Sixth Brics Summit – Fortaleza Declaration

July 15, 2014 1. We, the leaders of the Federative Republic of Brazil, the Russian Federation, the Republic of India, the People’s Republic of China and the Republic of South Africa, met in Fortaleza, Brazil, on 15 July 2014 at the Sixth BRICS Summit. To inaugurate the second cycle of BRICS Summits, the theme chosen for our discussions was "Inclusive Growth: Sustainable Solutions”, in keeping with the inclusive macroeconomic and social policies carried out by our governments and the imperative to address challenges to humankind posed by the need to simultaneously achieve growth, inclusiveness, protection and preservation. 2. In the aftermath of the first cycle of five Summits, hosted by every BRICS member, our coordination is well established in various multilateral and plurilateral initiatives and intra-BRICS cooperation is expanding to encompass new areas. Our shared views and commitment to international law and to multilateralism, with the United Nations at its center and foundation, are widely recognized and constitute a major contribution to global peace, economic stability, social inclusion, equality, sustainable development and mutually beneficial cooperation with all countries. 3. We renew our openness to increasing engagement with other countries, particularly developing countries and emerging market economies, as well as with international and regional organizations, with a view to fostering cooperation and solidarity in our relations with all nations and peoples. To that effect, we will hold a joint session with the leaders of the South American nations, under the theme of the Sixth BRICS Summit, with a view to furthering cooperation between BRICS and South America. We reaffirm our support for the South American integration processes, and recognize in particular the importance of the Union of South American Nations (UNASUR) in promoting peace and democracy in the region, and in achieving sustainable development and poverty eradication. We believe that strengthened dialogue among BRICS and South American countries can play an active role in enhancing multilateralism and international cooperation, for the promotion of peace, security, economic and social progress and sustainable development in an interdependent and increasingly complex, globalizing world. 4. Since its inception the BRICS have been guided by the overarching objectives of peace, security, development and cooperation. In this new cycle, while remaining committed to those objectives, we pledge to deepen our partnership with a renewed vision, based on openness, inclusiveness and mutually beneficial cooperation. In this sense, we are ready to explore new areas towards a comprehensive cooperation and a closer economic partnership to facilitate market inter-linkages, financial integration, infrastructure connectivity as well as people-to-people contacts. 5. The Sixth Summit takes place at a crucial juncture, as the international community assesses how to address the challenges of strong economic recovery from the global financial crises, sustainable development, including climate change, while also formulating the post-2015 Development Agenda. At the same time, we are confronted with persistent political instability and conflict in various global hotspots and non-conventional emerging threats. On the other hand, international governance structures designed within a different power configuration show increasingly evident signs of losing legitimacy and effectiveness, as transitional and ad hoc arrangements become increasingly prevalent, often at the expense of multilateralism. We believe the BRICS are an important force for incremental change and reform of current institutions towards more representative and equitable governance, capable of generating more inclusive global growth and fostering a stable, peaceful and prosperous world. 6. During the first cycle of BRICS Summits, collectively our economies have consolidated their position as the main engines for sustaining the pace of the international economy as it recovers from the recent economic and financial global crisis. The BRICS continue to contribute significantly to global growth and to the reduction of poverty in our own and other countries. Our economic growth and social inclusion policies have helped to stabilize global economy, to foster the creation of jobs, to reduce poverty, and to combat inequality, thus contributing to the achievement of the Millennium Development Goals. In this new cycle, besides its contribution in fostering strong, sustainable and balanced growth, BRICS will continue to play a significant role in promoting social development and in contributing to define the international agenda in this area, building on its experience in addressing the challenges of poverty and inequality. 7. To better reflect the advancement of the social policies of the BRICS and the positive impacts of its economic growth, we instruct our National Institutes of Statistics and the Ministries of Health and Education to work on the development of joint methodologies for social indicators to be incorporated in the BRICS Joint Statistical Publication. We also encourage the BRICS Think Tanks Council to provide technical support in this task. We further request the BRICS National Institutes of Statistics to discuss the viability and feasibility of a platform for the development of such methodologies and to report thereon. 8. The world economy has strengthened, with signs of improvement in some advanced economies. Significant downside risks to this recovery remain, however. Unemployment and debt levels are worryingly high and growth remains weak in many advanced economies. Emerging market economies and developing countries (EMDCs) continue to contribute significantly to global growth and will do so in the years to come. Even as the global economy strengthens, monetary policy settings in some advanced economies may bring renewed stress and volatility to financial markets and changes in monetary stance need to be carefully calibrated and clearly communicated in order to minimize negative spillovers. 9. Strong macroeconomic frameworks, well regulated financial markets and robust levels of reserves have allowed EMDCs in general, and the BRICS in particular, to better deal with the risks and spillovers presented by the challenging economic conditions in the last few years. Nevertheless, further macroeconomic coordination amongst all major economies, in particular in the G20, remains a critical factor for strengthening the prospects for a vigorous and sustainable recovery worldwide. In this context, we reaffirm our strong commitment to continue working among ourselves and with the global community to foster financial stability, support sustainable, stronger and inclusive growth and promote quality jobs. The BRICS stand ready to contribute to the G20 goal of lifting our collective GDP by more than 2 percent above the trajectory implied by current policies over the coming 5 years. 10. We commend Russia for the successful work during its presidency of the G20 in 2013. The institution of the BRICS Summits largely coincided with the beginning of the global crisis, the first G20 Summits and the consolidation of that Group as the premier forum for economic coordination among its members. As a new round of BRICS Summits begins, we remain committed to deliver constructive responses to global economic and financial challenges and to serve as a strong voice for the promotion of sustainable development, inclusive growth, financial stability and of more representative international economic governance. We will continue to pursue our fruitful coordination and to promote our development goals within the international economic system and financial architecture. 11. BRICS, as well as other EMDCs, continue to face significant financing constraints to address infrastructure gaps and sustainable development needs. With this in mind, we are pleased to announce the signing of the Agreement establishing the New Development Bank (NDB), with the purpose of mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging and developing economies. We appreciate the work undertaken by our Finance Ministers. Based on sound banking principles, the NDB will strengthen the cooperation among our countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to our collective commitments for achieving the goal of strong, sustainable and balanced growth. 12. The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. The first chair of the Board of Governors shall be from Russia. The first chair of the Board of Directors shall be from Brazil. The first President of the Bank shall be from India. The headquarters of the Bank shall be located in Shanghai. The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters. We direct our Finance Ministers to work out the modalities for its operationalization. 13. We are pleased to announce the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements. We appreciate the work undertaken by our Finance Ministers and Central Bank Governors. The Agreement is a framework for the provision of liquidity through currency swaps in response to actual or potential short-term balance of payments pressures. 14. We also welcome the signing of the Memorandum of Understanding on Cooperation among BRICS Export Credit and Guarantees Agencies that will improve the support environment for increasing trade opportunities among our nations. 15. We appreciate the progress our Development Banks have made in enhancing and strengthening the financial ties among BRICS countries. Given the importance of adopting innovation initiatives, we welcome the conclusion of the Cooperation Agreement on Innovation within the BRICS Interbank Cooperation Mechanism. 16. We recognize that there is potential for BRICS insurance and reinsurance markets to pool capacities. We direct our relevant authorities to explore avenues of cooperation in this regard. 17. We believe that sustainable development and economic growth will be facilitated by taxation of revenue generated in jurisdictions where economic activity takes place. We express our concern over the harmful impact of tax evasion, transnational fraud and aggressive tax planning on the world economy. We are aware of the challenges brought by aggressive tax avoidance and non-compliance practices. We, therefore, affirm our commitment to continue a cooperative approach on issues related to tax administrations and to enhance cooperation in the international forums targeting tax base erosion and information exchange for tax purposes. We direct our relevant authorities to explore ways of enhancing cooperation in this area. We also direct our relevant authorities to strengthen cooperation in the field of customs. 