Asia, Oceania and the MiddleEast at the Brazilian Foreign Ministry at an IBSA seminar hosted by the Instituto deEstudos Economicos e Internacionais (IEEI), Sao Paulo, Brazil, in August 2005.

13 All three are also members of the broader G-20 Rnance Ministers and Central BankGovernors. Available at http://www.g20.org.

14 Munoz C, 'Postdam's Price', Economist, 28 June 2007. Available at http://www.economist.com/research/articlesBySubjecl/displaystory.cfm?subjectid=548869&story_id=9409117.

15 'Development Concerns Raised over European Chemical Legislation', BRIGDESTrade Newsletter, 5, 20, 11 November 2005. Available at http://www.ictsd.org/biores/05-11-11/story3.htm. 'EU urged to review its legislation', SABC News, 31


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March 2006. Available at http://www.sabcnews.com/economy/business/0,2172,124835,00.html.

16 Jones A, Registration Evaluation and Authorisation of Chemicals European DraftRegulation' BioTrade Facilitation Programme Update Report Geneva: UNCTADBioTrade Initiative, September 2006. Available at http://www.biotrade.org/BTFP/BTFP-docs/Working_docs/REACH_UPDATE_public.pdf.

17 Ackerman F, 'Implications of REACH for the Developing Countries; Possible Waysand Means to Preserve their Interests'. Report from the International ChemicalSecretariat (Chemsec) to the European Parliament, March 2006. Available athttp://ase.tufts.edu/gdae/about_us/cv/ackerman_cv.html.

18 Most trade data is sourced from the UN's Commodity Trade Statistics Database.Additional data is taken from the Government of India's Ministry of Commerce andIndustry Export Import Data Bank, http://commerce.nic.in/eidb/lcntcom.asp.Growth in trade during the entire data sample, from 2000 to 2006, is compared totrends since IBSA's inception, 2003 to 2006, to illustrate the effect of IBSA on tradebetween the three countries.

19 Projections made by South African Department of Foreign Affairs, November 2006.20 President Thabo Mbeki, Prime Minister Manmohan Singh Closing Speeches, IBSA

Summit, 19 October 2007.21 Although China is rapidly challenging this 'stylised facf of global trade, it is the only

developing country to feature prominently in other developing countries' totalimports or exports. Should China join IBSA, the health of intra-IBSA trade wouldinstantly improve.

22 See Alves P, 'India-South Africa: Shifting Priorities?' in this volume.23 Gedye L, 'Spicing up India-SA trade', Mail & Guardian Online, 9 July 2007. Available

at http://www.mg.co.za/articlePage.aspx?artideid=313406&area=/insight/insighteconomy business/.

24 Davies M & A Verachia, 'Business Destiny of India, SA Entwined', Business Day, 29September 2006. Available at http://www.allafrica.com/stories/2006092903660.html.

25 'India emerges second biggest FDI magnet', The Economic Times, 17 October 2007.26 SAB Miller, 'SAB Miller Completes Fosters India Transaction', press release, 12

September 2006. Available at www.sabmiller.com/sabmiller.com/en_gb.Giriprakash K, 'SAB Miller Plans to Bring in Some Global Brands', The Hindu BusinessLine, 23 March 2006. Available at http://www.thehindubusinessline.com/2006/03/24/stories/2006032402011000.htm

27 Puri L, 'IBSA: An emerging trinity in the new geography of international trade', PolicyIssues in International Trade and Commodities, Study Series no. 35, 2007. Availableat http://www.cni.org.br/empauta/src/ibas/LakshmiPuri_DirectorUNCTAD.pdf.

28 United Nations, Transnational Corporations, Extractive Industries andDevelopment', World Investment Report 2007. New York: United NationsPublications, 2007, p.43.

29 'FDI Investments: Work in progress for India', Moneycontrol India, 22 December2007. Available at www.moneycontrol.com/india/news/management/fdi-investmentswork-progress.

30 United Nations, 'Latin America and the Caribbean: FDI outflows, top 10 economies,2005-2006a', World Investment Report 2007, op. cit.

31 'Outward FDI from Brazil: poised to take off?' UNCTAD Occasional Note, 16, 7December 2004. Available at http://www.unctad.org/en/docs/iteiia200416_en.pdf.


