Experts suggest annual BRIC summit and democratisation of IMF

New Delhi, May 15 (ANI): After two days of intense discussions at the Pre-BRIC Summit Preparatory Meeting, experts from Brazil, Russia, India and China have suggested holding annual BRIC Summits with each member-state taking turns at hosting the meeting and urgent democratising of the International Monetary Fund.

They said if this is difficult initially, summits should be held taking advantage of the opportunity of the presence of the four Heads of State on occasions such as the UNGA, G20, and G8 Summits.

This suggestion is part of the 45-point recommendations arrived at by teams of experts from BRIC countries at Observer Research Foundation (ORF) on 13 and 14 May, as part of the tract II process ahead of the first BRIC Summit in June this year in Russia.

The pre-BRIC Summit Preparatory Meeting said the Summits should do away with the practice and expectation of invariably issuing elaborately negotiated communiquis/joint statements after each high-level meeting, thereby reducing the possibilities of setting unachievable goals and undermining the authority of such meetings.

The experts said the practice of regular meetings and consultations between the foreign ministers of the four countries should be formalized, initially if necessary, on the sidelines of major international conferences.

They said BRIC Finance Ministers and Central Bank Governors should meet before G20 FM/CBG and/or annual Fund-Bank meetings with the objective of formulating joint positions. BRIC Ministers of functional areas such as Trade, Environment etc. should also meet prior to major conferences dealing with their subjects.

They said BRIC governments should institutionalise BRIC's "second track" as a permanent process to generate creative proposals for BRIC cooperation and constructive joint action, especially at the current formative stage.

The experts suggested that BRIC Ambassadors/Permanent Representatives at international conference centres such as Geneva, Vienna etc. should set up the practice or regular consultations to identify issues and situations where coordinated /joint positions by BRIC could be appropriate and make a constructive contribution.

They suggested that the BWI and IFI must be urgently overhauled and reformed. The current 'Voice and Vote' in the multi-lateral institutions do not provide an equitable and effective agency for addressing the specific concerns of nation states, specially the developing and emerging economies.

Expressing doubts on the ability of the IMF (FSF) to serve as a regulator or in making decisive interventions, they said there was an urgent need for democratising the IMF and thereafter giving it the sanction and authority through the FSF or other instruments to play the role of a regulator.

It was also generally agreed that prior to further resource mobilisation for and authorisation to the IMF, the governing structures of the World Bank and the IMF must be reconstituted to reflect current realities. GDP on PPP basis could be one basis for determining quotas and voice in this and other BWIs.

Following are the recommendations of Pre-BRIC Summit

BRIC institutionalisation

1. Enhanced dialogue and cooperation between BRIC countries, based on equality, mutual trust and respect, and their common interests and identical or similar views on many pressing problems of global development and important international and regional issues, will be conducive to promoting international solidarity and common development, and enable BRIC countries to play a constructive role in international affairs.

2. The dialogue in the BRIC format, so far conducted at the level of Foreign and Finance Ministers, needs be deepened and institutionalized as a permanent process.

3. BRIC focus should be on global issues on which there is maximum convergence of BRIC positions. In such matters, BRIC should aim to express the highest common factor of their respective positions. Inclusion in a joint BRIC position should be decided by consensus. Other issues may be discussed informally with a view to harmonizing approaches.

4. While BRIC has a vocation broadly to promote developing country interests in the international agenda, consideration of expansion of the BRIC format may be taken up only after the institutionalization of BRIC, and the tuning of four-party interactions has developed to an appropriate stage.

5. There should be annual BRIC Summits, with each member-state taking turns at hosting the summits and/or taking advantage of the opportunity of the presence of the four leaders on occasions such as the UNGA, G20, and G8 Summits, with the aim of moving towards stand-alone summits. The summits should do away with the practice and expectation of invariably issuing elaborately negotiated communiquis/joint statements after each high-level meeting, thereby reducing the possibilities of setting unachievable goals and undermining the authority of such meetings.

6. The practice of regular meetings and consultations between the foreign ministers of the four countries should be formalized, initially if necessary, on the sidelines of major international conferences.