18. We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund (IMF) reforms, which negatively impacts on the IMF’s legitimacy, credibility and effectiveness. The IMF reform process is based on high-level commitments, which already strengthened the Fund's resources and must also lead to the modernization of its governance structure so as to better reflect the increasing weight of EMDCs in the world economy. The Fund must remain a quota-based institution. We call on the membership of the IMF to find ways to implement the 14th General Review of Quotas without further delay. We reiterate our call on the IMF to develop options to move ahead with its reform process, with a view to ensuring increased voice and representation of EMDCs, in case the 2010 reforms are not entered into force by the end of the year. We also call on the membership of the IMF to reach a final agreement on a new quota formula together with the 15th General Review of Quotas so as not to further jeopardize the postponed deadline of January 2015. 19. We welcome the goals set by the World Bank Group to help countries end extreme poverty and to promote shared prosperity. We recognize the potential of this new strategy in support of the fulfillment of these ambitious goals by the international community. This potential will only be realized, however, if the institution and its membership effectively move towards more democratic governance structures, strengthen the Bank's financial capacity and explore innovative ways to enhance development financing and knowledge sharing while pursuing a strong client orientation that recognizes each country's development needs. We look forward to initiating the work on the next shareholding review at the World Bank as soon as possible in order to meet the agreed deadline of October 2015. In this sense, we call for an international financial architecture that is more conducive to overcoming development challenges. We have been very active in improving the international financial architecture through our multilateral coordination and through our financial cooperation initiatives, which will, in a complementary manner, increase the diversity and availability of resources for promoting development and ensuring stability in the global economy. 20. We are committed to raise our economic cooperation to a qualitatively new level. To achieve this, we emphasize the importance of establishing a road map for intra-BRICS economic cooperation. In this regard, we welcome the proposals for a "BRICS Economic Cooperation Strategy” and a "Framework of BRICS Closer Economic Partnership”, which lay down steps to promote intra-BRICS economic, trade and investment cooperation. Based on the documents tabled and informed by the input of the BRICS Think Tanks Council (BTTC), we instruct our Sherpas to advance discussions with a view to submit their proposal for endorsement by the next BRICS Summit. 21. We believe all countries should enjoy due rights, equal opportunities and fair participation in global economic, financial and trade affairs, recognizing that countries have different capacities and are at different levels of development. We strive for an open world economy with efficient allocation of resources, free flow of goods, and fair and orderly competition to the benefit of all. In reaffirming our support for an open, inclusive, non-discriminatory, transparent and rule-based multilateral trading system, we will continue our efforts towards the successful conclusion of the Doha Round of the World Trade Organization (WTO), following the positive results of the Ninth Ministerial Conference (MC9), held in Bali, Indonesia, in December 2013. In this context, we reaffirm our commitment to establish by the end of this year a post-Bali work program for concluding the Doha Round, based on the progress already made and in keeping with the mandate established in the Doha Development Agenda. We affirm that this work program should prioritize the issues where legally binding outcomes could not be achieved at MC9, including Public Stock-Holding for Food Security Purposes. We look forward to the implementation of the Agreement on Trade Facilitation. We call upon international partners to provide support to the poorest, most vulnerable WTO members to enable them to implement this Agreement, which should support their development objectives. We strongly support the WTO dispute settlement system as a cornerstone of the security and predictability of the multilateral trading system and we will enhance our ongoing dialogue on substantive and practical matters relating to it, including in the ongoing negotiations on WTO Dispute Settlement Understanding reform. We recognize the importance of Regional Trade Agreements, which should complement the multilateral trading system, and of keeping them open, inclusive and transparent, as well as refraining from introducing exclusive and discriminatory clauses and standards. 22. We reaffirm the United Nations Conference on Trade and Development’s (UNCTAD) mandate as the focal point in the UN system dedicated to consider the interrelated issues of trade, investment, finance and technology from a development perspective. UNCTAD’s mandate and work are unique and necessary to deal with the challenges of development and growth in the increasingly interdependent global economy. In congratulating UNCTAD for the 50th anniversary of its foundation in 2014, which is also the anniversary of the establishment of the Group of 77, we further reaffirm the importance of strengthening UNCTAD’s capacity to deliver on its programs of consensus building, policy dialogue, research, technical cooperation and capacity building so that it is better equipped to deliver on its development mandate. 23. We acknowledge the important role that State Owned Companies (SOCs) play in the economy and encourage our SOCs to continue to explore ways of cooperation, exchange of information and best practices. We also recognize the fundamental role played by small and medium-sized enterprises in the economies of our countries as major creators of jobs and wealth. We will enhance cooperation and recognize the need for strengthening intra-BRICS dialogue with a view to promote international exchange and cooperation and to foster innovation, research and development. 24. We underline that 2015 marks the 70th anniversary of the founding of the United Nations (UN) and the end of the Second World War. In this connection, we support the UN to initiate and organize commemorative events to mark and pay tribute to these two historical moments in human history, and reaffirm our commitment to safeguarding a just and fair international order based on the UN Charter, maintaining world peace and security, as well as promoting human progress and development. 25. We reiterate our strong commitment to the UN as the fundamental multilateral organization entrusted with helping the international community maintain international peace and security, protect and foster human rights and promote sustainable development. The UN enjoys universal membership and is at the very center of global governance and multilateralism. We recall the 2005 World Summit Outcome Document. We reaffirm the need for a comprehensive reform of the UN, including its Security Council, with a view to making it more representative, effective and efficient, so that it can adequately respond to global challenges. China and Russia reiterate the importance they attach to Brazil, India and South Africa's status and role in international affairs and support their aspiration to play a greater role in the UN. 26. We recall that development and security are closely interlinked, mutually reinforcing and key to attaining sustainable peace. We reiterate our view that the establishment of sustainable peace requires a comprehensive, concerted and determined approach, based on mutual trust, mutual benefit, equity and cooperation, that addresses the root causes of conflicts, including their political, economic and social dimensions. In this context, we also stress the close interrelation between peacekeeping and peacebuilding. We also highlight the importance of bringing gender perspectives to conflict prevention and resolution, peacebuilding, peacekeeping, rehabilitation and reconstruction efforts. 27. We will continue our joint efforts in coordinating positions and acting on shared interests on global peace and security issues for the common well-being of humanity. We stress our commitment to the sustainable and peaceful settlement of disputes, according to the principles and purposes of the UN Charter. We condemn unilateral military interventions and economic sanctions in violation of international law and universally recognized norms of international relations. Bearing this in mind, we emphasize the unique importance of the indivisible nature of security, and that no State should strengthen its security at the expense of the security of others. 28. We agree to continue to treat all human rights, including the right to development, in a fair and equal manner, on the same footing and with the same emphasis. We will foster dialogue and cooperation on the basis of equality and mutual respect in the field of human rights, both within BRICS and in multilateral fora – including the United Nations Human Rights Council where all BRICS serve as members in 2014 – taking into account the necessity to promote, protect and fulfill human rights in a non-selective, non-politicized and constructive manner, and without double standards. 29. We commend the efforts made by the United Nations, the African Union (AU), Economic Community of West African States (ECOWAS) and the Community of Portuguese-Speaking Countries (CPLP), among others, in support for the realization of legislative and presidential elections in Guinea Bissau, paving the way for the return to constitutional democracy in the country. We recognize the importance of promoting long-term political stability in Guinea-Bissau, which necessarily encompasses measures to reduce food insecurity and to advance a comprehensive security sector reform, as proposed by the Guinea-Bissau Configuration of the UN Peacebuilding Commission. Similarly, we also welcome the efforts of the UN, AU and Southern African Development Community (SADC) in support of legislative and presidential elections in Madagascar, assisting in the return of constitutional democracy in the country. 30. We commend the efforts of the international community in addressing instability in Africa through engagement with, and coordination by, the AU and its Peace and Security Council. We express our deep concern at the deterioration of the security and the humanitarian situation in West Africa. We call upon all parties in these conflicts to cease hostilities, exercise restraint and engage in dialogue to ensure return to peace and stability. However, we also note the progress that has been made in areas of the region in addressing political and security challenges. 31. We also express our concern with the plight of the abducted women and children of Chibok and call for an end to the continued terrorist acts perpetrated by Boko Haram. 