Not too long ago, the economic invincibility of the developed world seemed immovable. But then BRIC (Brazil, Russia, India, and China) and now with the addition of South Africa becoming BRICS, are on the world stage as serious contenders.
Today, the BRICS countries, with a third of the world’s land mass, more than 43% of the world’s population, 18% of the global trade, and 20% of the world’s Gross Domestic Product (GDP), have now attained a level of economic importance since 2006 that may see no turning back. And those BRICS countries are now a political reality (Mielniczuk, 2013).
While the international financial meltdown in 2008 produced economic crises in the developed world, BRICS demonstrated steady development and even outperformed some developed countries. For instance, when in 2009, the economies of Japan and Germany declined by 6%, Brazil sustained its growth, India’s economy showed a 5.9% growth and China 8.1%; Russia’s economy declined by 7% (Biggemann and Fam, 2011).
When in 2012, the GDP growth for the USA was 2.2%, Japan 1.9%, Canada 1.7%, Germany 0.7%, and the United Kingdom 0.3%, BRICS largely outperformed the developed nations with GDP growth for Brazil at 0.9%, Russia 3.4%, India 3.2%, China 7.8%, and South Africa 2.5% ( http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG).
Reviewing the 2009 real GDP statistics, the World Bank noted that Brazil took the spot as the world’s 10th largest economy, Russia 13th, India 11th, and China 3rd; in 2009, the BRICS economies together were equivalent to 50% of the world’s largest economy, the U.S. economy.
But 10 years back in 1999, Brazil was the world’s 10th largest economy, Russia 15th, India 16th, and China 7th; and together they were equivalent to 30% of the U.S. economy. The World Bank further noted that between 1999 and 2009, the U.S. economy grew by 20%, Brazil’s growth was 36%, with Russia 69%, India 92%, and China was 2.5 times richer.
BRICS countries are now key players in the emerging economies’ world dominance; and with this emerging dominance of BRICS, some economies in the developed world are now on the defensive. BRICS countries continue to transform Wallerstein’s world system theory, among others, where for decades, if not centuries, under different ideological labels, there have been unequal economic and political relationships between the developed and the developing world.
BRICS countries persisted in the knowledge and applications that they will not allow themselves to remain in a state of permanent dependence. And they have moved on by removing the foundations of permanent dependence vis-à-vis making a dent on export dependency, the debt trap, and multinational corporations, as these remain poor nations’ predators.
The author presents a comparative focus on India in relation to the BRICS countries, as India debatably is the least formidable of the BRICS countries in terms of economic dominance. And using India, and perhaps any of the other BRICS country, may demonstrate that poverty is not a permanent condition, and many small, poor economies could strive for betterment vis-à-vis applying the BRICS model, where appropriate. Of course, you would need far more than the BRICS model to transform poverty into surplus.
Drawing mainly from the IMF World Economic Outlook, India carried a 3.5% economic growth rate from the 1950s through the 1970s, sporting a stagnant economy for almost three decades. But in the period 2000-2005, India experienced just over 6% average GDP growth rate, less than 5% inflation, and all BRICS countries had about 10% unemployment; and in 2005, India’s GDP volume was about US$800 billion and its GDP per capita tottered around US$1,000. Among BRICS countries in terms of GDP composition in 2004, India had the largest agricultural sector with a growing service sector; India had no current account surplus in 2005, when the other BRICS countries did; and in the same year had a small amount of foreign reserves, approximating US$150 billion.
Extracting data from the IMF World Economic Outlook (2011 and 2012), here are some selected statistics for India and the other BRICS countries (Brazil, Russia, China, and South Africa) in 2010: India’s real GDP was 10.6% (Brazil 7.5%, Russia 4.3%, China 10.4%, and South Africa 2.9%). In 2011, India’s real GDP was 7.2% with the other BRICS countries as follows: Brazil 2.7%, Russia 4.3%, China 9.2%, and South Africa 3.1%). In 2011, India’s balance on current account was -2.8% of GDP (Brazil -2.1%, Russia 5.5%, China 2.8%, and South Africa -3.3% ) and projected to be -3.2% in 2012; India’s consumer prices were 5.4% (Brazil 6.6%, Russia 8.4%, China 8.6%, and South Africa 5.0%) and projected to be 8.2% in 2012.