7. BRIC Finance Ministers and Central Bank Governors should meet before G20 FM/CBG and/or annual Fund-Bank meetings with the objective of formulating joint positions. BRIC Ministers of functional areas such as Trade, Environment etc. should also meet prior to major conferences dealing with their subjects.

8. The primary BRIC bureaucratic infrastructure should consist of specially appointed Sherpas. They should consult regularly among themselves, take the initiative to propose high-level meetings as necessary and appropriate, and handle arrangements for such top-level consultations. At the initial stages, the UN envoys of the four countries at New York could perform the functions of such Sherpas.

9. BRIC Ambassadors/Permanent Representatives at international conference centres such as Geneva, Vienna etc. should set up the practice or regular consultations to identify issues and situations where coordinated /joint positions by BRIC could be appropriate and make a constructive contribution.

10. Specialist BRIC working groups to examine issues in depth and to provide substantive back-up to high level meetings may be set up as necessary in priority areas such as the response to the current financial and economic crisis, IMF/IBRD matters, reserve currencies/SDRs, expansion of access to finance for developing countries and promotion of intra-BRIC trade, finance, investment and strategic industries and energy security.

11. The BRIC institutional infrastructure and working methods should be modern and emphasize flexibility and agility, encourage working groups with designated lead countries to network through email and telephone etc. rather than travelling long distances for physical meetings, minimize the burden for BRIC countries in terms of both financial and human resources.

12. It would be useful to establish a BRIC Business Forum to provide a platform for productive interaction among CEOs/directors of leading BRIC corporations and financial ompanies, as well as BRIC producers and consumers of various products and services that are major items of exports/imports and competition in BRIC . Each country could nominate 4-6 business leaders to this forum and encourage them to meet at least once a year.

13. BRIC governments should institutionalise BRIC's "second track" as a permanent process to generate creative proposals for BRIC cooperation and constructive joint action, particularly at the current formative stage. The institutions in the four countries involved in the current pre-Summit Track II interaction should be entrusted with this task.

Financial Crisis and the New Global Financial Architecture

14. The BWI and IFI must be urgently overhauled and reformed. he current 'Voice and Vote' in the multi-lateral institutions do not provide an equitable and effective agency for addressing the specific concerns of nation states, specially the developing and emerging economies.

15. It was agreed that the BRIC countries must coordinate at the -20 and at the G-8 + 5 to ensure the restructuring and reconstitution of the BWI. There was also a suggestion that the BRICs may wish to seek institutionalisation of the G-20 Leaders summit as it provides a more democratic framework for global decision making.

16. Doubts were expressed on the ability of the IMF (FSF) to serve as a regulator or in making decisive interventions. While some suggested an alternate body for effective financial regulation, there was consensus on the need for democratising the IMF and thereafter giving it the sanction and authority through the FSF or other instruments to play the role of a regulator.

17. It was also generally agreed that prior to further resource mobilisation for and authorisation to the IMF, the governing structures of the World Bank and the IMF must be reconstituted to reflect current realities. GDP on PPP basis could be one basis for determining quotas and voice in this and other BWIs.

18. The issue of an alternate reserve currency or a new global currency was discussed. While it was accepted that the predominance of the 'US Dollar' is not desirable, it was agreed that the possible consequences of drastic changes in the current currency regime required further examination.

19. The balance of advantage in conducting Intra-BRIC trade in BRIC national currencies such as recent offerings of China to other EMEs, even if initially on a modest basis, was recommended for consideration.

20. It was agreed that the 'Stimulus' oriented responses across the globe needed a coordinated approach in order to cushion the inflationary impact that may result and depriving developing countries of access to finance (Crowding Out) for development. Regular meetings of BRIC Central Banks should be instituted to keep these developments under review.

21. A BRIC fund and/or issue of BRIC bonds could be commissioned for development of large strategic projects of intra-BRIC collaboration.

22. BRIC should set up mechanisms for commissioning serious studies to assess the potential of intra-BRIC trade expansion as an offset against the shrinking western demand and to also achieve diversified growth strategies.

23. Since BRIC countries have significant commodity imports and exports, there was a clearly felt need for shifting the 'price discovery' of important commodities from the west towards the east. As a case in point BRIC account for over 18% of oil trade and should exert some influence in price.Energy and Climate Change

24. Energy Security and climate change are two sides of the same coin. BRIC should coordinate their position at the forthcoming Copenhagen climate change negotiations and propose constructive approaches to international cooperation which address the needs and interests of all countries based on the agreed principle of "shared but differentiated responsibility".