32. We support the efforts of the UN Multidimensional Integrated Stabilization Mission in Mali (MINUSMA) in its task to help the Government of Mali fully stabilize the country, facilitate national political dialogue, protect civilians, monitor the human rights situation, create conditions for the provision of humanitarian assistance and the return of displaced persons, and extend the State authority in the whole country. We emphasize the importance of an inclusive political process; the immediate implementation of a disarmament, demobilization and reintegration (DDR) process; and political, economic and social development in order for Mali to achieve sustainable peace and stability. 33. We express our concern about the ongoing political and humanitarian crises in South Sudan. We condemn the continuation of violence against civilians and call upon all parties to ensure a safe environment for the delivery of humanitarian assistance. We also condemn the continuation of confrontations despite the successive commitments to the cessation of hostilities and express our belief that a sustainable solution to the crisis is only possible through an inclusive political dialogue aimed at national reconciliation. We support, in this regard, the regional efforts to find a peaceful solution to the crisis, especially the mediation process led by the Intergovernmental Authority on Development (IGAD). We welcome the "Agreement to Resolve the Crisis in South Sudan", signed on May 9, and expect the political leaders of South Sudan to remain committed to the negotiation process and to the completion of dialogue on the formation of a transitional government of national unity within 60 days, as announced by IGAD on June 10. We commend the efforts of the United Nations Mission in South Sudan to fulfill its mandate and express our deep concern about the armed attacks that were led against UN bases in the country. 34. We reiterate our grave concern with the situation in the Central African Republic (CAR). We strongly condemn the abuses and acts of violence against the civilian population, including sectarian violence, and urge all armed groups to cease hostilities immediately. We recognize the efforts of the Economic Community of Central African States and the AU to restore peace and stability in the country. We commend the establishment of the UN Multidimensional Integrated Stabilization Mission in the CAR (MINUSCA). We express our support for a successful transition from the African-led International Support Mission to the CAR (MISCA) to MINUSCA by 15 September 2014. We urge the transitional authorities in the CAR to adhere strictly to the N'Djamena Roadmap. We call upon all parties to allow safe and unhindered humanitarian access to those in need. We reaffirm our readiness to work with the international community to assist the CAR in accelerating the implementation of the political process of the country. 35. We support the efforts by the UN, in particular the UN Organization Stabilization Mission in the Democratic Republic of the Congo (MONUSCO), deployed under UN Security Council resolution 2098, and the regional and sub-regional organizations to bring peace and stability to the Democratic Republic of the Congo (DRC), and we call upon all involved to honor their obligations in order to achieve lasting peace and stability in the DRC. 36. We welcome the AU Malabo Summit decision to establish an interim African Capacity for Immediate Response to Crises (ACIRC) by October 2014 to respond quickly to crisis situations as they arise. We stress the importance of adequate support to ensure the timely operationalization of the ACIRC, pending the final establishment of the African Stand-by Force. 37. We express deep concern about the ongoing violence and the deterioration of the humanitarian situation in Syria and condemn the increasing violations of human rights by all parties. We reiterate our view that there is no military solution to the conflict, and highlight the need to avoid its further militarization. We call upon all parties to commit immediately to a complete cease-fire, to halt violence and to allow and facilitate immediate, safe, full and unimpeded access for humanitarian organizations and agencies, in compliance with the UN Security Council resolution 2139. We recognize practical steps undertaken by the Syrian parties in implementing its requirements, including the practice of local cease-fire agreements reached between the Syrian authorities and the opposition forces. We reiterate our condemnation of terrorism in all its forms and manifestations, wherever it occurs. We are gravely concerned at the continued threat of terrorism and extremism in Syria. We call on all Syrian parties to commit to putting an end to terrorist acts perpetrated by Al-Qaeda, its affiliates and other terrorist organizations. We strongly condemn the use of chemical weapons in any circumstances. We welcome the decision of the Syrian Arab Republic to accede to the Chemical Weapons Convention. In accordance with related Organization for the Proscription of Chemical Weapons (OPCW) Executive Council decisions and UN Security Council resolution 2118, we reiterate the importance of the complete removal and elimination of the Syrian chemical weapons. We commend the progress in that regard and welcome the announcement that the removal of declared chemicals from the Syrian Arab Republic was completed. We call on all Syrian parties and interested external actors with relevant capabilities to work closely together and with the OPCW and the UN to arrange for the security of the monitoring and destruction mission in its final stage. We support the mediation role played by the UN. We appreciate the contribution made by former Joint UN – Arab League Special Representative for Syria, Mr. Lakhdar Brahimi, and welcome the appointment of Mr. Staffan De Mistura as UN Special Envoy to Syria, and express our hope for his active efforts to promote an early resumption of comprehensive negotiations. We recall that national dialogue and reconciliation are key to the political solution for the Syrian crisis. We take note of the recent Syrian presidential elections. We stress that only an inclusive political process, led by the Syrians, as recommended in the Action Group on Syria Final Communiqué of 2012, will lead to peace, effective protection of civilians, the realization of the legitimate aspirations of the Syrian society for freedom and prosperity and respect for Syrian independence, territorial integrity and sovereignty. We emphasize that a national reconciliation process needs to be launched as early as possible, in the interest of the national unity of Syria. To that end, we urge all parties in Syria to demonstrate political will, enhance mutual understanding, exercise restraint and commit to seeking common ground in accommodating their differences. 38. We reaffirm our commitment to contribute to a comprehensive, just and lasting settlement of the Arab-Israeli conflict on the basis of the universally recognized international legal framework, including the relevant UN resolutions, the Madrid Principles and the Arab Peace Initiative. We believe that the resolution of the Israeli-Palestinian conflict is a fundamental component for building a sustainable peace in the Middle East. We call upon Israel and Palestine to resume negotiations leading to a two-State solution with a contiguous and economically viable Palestinian State existing side by side in peace with Israel, within mutually agreed and internationally recognized borders based on the 4 June 1967 lines, with East Jerusalem as its capital. We oppose the continuous construction and expansion of settlements in the Occupied Palestinian Territories by the Israeli Government, which violates international law, gravely undermines peace efforts and threatens the viability of the two-State solution. We welcome recent efforts to achieve intra-Palestinian unity, including the formation of a national unity government and steps towards conducting general elections, which is key element to consolidate a democratic and sustainable Palestinian State, and call on the parties to fully commit to the obligations assumed by Palestine. We call on the UN Security Council to fully exercise its functions under the UN Charter with regard to the Israeli-Palestinian conflict. We recall with satisfaction the decision of the UN General Assembly to proclaim 2014 the International Year of Solidarity with the Palestinian People, welcome the efforts of UN Relief and Works Agency (UNRWA) in providing assistance and protection for Palestine refugees and encourage the international community to continue to support the activities of the agency. 39. We express our support for the convening, at the earliest possible date, of the Conference on the establishment of a Middle East zone free of nuclear weapons and all other weapons of mass destruction. We call upon all states of the region to attend the Conference and to engage constructively and in a pragmatic manner with a view to advancing that goal. 40. Noting the open-ended consultations on a draft International Code of Conduct on Outer Space Activities, and the active and constructive engagement of our countries in these consultations, we call for an inclusive and consensus-based multilateral negotiation to be conducted within the framework of the UN without specific deadlines in order to reach a balanced outcome that addresses the needs and reflects the concerns of all participants. Reaffirming our will that the exploration and use of outer space shall be for peaceful purposes, we stress that negotiations for the conclusion of an international agreement or agreements to prevent an arms race in outer space remain a priority task of the Conference on Disarmament, and welcome the introduction by China and Russia of the updated draft Treaty on the Prevention of the Placement of Weapons in Outer Space, the Threat or Use of Force Against Outer Space Objects. 41. While reiterating our view that there is no alternative to a negotiated solution to the Iranian nuclear issue, we reaffirm our support to its resolution through political and diplomatic means and dialogue. In this context, we welcome the positive momentum generated by talks between Iran and the E3+3 and encourage the thorough implementation of the Geneva Joint Plan of Action of 24 November 2013, with a view to achieving a comprehensive and long-lasting solution to this issue. We also encourage Iran and the International Atomic Energy Agency (IAEA) to continue strengthening their cooperation and dialogue on the basis of the Joint Statement signed on 11 November 2013. We recognize Iran's inalienable right to the peaceful use of nuclear energy in a manner consistent with its international obligations. 