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32 Capitals Braileiros no exterior, Departmentode Capitais Estrangerios e Cambio,Banco Central do Brasil, 2004. Available at http://www.bcb.gov.br/?CBE

33 'India, Brazil and South Africa agree to closer co-operation on tax and customsadministration', press release, South African Revenue Service, 21 November 2006.Available at http://www.sars.gov.za/media/media_releases/2006/Press%20Statement%20-%20IBSA%20agree%20to%20cIoser%20cooperation%20on% 2 0 t a x % 2 0 a n d % 2 0 c u s t o m s % 2 0 a d m i n i s t r a t i o n % 2 0 - % 2 0 2 1 %20November%202006.htm.

34 Presentation made at South-South Trade and Investment Co-operation: NationalConsultation Meeting, South Africa, 27 October 2005.

35 'India-Brazil-South Africa (IBSA) Economic Co-operation: Towards aComprehensive Economic Partnership', RIS Policy Briefs, 26, 2006, pp.1-3. Availableat http://www.ris, org.in/pb26.pdf.

36 Sandrey R, Trade Creation and Trade Diversion resulting from SACU tradingagreements', Tralac Working Paper 11, 29 August 2006. Available at http://www.tralac.org/pdf/20060829_Sandrey_TradeCreationandDiversion.pdf.

37 Le Pere G & L White, 'IBSA is about more than just trade', Business Report, 25October, 2005. Naidu S, 'IBSA: A Pragmatic voice of the South or a Vending Machineof Competing and Diffused Interests', Policy Studies Bulletin, 8, 2, 2006, p.19.

38 Kumar N, 'India-Brazil-South Africa (IBSA) Economic Co-operation: Towards aComprehensive Economic Partnership', RIS Policy Briefs, 26, 2006, pp.2-4; 'SectoralCo-operation within IBSA: Some Explorations in South-South Co-operation', PolicyStudies Bulletin, 8, 2, 2006, pp.8-10.

39 Consultation with Ms Pumla Ncapayi, Acting Director: Bilateral Trade RelationsEurope, International Trade and Economic Development, South African Departmentof Trade and Industry.

40 Kulkarni P, 'South-South Economic Co-operation: Exploring IBSA (India-Brazil-South Africa) Initiative', Field Survey Report: India, CUTS Centre for InternationalTrade, Economics and Environmental (CITEE), 2006. Available at http://www.cuts-citee.org/PDF/IBSA-DraftReport-lndia.pdf.

41 Hartley W, 'Erwin backs Mango as SAA bale-out looms'. Business Day, 2 March2007.

42 'Gol Airline Buying Varig for $275m', BBC News, 28 March 2007. Available athttp://news.bbcco.Uk/2/hi/business/6505207.stm.

43 Stones L, 'SA loses ground in world ICT rankings', Business Day, 29 March 2007.Available at http://mybroadband.co.za/nephp/?m=show&jd=6003.

44 Chatterjee B & S Dhoot, 'Economic Cooperation between India-Brazil-SouthAfrica: The Road Ahead!', Policy Studies Bulletin, 8, 2, 2006.

45 Spadavecchia O, 'Maize excluded from SA biofuels plan, production target scaledback', Engineering News Online, 6 December 2007. Available at http://www.engineeringnews.co.za/article.php?a_id=122990.

46 Consultation with Ms Ncapayi, South Africa Department of Trade and Industry, op.cit. Le Pere G & L White, 'IBSA is about more than just trade', Business Report, 25October 2005.

47 Katakey R, 'Oil ministry for ethanol, bio-fuel imports', Business Standard, 22 March2007. Available at http://www.business-standard.com/common/storypage.php?autono=278543&le (accessed 25 March 2007).

48 2007 Tshwane IBSA Summit Declaration. Available at http://www.dfa.gov.za/docs/2007/ibsa1018.htm (accessed 18 October 2007).


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49 Alves P, op. cit.50 2007 Tshwane IBSA Summit Declaration. op. cit.51 Report of the Academic Forum to the IBSA Summit, Second IBSA Summit,

Johannesburg, October 2007.52 Rio de Janeiro Ministerial Communique, India-Brazil-South Africa (IBSA) Dialogue

Forum, 30 March 2006.53 White L, 'Developing IBSA into a Coalition of the Willing', South African Foreign

Policy Monitor, September/October 2005, p.1.54 Recommendations of the IBSA Business Council, Second IBSA Summit,

Johannesburg, October 2007.


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south‐south co‐operation: the case for ibsa

Documents