As stated earlier, in 2012, GDP growth for Brazil was 0.9%, Russia 3.4%, India 3.2%, China 7.8%, and South Africa 2.5% ( http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG).
On the basis of these selected data, India continues to be the weakling among the BRICS countries on average growth rate, consumer prices, and balance on current account. And its faltering growth rate may be gradually regressing toward the average GDP growth of 6% it had between 2000 and 2005. A high growth rate is necessary for a growing population and a growing workforce, and also a critical economic indicator to maintain its status within BRICS.
In addition, India would need an active Knowledge Economy (KE) to sustain a high growth rate that has a relationship with total factor productivity (TFP); TFP is the nation’s capability to create and use knowledge. And the World Bank projected that India’s TFP will grow by more than 50% in 2020 than what it was in 1991/92.
Nevertheless, in light of the IMF World Economic Outlook 2011 and 2012 statistics on India, it may be worth revisiting the concerns raised in the following: Das et al. (2010) found that in the 1980-2004 period productivity was moderate with pointed fluctuations; and productivity increases arose largely out of technical change, as there was little efficiency over the last 30 years (Alejandro, Yu, & Fan, 2009).
The World Bank (2005) noted that India would need to develop policies concentrating on effectively utilizing knowledge to increase productivity and the nation’s welfare. And, invariably, some people refer to this knowledge economy as ICT industries.
The World Bank suggests that KE is broader; KE refers to how an economy channels and applies new and existing knowledge to raise productivity and total welfare; for this reason, KE will make a difference between poverty and wealth.
India is forging ahead at a brisk pace with its KE. And perhaps, small, poor countries around the world, in order to rid themselves of their poverty, would have to show more than keen interest in KE, and start intensively building KE to spur economic growth; and to ensure that that economic growth reaches the poor and vulnerable population.
What is challenging for India is that its real GDP declined from 10.6% in 2010 to 3.2% in 2012, and its current account balance is now negative (where domestic investments are funded through foreigners’ savings) and way behind Russia and China. Only a few days ago, the IMF reduced its growth forecast from 5.6% to 3.8% for this fiscal year, and the rupee (India’s local currency) fell in the wake of this IMF’s forecast. And so India’s quest to becoming a robust knowledge economy remains a formidable challenge, as a consistently high growth rate requires a KE. And would India be able to sustain its status as a constituent of BRICS?
CHETRA Eyes Africa for Expansion
CHETRA is a Russian company that sells industrial equipment and spare parts under the brand “CHETRA” produced by the Promtractor plant, as well as supplies spare parts and components from the company. It uses a unique technique in the construction of production sites, seaports, development of natural resources and pipelines in 30 countries and in all climatic zones.
The goal is to provide its partners and customers with modern high-performance equipment for successful projects, even in areas with complex climatic and geological backgrounds. More than 3,000 units of equipment under the brand “CHETRA” are now in operation in the Russian Federation and beyond.
Executive Director Vladimir Antonov has been working in engineering industry for 19 years. He has successful experience in product export to the CIS countries and Ukraine, the Baltic States, Europe, Argentina, Africa and Cuba. He has been leading company as its Executive Director since 2018. During his leadership, the share of the company’s machinery in the Russian market has doubled.
In this snapshot interview, Vladimir Antonov talks about his company’s plans in the direction of Africa. Here are the interview excerpts:
Q:First, tell us briefly about tPlants previous working connection with Africa? What are your products and services, what African regions or countries are keen using products?
A:Our company has a long experience of cooperation with African countries which began in the Soviet times and continues today. Traditionally we collaborate in the African continent with such partner countries of Russia as Egypt, Algeria, Zimbabwe. About 50 units of CHETRA machines have been supplied to these countries over the last ten years. Our goal is to enlarge our footprint in the African continent. Nowadays, we are negotiating cooperation with potential partners in West Africa and the SADC region (Southern African Development Community, South Africa).
Q:Compared to other foreign players, how competitive is the African market? From the previous experience in the African regions, what key problems and challenges the company faces in Africa?
A:Today the market of mining and construction equipment in Africa is characterized by high competition, all our competitors work in the region, both from the West and from the East. This has led to the fact that the market applies high requirements to new products. For that reason today we do not just sell our machines to customers: we offer a range of services, which includes commissioning of the machines, training of local staff, organization of after-sales maintenance service at the customer’s site. The main challenge for us today when working in Africa is the need to find a local partner who has qualified staff, equipment, maintenance facilities and not bound by contracts with other manufacturers of similar machines.