42. Recognizing that peace, security and development are closely interlinked, we reaffirm that Afghanistan needs time, development assistance and cooperation, preferential access to world markets and foreign investment to attain lasting peace and stability. We support the commitment of the international community to remain engaged in Afghanistan during the transformation decade (2015-2024), as enunciated at the Bonn International Conference in December 2011. We stress that the UN should play an increasingly important role in assisting Afghanistan's national reconciliation, recovery and economic reconstruction. We also reaffirm our commitment to support Afghanistan's emergence as a peaceful, stable and democratic state, free of terrorism and extremism, and underscore the need for more effective regional and international cooperation for the stabilization of Afghanistan, including by combating terrorism. We extend support to the efforts aimed at combating illicit traffic in opiates originating in Afghanistan within the framework of the Paris Pact. We expect a broad-based and inclusive peace process in Afghanistan which is Afghan-led and Afghan-owned. We welcome the second round of the presidential elections in Afghanistan which contribute to the democratic transfer of power in this country. We welcome China’s offer to host the Fourth Heart of Asia Ministerial Conference in August 2014. 43. We are deeply concerned by the situation in Iraq. We strongly support the Iraqi government in its effort to overcome the crisis, uphold national sovereignty and territorial integrity. We are concerned about spillover effects of the instability in Iraq resulting from increased terrorist activities in the region, and urge all parties to address the terrorist threat in a consistent manner. We urge all regional and global players to refrain from interference that will further deepen the crisis and to support the Iraqi government and the people of Iraq in their efforts to overcome the crisis, and build a stable, inclusive and united Iraq. We emphasize the importance of national reconciliation and unity in Iraq, taking into consideration the wars and conflicts the Iraqi people have suffered and in this context we commend the peaceful and orderly holding of the latest parliamentary elections. 44. We express our deep concern with the situation in Ukraine. We call for a comprehensive dialogue, the de-escalation of the conflict and restraint from all the actors involved, with a view to finding a peaceful political solution, in full compliance with the UN Charter and universally recognized human rights and fundamental freedoms. 45. We reaffirm our commitment to continue to tackle transnational organized crime, with full respect for human rights, in order to reduce the negative impact it has on individuals and societies. We encourage joint efforts aimed at preventing and combating transnational criminal activities in accordance with national legislations and international legal instruments, especially the UN Convention against Transnational Organized Crime. In this regard, we welcome BRICS cooperation in multilateral fora, highlighting our engagement in the ECOSOC Commission on Crime Prevention and Criminal Justice. 46. Piracy and armed robbery at sea are complex phenomena that must be fought effectively in a comprehensive and integrated manner. We welcome the efforts made by the international community to counter maritime piracy and call upon all stakeholders – civilian and military, public and private – to remain engaged in the fight against this phenomenon. We also highlight the need for a transparent and objective review of the High Risk Areas, with a view to avoiding unnecessary negative effects on the economy and security of coastal states. We commit to strengthen our cooperation on this serious issue. 47. We are deeply concerned by the world drug problem, which continues to threaten public health, safety and well-being and to undermine social, economic and political stability and sustainable development. We are committed to countering the world drug problem, which remains a common and shared responsibility, through an integrated, multidisciplinary, mutually reinforcing and balanced approach to supply and demand reduction strategies, in line with the three UN drug conventions and other relevant norms and principles of international law. We welcome the substantive work done by Russia in preparing and hosting the International Ministers Meeting on 15 May 2014 to discuss the world drug problem. We take note of the proposal for the creation of an Anti-Drug Working Group presented at the Second Meeting of BRICS Heads of Drug Control Agencies. 48. We reiterate our strong condemnation of terrorism in all its forms and manifestations and stress that there can be no justification, whatsoever, for any acts of terrorism, whether based upon ideological, religious, political, racial, ethnic, or any other justification. We call upon all entities to refrain from financing, encouraging, providing training for or otherwise supporting terrorist activities. We believe that the UN has a central role in coordinating international action against terrorism, which must be conducted in accordance with international law, including the UN Charter, and with respect to human rights and fundamental freedoms. In this context, we reaffirm our commitment to the implementation of the UN Global Counter-Terrorism Strategy. We express our concern at the increasing use, in a globalized society, by terrorists and their supporters, of information and communications technologies (ICTs), in particular the Internet and other media, and reiterate that such technologies can be powerful tools in countering the spread of terrorism, including by promoting tolerance and dialogue among peoples. We will continue to work together to conclude as soon as possible negotiations and to adopt in the UN General Assembly the Comprehensive Convention on International Terrorism. We also stress the need to promote cooperation among our countries in preventing terrorism, especially in the context of major events. 49. We believe that ICTs should provide instruments to foster sustainable economic progress and social inclusion, working together with the ICT industry, civil society and academia in order to realize the ICT-related potential opportunities and benefits for all. We agree that particular attention should be given to young people and to small and medium-sized enterprises, with a view to promoting international exchange and cooperation, as well as to fostering innovation, ICT research and development. We agree that the use and development of ICTs through international cooperation and universally accepted norms and principles of international law is of paramount importance, in order to ensure a peaceful, secure and open digital and Internet space. We strongly condemn acts of mass electronic surveillance and data collection of individuals all over the world, as well as violation of the sovereignty of States and of human rights, in particular the right to privacy. We take note of the Global Multistakeholder Meeting on the Future of Internet, held in São Paulo, on 23-24 April 2014. We thank Brazil for having organized it. 50. We will explore cooperation on combating cybercrimes and we also recommit to the negotiation of a universal legally binding instrument in that field. We consider that the UN has a central role in this matter. We agree it is necessary to preserve ICTs, particularly the Internet, as an instrument of peace and development and to prevent its use as a weapon. Moreover, we commit ourselves to working together in order to identify possibilities of developing joint activities to address common security concerns in the use of ICTs. We reiterate the common approach set forth in the eThekwini Declaration about the importance of security in the use of ICTs. We welcome the decision of the National Security Advisors to establish a group of experts of BRICS member States which will elaborate practical proposals concerning major fields of cooperation and coordinate our positions in international fora. Bearing in mind the significance of these issues, we take note of Russia’s proposal of a BRICS agreement on cooperation in this field to be jointly elaborated. 51. We reiterate our commitment to the implementation of the Convention on Biological Diversity and its Protocols, with special attention to the Strategic Plan for Biodiversity 2011-2020 and the Aichi Targets. We recognize the challenge posed by the agreed targets on conservation of biodiversity and reaffirm the need to implement the decisions on resource mobilization agreed to by all parties in Hyderabad in 2012, and set resource mobilization targets that are ambitious in order to allow for their fulfillment. 52. Acknowledging that climate change is one of the greatest challenges facing humankind, we call on all countries to build upon the decisions adopted in the UN Framework Convention on Climate Change (UNFCCC) with a view to reaching a successful conclusion by 2015, of negotiations on the development of a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties, in accordance with the principles and provisions of UNFCCC, in particular the principle of common but differentiated responsibilities and respective capabilities. In this regard, we reiterate our support to the Presidency of the 20th session of the Conference of the Parties and the 10th session of the Conference of the Parties serving as the Meeting of the Parties to the Kyoto Protocol, to be held in Lima, Peru, in December 2014. We also note the convening of the UN Climate Summit 2014 to be held this September. 53. While bearing in mind that fossil fuel remains one of the major sources of energy, we reiterate our belief that renewable and clean energy, research and development of new technologies and energy efficiency, can constitute an important driver to promote sustainable development, create new economic growth, reduce energy costs and increase the efficiency in the use of natural resources. Considering the dynamic link between renewable and clean energy and sustainable development, we reaffirm the importance of continuing international efforts aimed at promoting the deployment of renewable and clean energy and energy efficiency technologies, taking into account national policies, priorities and resources. We stand for strengthening international cooperation to promote renewable and clean energy and to universalize energy access, which is of great importance to improving the standard of living of our peoples. 54. We are committed to working towards an inclusive, transparent and participative intergovernmental process for building a universal and integrated development agenda with poverty eradication as the central and overarching objective. The agenda should integrate the economic, social and environmental dimensions of sustainable development in a balanced and comprehensive manner with concise, implementable and measurable goals, taking into account differing national realities and levels of development and respecting national policies and priorities. The Post-2015 Development Agenda must also be based on and fully respect all Rio principles on sustainable development, including the principle of common but differentiated responsibilities. We welcome the outcome document of the UN General Assembly Special Event on the Millennium Development Goals, which decided to launch an intergovernmental process at the beginning of the 69th Session of the UN General Assembly that will lead to the adoption of the Post-2015 Development Agenda. 