25. BRIC should reject any suggestion that makes 'Green' the new label for discriminatory protectionist practices

26. Even as the current downturn has de-stabilized financial markets and is threatening investments in energy and infrastructure which are going to be critical for future growth, it also presents an opportunity for a fresh dialogue on the principles of mutual energy interdependence which can protect the interests of both producers and consumers against unpredictable and dangerous volatility.

27. As some of the world's largest producers as well as consumers of energy, BRIC countries can work toward developing the future architecture of world energy commerce. The need is to promote possibilities of finance and cross investments in energy infrastructure on a mutually beneficial basis.

28. BRIC countries should consult and cooperate to achieve a progressive diversification of energy sources to an appropriate fuel mix that includes fossil fuels, renewables and nuclear energy drawing upon on the resource and technology strengths of each nation

29. Reducing the energy intensity of their growth trajectory BRIC nations can collaborate to promote greater efficiency in the production, distribution and use of energy as possibilities for the biggest reductions in emissions are predicated on the achievement of these efficiencies.

30. Recognizing the inherent strengths of each of the four countries a mechanism for exchange and collaboration between Government's and Institutions needs to be put in place that can help understand, and enable each country to adapt and apply successful practices of different countries and their systems of technology and policy innovation.

31. Institutions from these countries can come together to build a shared energy and technology database to further collaborative research on energy and climate change that can better help and understand the impact of energy production, and patterns of its use and consumption for mitigation and adaptation issues that affect these nations.

Trade and Industrial Policy

32. It was emphasized that the need to understand the differences and contradictions is critical for fuller collaboration.

33. It was explicitly recognized that before identifying concrete areas of collaboration some detailed work needed to be done to ascertain spaces where complementary capabilities of the four countries can be utilized to meet common challenges. Such an exercise would be critical to highlight feasible options where constraints on co-operation are minimal.

34. Given this recognition, it was felt that co-operation in the following areas would be useful: Science and technology (including areas of innovation, intellectual property rights), agriculture, food security, energy and climate change would be useful.

35. It was also suggested that the scope of collaboration should be broad and encompass all these areas instead of focusing on a few. This would help resolve some of the differences that may constrain collaboration across BRIC countries.

36. Within science and technology, it was felt that all four countries have very good capabilities in the basic sciences and collaboration in this area to address common problems would be desirable.

37. One way of identifying collaboration opportunities would be to identify sectors where different BRIC nations have complementary capabilities and build a joint research programme. It was suggested that sectors like aviation, pharmaceuticals, energy, and space exploration may be appropriate for such 'project' like collaborations.

38. While the volume of trade between BRIC countries is not very large it has grown rapidly in recent years. The same is true of intra-BRIC foreign investments. This implies that the market has recognized the business potential of BRIC as an entity. Efforts now are required to facilitate a faster growth of this market based process. Among others, building of political relationships across BRIC nations would be critical to push this process.

39. It was suggested that we start with small steps to enhance intra-BRIC trade. This would involve removing/reducing tariff and non-tariff barriers including harmonization of standards. At a later stage more significant steps to tackle geo-political (e.g., energy transit) and other complex issues can be taken up.

40. Steps like co-operation between chambers of commerce, academicians etc. would build confidence and help identify new opportunities for co-operation.

41. It may be useful for BRIC to engage with countries like South Africa, both to enhance trade possibilities between Brazil and the other three nations (using South Africa as a transit point) but to also tap into the trade possibilities with regional trade partners of each of the BRIC countries. This might help create a trade enhancing network of FTAs.

42. All the four BRIC countries have significant forex reserves and there are some signs of the integration of capital markets of these countries. It may be useful to identify investment opportunities which all countries can exploit together by co-investing. These projects may be located within the BRIC region or in another region (e.g., Africa) where co-investments can be advantageous to all four nations.

43. Finally, it was felt that while we try and identify areas for long term collaboration, a few simple projects which can exploit existing opportunities quickly would be very useful. This will build a BRIC success story and build an impetus for collaboration by underlying the business and strategic potential of such co-operation. (ANI)