Q:What kind of business perceptions and approach could be considered as impediments or stumbling blocks to business between Russia and Africa?
A:Another challenge for us when working in Africa is that many consumers have no free funds to purchase new machines. This often diverts our partner from the renewal of the fleet or makes them buy used machines on the after-market. We are trying to solve this problem by attracting Russian government agencies of export support, such as the Russian Export Center, in order to finance transactions.
Q:Business needs vital information, knowledge about the investment climate and so forth. Do you think that there has been an information vacuum or gap between the two regions?
A:Taking into account the level of development of information technology today there are no particular problems in obtaining information about the investment level of any country or about business situation of a particular company. Besides that, we are in constant contact with Trade missions at the Embassies of the Russian Federation in the countries of our interest, which are also a good source of information about the conditions of the market.
Q:And now how would you envisage the level of investment and business engagement with Africa? Is Sochi an opportunity for expanding business to Africa?
A:In my opinion the Economic Forum in Sochi was organized at the highest level. A lot of guests from Africa visited it. We held a number of meetings with companies that are new to us, and I hope that these will lead to long-term cooperation and geographic growth of supplies of CHETRA machines in Africa.
The Bust: WeWork’s diminishing stature of the perfect “start-up”
Until recently, the globally acclaimed startup, WeWork was transforming the future of office spaces and staff hiring processes. Truly, it was transformational in the sense that the startup was providing a vital service point to many multinationals around the world. However, Mark Dixon, the cofounder of IWG, another workspace solutions company, was not getting the trick. Here was IWG, a decently profitable startup with consistent annual growth, still unable to compete with the superstar of the industry. Soon after SoftBank poured cash into the company, WeWork was valued for more than $40 bn. Then, it was making headlines for overwhelm; now, WeWork is in a state of awe. As market reports suggest, WeWork even lacks the cash to fire its existing employees.
As Adam Neumann, the chastened cofounder of the dwindling company once proclaimed, co-working was the future and that employees would prove to become more productive and efficient. In his own words, different cultures and organizational goals would inspire the entire floor. Much as the concept is about renting an office space, Mr. Neumann deliberately did not elaborate on the nuisances of dealing with office neighbors, as seen from a tenant’s perspective. The idea would have charmed many organizations; it was a great opportunity to redeem operating costs or dealing with unwarranted office culture problems. Or, as many renting executives thought, WeWork would define the ground rules, aptly in accordance with global standards. For many, it was also an experiment for the future. Also, nobody could take away the fact of losing varied insights from “not” participating in what at first seemed like a once in a time revolution.
SoftBank, a Japanese conglomerate investing fund is writing the most important plot in the story. Strangely, both the rise and fall of WeWork has been catalyzed by SoftBank. However, the fact that WeWork was blessed by an investing fund is not strange, or surprising. Amongst sovereign funders, there is competition to stay one foot ahead of another. The Europeans have long stressed on how very few startups from their region go onto becoming a global giant. SoftBank’s associations elsewhere is a testimony to its deliberate strategy of staying ahead in the future. Notwithstanding the fact that the Japanese investors would have loved the idea of co-working space more than others. In early 2017, WeWork’s market value, shot over $40 bn, even though the company was registering profits below what Mr. Dixon’s firm were accounting to. There was a strange gossip in the market around why other investors were not jumping to what the SoftBank deemed as highly profitable. For many like Mr. Dixon and other investors, answers were soon to be found. If it could only be timely, Japanese angels would have anticipated why Mr. Neumann would sell his rights of the name, “We” in WeWork. It was a five million dollar (plus) exit for the charismatic man, whose venture was taken over by those who thought of multiplying their fortunes. SoftBank will be sorry for its decision to trust the hierarchy in Mr. Neumann’s leadership. Nevertheless, post takeover, Mr. Dixon will not be contemplating any further on why it has decided to appoint two CEO’s. Nor will there be any sort of contemplation on why the new appointees have secured their severance package before paying out dues.
As it stands, IWG is not doing a bad business in comparison to WeWork’s downfall. The American start-up was destined for success from its early years. Co-working will still be a grand idea in our times but filthy abundance in a short period of time has brought a winning project to a standstill. There will be other co-working competitors for IWG, but it will learn from the mistakes of a competitor who was bigger than the entire industry. If anything, Mr. Dixon will be smelling opportunities ahead.