55. We reiterate our commitment to the UN General Assembly Open Working Group on Sustainable Development Goals (SDGs) and to working together to achieve a consensual and ambitious proposal on SDGs. We emphasize the importance of the work by the Intergovernmental Committee of Experts on Sustainable Development Financing and highlight the need for an effective sustainable development financing strategy to facilitate the mobilization of resources in achieving sustainable development objectives and supporting developing countries in the implementation efforts, with ODA as a major source of financing. We support the creation of a facilitation mechanism for the development, transfer and dissemination of clean and environmentally sound technologies and call for the establishment of a working group within the UN on this proposal, taking into account the Rio+20 outcome document and the Secretary General's reports on the issue. In this regard, we reaffirm that the outcome of each of these processes can contribute to the formulation of Sustainable Development Goals. 56. We recognize the strategic importance of education for sustainable development and inclusive economic growth. We reaffirm our commitment to accelerating progress in attaining the Education for All goals and education-related Millennium Development Goals by 2015 and stress that the development agenda beyond 2015 should build on these goals to ensure equitable, inclusive and quality education and lifelong learning for all. We are willing to strengthen intra-BRICS cooperation in the area and welcome the meeting of Ministers of Education held in Paris, in November 2013. We intend to continue cooperation with relevant international organizations. We encourage the initiative to establish the BRICS Network University. 57. In March 2014 we agreed to collaborate through dialogue, cooperation, sharing of experiences and capacity building on population related matters of mutual concern to member states. We recognize the vital importance of the demographic dividend that many of us possess to advance our sustainable development as well as the need to integrate population factors into national development plans, and to promote a long-term balanced population and development. The demographic transition and post-transition challenges, including population ageing and mortality reduction are amongst the most important challenges facing the world today. We confirm our strong commitment to address social issues in general and in particular gender inequality, women's rights and issues facing young people and we reaffirm our determination to ensure sexual and reproductive health and reproductive rights for all. 58. We recognize that corruption negatively affects sustainable economic growth, poverty reduction and financial stability. We are committed to combat domestic and foreign bribery, and strengthen international cooperation, including law enforcement cooperation, in accordance with multilaterally established principles and norms, especially the UN Convention Against Corruption. 59. Considering the link between culture and sustainable development, as well as the role of cultural diplomacy as a promoter of understanding between peoples, we will encourage cooperation between BRICS countries in the cultural sector, including on the multilateral basis. Recognizing the contribution and the benefits of cultural exchanges and cooperation in enhancing our mutual understanding and friendship, we will actively promote greater awareness, understanding and appreciation of each other’s arts and culture. In this regard, we ask our relevant authorities responsible for culture to explore areas of practical cooperation, including to expedite negotiations on the draft agreement on cultural cooperation. 60. We are pleased with progress in implementing the eThekwini Action Plan, which further enhanced our cooperation and unleashed greater potential for our development. In this regard, we commend South Africa for the full implementation of the eThekwini Action Plan. 61. We are committed to promoting agricultural cooperation and to exchange information regarding strategies for ensuring access to food for the most vulnerable population, reduction of negative impact of climate change on food security and adaptation of agriculture to climate change. We recall with satisfaction the decision of UN General Assembly to declare 2014 the International Year of Family Farming. 62. We take note of the following meetings which were held in preparation for this Summit: - Third BRICS Think Tanks Council (BTTC); - Third BRICS Business Council; - Sixth Academic Forum; - Fifth Business Forum; - Fourth Financial Forum. 63. We welcome the outcomes of the meeting of the BRICS Finance Ministers and Central Bank Governors and endorse the Joint Communiqué of the Meeting of the BRICS Trade Ministers held in preparation for the Summit. 64. The 5th edition of the BRICS Business Forum provided an opportunity for match-making and for in-depth discussion of highly relevant issues of the trade and investment agenda. We welcome the meeting of the BRICS Business Council and commend it for its Annual Report 2013/2014. We encourage the respective business communities to follow-up the initiatives proposed and to deepen dialogue and cooperation in the five areas dealt with by the Industry/Sector Working Groups with a view to intensifying trade and investment flows amongst BRICS countries as well as between BRICS and other partners around the world. 65. We reiterate our commitment made during the BRICS Leaders-Africa Retreat at the 5th BRICS Summit to foster and develop BRICS-Africa cooperation in support of the socioeconomic development of Africa, particularly with regard to infrastructure development and industrialization. We welcome the inclusion of these issues in discussions during the BRICS Business Council Meeting, held in Johannesburg in August 2013. 66. We welcome the BTTC Study "Towards a Long-Term Strategy for BRICS: Recommendations by the BTTC”. We acknowledge the decision taken by the BTTC, taken at its Rio de Janeiro meeting in March 2014 to focus its work on the five pillars upon which the BRICS long-term strategy for cooperation will rest. The BTTC is encouraged to develop strategic pathways and action plans that will lead to the realization of this long-term strategy. 67. We welcome the holding of the first Meeting of the BRICS Ministers of Science, Technology and Innovation and the Cape Town Declaration, which is aimed at: (i) strengthening cooperation in science, technology and innovation; (ii) addressing common global and regional socio-economic challenges utilizing shared experiences and complementarities; (iii) co-generating new knowledge and innovative products, services and processes utilizing appropriate funding and investment instruments; and (iv) promoting, where appropriate, joint BRICS partnerships with other strategic actors in the developing world. We instruct the BRICS Ministers of Science and Technology to sign at their next meeting the Memorandum of Understanding on Science, Technology and Innovation, which provides a strategic framework for cooperation in this field. 68. We welcome the establishment of the BRICS Information Sharing and Exchange Platform, which seeks to facilitate trade and investment cooperation. 69. We will continue to improve competition policy and enforcement, undertake actions to address challenges that BRICS Competition Authorities face and further enable competitive environments in order to enhance contributions to economic growth in our economies. We note South Africa’s offer to host the 4th Meeting of BRICS Competition Authorities in 2015. 70. We reiterate our commitment to fostering our partnership for common development. To this end, we adopt the Fortaleza Action Plan. 71. Russia, India, China and South Africa extend their warm appreciation to the Government and people of Brazil for hosting the Sixth BRICS Summit in Fortaleza. 72. Brazil, India, China and South Africa convey their appreciation to Russia for its offer to host the Seventh BRICS Summit in 2015 in the city of Ufa and extend their full support to that end. Fortaleza Action Plan 1. Meeting of BRICS Ministers of Foreign Affairs / International Relations on the margins of UN General Assembly. 2. Meeting of BRICS National Security Advisors. 3. Mid-term meeting of BRICS Sherpas and Sous-Sherpas. 4. Meetings of BRICS Finance Ministers and Central Bank Governors on the margins of G20 meetings, WB/IMF meetings, as well as stand-alone meetings, as required. 5. Meetings of BRICS Trade Ministers on the margin of multilateral events, or stand-alone meetings, as required. 6. Meeting of BRICS Ministers of Agriculture and Agrarian Development, preceded by the Meeting of BRICS Agricultural Cooperation Working Group. 7. Meeting of BRICS Health Ministers. 8. Meeting of BRICS Ministers of Science, Technology and Innovation. 9. Meeting of BRICS Ministers of Education. 10. Meeting of Ministers or Senior Officials responsible for social security, on the margins of a multilateral meeting. 11. BRICS Seminar of Officials and Experts on Population Matters. 12. Meeting of BRICS Cooperatives (held in Curitiba on 14-16 May 2014). 13. Meetings of financial and fiscal authorities on the margins of WB/IMF meetings as well as stand-alone meetings, as required. 14. Meetings of the BRICS Contact Group on Economic and Trade Issues (CGETI). 15. Meeting of the BRICS Friendship Cities and Local Governments Cooperation Forum. 16. Meeting of the BRICS Urbanization Forum. 17. Meeting of BRICS Competition Authorities in 2015 in South Africa. 18. Meeting of BRICS Heads of National Statistical Institutions. 19. Meeting of Anti-Drug Experts. 20. Meeting of BRICS Experts on Anti-corruption cooperation, on the margins of a multilateral meeting 21. Consultations amongst BRICS Permanent Missions and/or Embassies, as appropriate, in New York, Vienna, Rome, Paris, Washington, Nairobi and Geneva, where appropriate. 22. Consultative meeting of BRICS Senior Officials on the margins of relevant sustainable development, environment and climate related international fora, where appropriate. 23. Sports and Mega Sporting Events. New areas of cooperation to be explored - Mutual recognition of Higher Education Degrees and Diplomas; - Labor and Employment, Social Security, Social Inclusion Public Policies; - Foreign Policy Planning Dialogue; - Insurance and reinsurance; - Seminar of Experts on E-commerce.

BRICS bank to counter Western hold on global finances

Leaders of the BRICS emerging market nations launched a $100-billion development bank and a currency reserve pool on Tuesday in their first concrete step toward reshaping the Western-dominated international financial system.

The bank aimed at funding infrastructure projects in developing nations will be based in Shanghai and India will preside over its operations for the first five years, followed by Brazil and then Russia, leaders of the five-nation group announced at a summit.

They also set up a $100 billion currency reserves pool to help countries forestall short-term liquidity pressures.

The long-awaited bank is the first major achievement of the BRICS countries since they got together in 2009 to press for a bigger say in the global financial order created by Western powers after World War II.

The BRICS were prompted to seek coordinated action following an exodus of capital from emerging markets last year, triggered by the scaling back of U.S. monetary stimulus.

The new bank reflects the growing influence of the BRICS, which account for almost half the world’s population and about one fifth of global economic output.

The bank will start with a subscribed capital of $50 billion divided equally between its five founders, with an initial total of $10 billion in cash put in over seven years and $40 billion in guarantees.

The bank will start lending in 2016 and be open to membership by other countries, but the capital share of the BRICS cannot drop below 55 percent.

The contingency currency pool will be held in the reserves of each BRICS country and can be shifted to another member to cushion balance of payments difficulties. This initiative gathered momentum after the reverse in the flows of cheap dollars that fueled a boom in emerging markets for a decade.

“It will help contain the volatility faced by diverse economies as a result of the tapering of the United States’ policy of monetary expansion,” President Dilma Rousseff said.

China, holder of the world’s largest foreign exchange reserves, will contribute the bulk of the contingency currency pool, or $41 billion. Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.

If a need arises, China will be eligible to ask for half of its contribution, South Africa for double and the remaining countries the amount they put in.

Negotiations over the headquarters and first presidency were reached at the eleventh hour due to differences between India and China. The impasse reflected the difficulties that Brazil, Russia, India, China and South Africa face in working together to build an alternative to the Bretton Woods institutions dominated by the International Monetary Fund and the World Bank.

“We pulled it off 10 minutes before the end of the game. We reached a balanced package that is satisfactory to all,” a Brazilian diplomat told Reuters.

Negotiations to create thebank dragged on for more than two years as Brazil and India fought China’s attempts to get a bigger share in the lender than the others.

Stark economic and political differences between the BRICS countries have made it difficult for the group to turn rhetoric into concrete action in coordinating policies.

Coming late to the war,In FATA, Pak army may be on verge of a paradigm shift. But it might be too late.

Earlier this month, the Pakistan army launched a new offensive in North Waziristan, which came close on the heels of unprecedented air strikes aimed at Islamist groups. This troop deployment is different from previous ones in its sheer magnitude and its targets.

North Waziristan is one of the best known Federally Administered Tribal Areas (FATA), a region which was demarcated by the British to act as a buffer against Afghanistan, as Russia’s southward expansion in the Great Game had set off several wars. The British never managed to establish any real control over the tribal areas bordering Afghanistan. Not only was the Durand Line disputed by the Pashtun tribes straddling the “border”, but some of those located to the east also continued to swear allegiance to the Afghan rulers.

After 1947, taking into account this sense of independence, the Karachi government followed the path trodden by the British: it relied on local leaders, the maliks, to whom it granted an annual stipend and considerable autonomy. As the name implies, the agencies of the FATA come directly under the authority of Pakistan’s president, who delegates power to the Khyber Pakhtunkhwa governor to oversee the administration. But at the level of each agency, power lies mainly in the hands of the political agent (PA, whose name and scope of action have not changed since the British), who enjoys extensive authority under the British Frontier Crimes Regulations (FCR), which remained in effect after 1947. According to this body of laws, the PA, a bureaucrat appointed by the governor, can punish any tribe as he sees fit. He can imprison whoever he likes for three years without having to offer justification.

Imtiaz Gul, an expert on the FATA, believes that “The main reason for the popularity of successive Islamist movements in the tribal areas stems from the draconian system of the FCR… the search for a fair justice system and the craving for equal citizenship has come to be synonymous with sharia” (The Most Dangerous Place: Pakistan’s Lawless Frontier). Many Islamist groups, in fact, claim the role of dispenser of justice, not only because they purportedly redress the wrongs done to the downtrodden, but also because they combat inequalities. This was one of their justifications for the recent assassinations of maliks, who have traditionally supported the cause of Pashtun nationalism inherited from Abdul Ghaffar Khan.

In the 1980s, Islamist movements began to prosper in the FATA because of the anti-Soviet jihad. At times, up to 40,000 people crossed the Durand Line daily at Torkham in the Khyber agency, one of the border crossing points, and in 1988, 104 of the 278 refugee tented villages in the Pashtun areas were in the FATA (“Demographic Reporting on Afghan Refugees in Pakistan”, Nancy Duprée). Thus, a sort of osmosistook place, closely meshing the FATA movements and the Afghan jihad, a form of integration first reflected in the development of new madrasas. Pakistani jihadist groups also set up their headquarters and their training camps in Wana, South Waziristan, and in Mir Ali, North Waziristan, and on the Afghan side, in Khost, where al-Qaeda had camps in the late 1980s.

A segment of the FATA youth was thus drawn into the jihad in the 1980s. Nek Muhammad, from South Waziristan, is a case in point. He came from a poor family, like many of his fellow combatants, and joined the Taliban in the mid-1990s. He ended up commanding 3,000 men in Bagram, where he fought the “American invasion” in November 2001. Returning to Kalosha, South Waziristan, with a fleet of six all-terrain pickups, Nek was someone to be reckoned with. As funds poured in with al-Qaeda fighters retreating into his territory, Nek grew richer.

For years, the Pakistan army tried to negotiate with the Islamists of the FATA. The first agreement was signed with Nek in 2004 in Shakai, South Waziristan. In exchange for his commitment to refrain from launching cross-border attacks in Afghanistan and to “register” foreign militants, the Pakistan government agreed to release a large number of prisoners and granted financial compensation to the victims of military operations. Due to lack of compliance — the clause stipulating that foreign militants be registered was indeed naive — military operations resumed within weeks. But they soon resulted in new rounds of talks, leading to another agreement signed in February 2005, this time by Baitullah Mehsud, who had succeeded Nek, killed in 2004 by a drone attack. Mehsud headed what was to become known as the Pakistan Taliban in 2007. In fact, till 2007, the Pakistan army contented itself with striking deals whose terms, very similar to those described above, were never observed.

Things started to change in the late 2000s, when the army was deployed in South Waziristan, in the Swat Valley and in several other places. The army stepped up operations in the Pashtun areas after General Kayani became chief of army staff in 2007. About 211 of them reportedly took place from 2007 to 2010. But the losses were heavy, estimated at around 2,300. Consequently, the army preferred to refrain from deploying ground troops and left the matter in American hands without specifically saying so. It was in this context that the US launched massive drone strikes. But this technique was not effective enough and became problematic after politicians denounced this violation of the country’s sovereignty during the 2013 election campaign. After becoming prime minister, Nawaz Sharif claimed that he wanted to reach a negotiated settlement with the Tehrik-e-Taliban Pakistan (TTP).

After months of trying to hold talks, the government had to admit that the TTP was either too divided or not sincere about meaning business. Last month, the attack on the Karachi airport sealed the fate for talks and enabled the army to again take the lead and attack North Waziristan.

This area had been spared so far, primarily because it is the stronghold of the Haqqani network, which has helped the ISI in Afghanistan to gain some “strategic depth” in the 1980s and to fight the Indian presence in the 2000s. The deployment of troops in this area suggests that the army has realised that Islamists — including the Haqqani network — pose an existential threat to the country and that they have to be decimated now, before the Nato forces withdraw fully from Afghanistan. If this is the case, the Pakistan army, which has traditionally considered India its priority target, is on the verge of a paradigm shift. But is it not too late? There are still some Nato forces in Afghanistan, but the country seems, ironically, to be a safe haven for the TTP, which may continue to strike from the other side of the Durand Line for a long time. And then Nawaz Sharif, who has been sidelined by the army initiative, may stage a comeback and claim that negotiations are needed

The great Game Folio: Russian Pipeline

RUSSIAN PIPELINE

The idea of an overland pipeline bringing hydrocarbons from Russia to India has been around for a while. Mooted under UPA rule, the proposal is gaining some traction with the NDA government. New Delhi and Moscow are looking for some big new projects to boost their stagnant commercial ties. Annual bilateral trade now hovers below a paltry $15 billion. Given the massive complementarities in the energy sector, the two sides rightly focus on making this the centrepiece of a stronger economic partnership in future.

Talks on Russian atomic reactor exports are making slow progress amidst the continuing differences over the application of India’s nuclear liability act. As India’s demand for oil and natural gas grows, the hydrocarbon sector presents itself as a major strategic opportunity. India already has $5bn invested in the Russian petroleum sector. India also imports crude oil worth nearly $200 million every year.

India would like to import a lot more and the idea of building a direct pipeline from Russia, therefore, has become an object of political interest in Delhi and Moscow. Further impetus for the project has come from a recent Russian deal with China to export natural gas worth $400bn over a 30-year period via a new pipeline. The idea is generating some excitement and is expected to figure in the bilateral talks between Prime Minister Narendra Modi and Russian President Vladimir Putin on the margins of the BRICS summit in Brazil.

LUCKLESS INDIA

It is easy drawing pipeline routes on the map. India knows that building them on the ground is not. For none of the pipeline projects that India has debated in the last two decades has taken off for reasons of costs, geopolitical and financial. There have been many proposals to build underwater pipelines from the Gulf to India; but cost considerations have put them on hold. Overland pipeline projects have been grounded mainly for geopolitical reasons. The plan to build the

Iran-Pakistan-India (IPI) pipeline has run into strong opposition from the United States, which remains opposed to any projects  involving Tehran.

India, Pakistan and Afghanistan have spent much time negotiating the TAPI pipeline that would have brought natural gas from Turkmenistan into the subcontinent. Given the security problems in the Af-Pak region, it has been hard selling the project to international bankers.

There was a plan to build a natural gas pipeline between Myanmar and India through Bangladesh. But the inability of Delhi and Dhaka to act fast saw Myanmar deciding to sell the gas to China. Beijing moved rapidly to build a twin pipeline system from the Bay of Bengal coast to the Yunnanprovince in southwestern China, just north of Myanmar.

Any Russian pipeline from Russia to India will have three possible routes into India. One is via Iran and Pakistan; another must traverse Afghanistan and Pakistan; and the third must come through China. The option of bringing them through Pakistan will face many of the same problems as the IPI and TAPI pipelines. The China option involves bringing the pipeline across the Great Himalayas and through the regions of Jammu and Kashmir that are part of the territorial dispute between Delhi
and Beijing.

LAHORE BECKONS

In a paradox, the only pipeline that could get off the ground in the near term is the one that would run out of India rather than into it. Delhi has been discussing with Islamabad for some time now plans to build a pipeline to the Punjab border to export liquefied natural gas to Pakistan.

Given the shortage of LNG infrastructure in Pakistan, it makes sense for Islamabad to import natural gas into Lahore from across the Radcliffe Line. In the budget presented to the Lok Sabha last week, Finance Minister Arun Jaitley exempted from customs duty the LNG that will be imported into India and then exported to Pakistan. Although this decision will cut the import costs for Islamabad, the Nawaz Sharif government may not have the freedom to act in Pakistan’s enlightened economic self-interest.

From the Indian perspective, though, the Modi government would be wise to focus on connecting India’s hydrocarbon grids
with those of the immediate neighbours. Given its vast coastline, Delhi should devote its attention for now to importing hydrocarbons by sea, investing in equity oil in Russia and other energy-rich countries, and concluding swap arrangements rather than grandiose transregional pipelines.

BRICS and bridges

The global financial architecture underpinned by the IMF and the World Bank has, for several decades, been in need of radical reform to remove its inherent deficiencies  —  for instance, its democratic deficit, exclusive reliance on the US dollar as an international reserve currency, inability to regulate the international financial market and the severe resource crunch it faces in dealing with crisis situations.

As members of the G-20, the BRICS countries played an important part in pulling the world economy back from the precipice after the 2008 crisis. They did this by maintaining the momentum of their own economic growth through the implementation of large rescue packages and by exerting pressure on the G-20 to mobilise additional resources, a large part of which went to developing countries. In the process, the resources of the IMF were enhanced from $250 billion to $750 billion and for the first time after the early 1970s, a general allocation of supplementary drawing rights was made. This brought closer to reality the long-cherished ambition of vastly enhancing the IMF’s resources to enable it to play its mandated role in the international monetary system and to create an international reserve currency as an alternative to the dollar.

The crisis also triggered intensive discussion on reform. Progress was made in reaching an agreement in 2009 on restructuring IMF quotas by bringing about a shift of 5 per cent from over-represented to under-represented member countries, thus raising the latter’s total quota to 48 per cent. This agreement, which is subject to ratification, has been languishing in the US Congress for the last five years. As a result, the next review of quotas, scheduled for January 2013 in order to further democratise the decision-making process inside the IMF, has been indefinitely postponed. Other reform proposals were never seriously pursued.

In this context, the initiative of the BRICS countries to establish a BRICS Development Bank (BDB) and put in place a contingency reserve arrangement (CRA) is significant. At their last summit in Durban, they agreed in principle to establish this institution. Now, an agreement has been reached on the objectives, functions, size of capital subscription, distribution among member countries, governance structure and operational mechanisms. It is hoped that the few differences that remained would have been resolved, and this initiative will be formally launched at the summit in Brazil.

There seems to be agreement that the BDB will have a total capital subscription of $50 billion, shared equally by the five member countries. Of this, the paid-up capital would be $10 billion. The initial capital of the CRA will be $100 billion, to be paid on call and not in advance. China’s share will be $41billion, that of Brazil, India and Russia, $18 billion each, and South Africa’s, $5 billion. The BDB will finance infrastructure and sustainable development projects of the BRICS and other emerging countries. The CRA will meet their short-term liquidity needs and forestall short-term liquidity pressure, strengthen financial stability and stabilise domestic currency. The fact that beneficiary countries will have access to an additional source of funding to tide over financial crises will increase investor confidence in their economies.

The BRICS countries have practical reasons to take this initiative. A study has estimated a gap of $1 trillion in financing infrastructure and sustainable development projects in emerging economies. The BDB is intended to bridge a part of this gap. Making the bank accessible to other emerging countries will strengthen solidarity, which is important to enhance the bargaining power of the BRICS in negotiations in global economic forums. The improved infrastructure in other developing countries will have a positive impact on attempts to forge stronger trade and economic ties. Capital subscriptions will help the BRICS diversify their options for reserve holdings. The BRICS have enhanced their foreign exchange reserves since 2008, and the availability of an alternative parking place in the form of short- and long-term loans to other developing countries should be regarded as a measure of fiscal prudence.

The BRICS know that they alone cannot change global monetary and financial systems. However, the BDB can help promote a more democratic and fair system of global financial governance. It cannot —  nor is it intended to — replace the World Bank and the IMF. But its potential impact on the global financial architecture cannot be ignored. It will complement, though on a modest scale, the World Bank, IMF and the regional development banks and regional contingency payment arrangements. In the process, it will contribute to the strengthening of the global financial architecture. It will also help the BRICS and other developing countries to strengthen their voice in the financial and monetary system. How successful they are in achieving these wider objectives will depend upon the scale and speed of the operation of the BDB and CRA.

Not budgeting for GST

he finance minister missed an opportunity to spell out the government’s views on its design.

The maiden budget of Finance Minister Arun Jaitley was presented amidst high expectations. After all, a decisive election mandate is always considered crucial to execute an economic rebound. However, such great expectations cannot be matched by a budget and what is possible for it to deliver, given that it is a short-term document. Given this limitation, the budget has excellently attempted to tackle the issues of an ailing economy inherited from the past government.

This budget aims to achieve three objectives: attaining a high growth rate for the economy, controlling inflation and achieving fiscal consolidation. To fulfil these objectives, Jaitley’s budget has followed the path of uplifting the economy in the short term and giving it direction in the long term.

The first priority of the budget is, therefore, to take steps to gradually repair and revive the economy so that it has the ability to shift to the fast growth-rate track in the medium term. In doing so, this budget makes an attempt to fulfil the expectations of the common man, domestic consumers and foreign investors. The budget provides some tax relief and expects an increase in consumer demand. It puts more money in the hands of the people by raising the exemption limit and the concession on housing loans and small savings.

It also attempts to create stability in the tax regime by suggesting abstinence from making retrospective amendments and proposing to set up a specialised committee in the tax administration to review disputes that have emerged from the Finance Act 2012. Similarly, the proposal to rationalise transfer pricing rules and the introduction of provisions for advance pricing will help in reviving investor sentiment.

The second priority is to boost growth drivers. Agriculture has been accorded high priority. Efforts will be made to develop supply chain linkages, ensure the reorientation of the state Agricultural Produce Market Committee acts to establish private markets, set up a price stabilisation fund and rejuvenate warehousing and cold storage facilities. The UPA flagship scheme, MGNREGA, has also been refurbished to link it to asset creation in the agricultural sector and to avoid waste.

The budget also focuses on various sectors in the short as well as long term. These include defence, infrastructure, health, education, textiles, road construction, food processing and tourism for employment generation through the skill development programme. To provide the requisite investment in some of these sectors, foreign direct investment up to 49 per cent is also proposed to be invited.

Finally, with regard to fiscal consolidation, the budget has

retained the fiscal deficit target at 4.1 per cent of GDP. With this in mind, the effort is to make savings on expenditure, for which an expenditure commission is planned to be set up.

The budget does confirm the intention of the government to get the Goods and Services Tax (GST) implemented at the earliest possible opportunity. In fact, in a TV interview after the presentation of the budget, the finance minister categorically stated that he has already twice met the empowered committee to discuss the concerns of the states. He has also stated that at present, the requisite money is not there for giving compensation for Central Sales Tax loss, but he would find an opportunity in the near future to take care of this aspect. It would have been a great plus if such an intention was reiterated in the budget speech. Further clarity was needed with regard to the concerns of the states, and about how the Centre intended to strike a balance between fiscal autonomy and harmonisation.

Similarly, consensus needs to be built about the design of the GST by taking into account the political economy of a federal democratic country, and the autonomy of its states. The finance minister, in his interview after the presentation of the budget, articulated his views regarding the coverage of the GST. According to him, the best design for the GST might not be introduced but a better one could be put in place even if the states want to exclude petroleum products from its coverage.

In this context, it is important that the Centre hammers in two points. First, there is a need to make the states understand that it would be to their advantage to not exclude petroleum products, even if the GST is not presently levied on these items. Excluding these items from the definition and coverage of the GST in the constitutional amendment bill will not provide any flexibility to levy the GST on these items in future, if and when the states may desire to do so. It would require another constitutional amendment to enable them to levy the GST on those items. What is to be taxed or not taxed, or what the coverage of the GST should be, is better left to the empowered committee or the proposed GST council. The Centre could invite academic think-tanks to make presentations before the empowered committee highlighting the pros and cons of including this in the definition of the GST, even if it is not listed in the present levy of the GST. Alternatively, the government should allow the empowered committee to develop a secretariat of its own to provide rigorous information and well thought-out analysis of the GST. This would help in sorting out some of the many issues regarding the design and implementation of the GST.

Second, this has to go hand-in-hand with an undertaking from the Centre that the GST will not be levied on these items, unless the same is cleared by the empowered committee. Itwould, however, have been better if the finance minister had spelt out these aspects in his budget speech.

Thus, the Modi government’s first budget strikes a balance between fiscal consolidation in the short term and a reform agenda to spur inclusive growth in the medium term.