Alibaba on Platform Economy
Alibaba on national mobilization of
entrepreneurialism on platform economy: today, Alibaba sold $38 Billion within 24
hours: Around the world, currently, there are 100 nations with less than $38
Billion dollars in annual GDP. Imagine if this single company performed at the
same rate for next 365 days, it would equal to annual GDP of Japan, Germany,
India, France, UK and Canada all combined. Bravo Alibaba, well done, the world in shock
is now fondling in own toolboxes.
Are Nations Awake: Are there enough reasons to explore how national mobilization of entrepreneurialism on platform economies and how it will uplift local grassroots prosperity? Are there enough trade-groups, Chambers of Commerce, Trade Associations with enough skills to play in these AI centric digitally advanced and globally friendly market-places? Outside a miniscule number most seriously out-dated trade-groups are in rapid transformation so they too would become shiny butterflies for the new global-age.
Old days of old ways are now new days of
Salvaging of exportability lost during last decade: Nation by nation, the grassroots medium-size economy was basically, ignored, abandoned and rejected, killing exportable goods and services. So long the trade groups around the 200 nations stuck in their old fashioned comfort zones spanning a century, outside handful organizations most nations are in deep trouble. Observe how nations with riots have the most disorganized, disconnected trade-groups, not due the lack of funding but due to lack of poor leadership with little or no global age skills.
Uplifting working-citizenry after a lost
decade on skills: So long the national leadership assumes that MBA degrees are
the saviors of their next economy and so long the corporations feels comfortable
that all their management is being well trained on YouTube, no additional proof
of this fallacy is necessary other than decimated economies and chaos on the
Understanding The Third Economy: During the first economy; rules of engagement and rules of balancing the books were established, the second economy; where fancy jargon was invented to cook the books to balance with political agenda and now the upcoming third economy where real numbers will balance the real books with real columns all managed by artificial intelligence and block-chain delivering honest picture instantly to all and all the times.
Alibaba proves the direct benefits of a Third Economy; such prosperity can only assured by respecting the balancing of pennies and cents with mobilizing millions of abandoned small and medium enterprises and using free technologies as starting base. Such deployments are only possible when leadership is skillfully equipped to understand global-age and able to serve the special transformation demands, by firing the first person for incompetence for saying they have no new funding to change and firing the next person for disorganization for saying they are too busy and have no time to change.
Public sector around the world had almost all
these resources available to deploy since last decade. Nation by nation, outside
the top business sectors rest of the small medium enterprise players
systematically abandoned and crushed were replaced by too big to fail nonsensical
hype. Now national races in the age of digital platform economy will demand
clarification on their internal conflicts of “digital-divide and mental-divide” and explain dysfunctional imbalanced spending on trade expansion
without “national mobilization of entrepreneurialism” …it is also a fact that
majority nations need massive in-depth-training at all top leadership levels to
understand the new language of the new days.
It’s time to choose; either build world-class export promotion agencies, vertical trade groups to foster trade by global-age showcasing on platform economies and bring home some grassroots prosperity or allow restless citizenry and rise of populism. It time to balance, that where public sectors mostly all over the world failed on such progressive affairs, technology has now blossomed as salvage operation with dramatic tools and deployment options. Is your national leadership ready now? Not to sidetrack, this is not an exclusive IT issues; this is global age expansion and entrepreneurial mobilization issues. Deeper studies and debates are essential.
The world is changing fast is no longer just a cliché, now growing into a warning
National Transformation: Futurism of ‘creating local grassroots economy’ demands two distinct national mobilizations. Firstly, creating skilled citizenry capable to swing with global-age demands and secondly, creating massive digitization of midsize economy to enable global-speed-performance to match trading with 100-200 nations. Mostly not new funding dependent but execution starved. Nations with such mastery will thrive and lead; generational transformation at magical speed with full deployments of platform economy is a prerequisite. Sounds rocket science, it is, but very doable and easy.
Rules of National Mobilization of Entrepreneurialism: To deploy such blueprints, launch a nationwide business-uplifting lifelong learning agenda for the entire export promotion bodies, Chambers, trade associations and also the entire small-medium-exporters base. Review this process meticulously every 100 days. Under right situation, the export promotion of the nation can easily quadruple within a year. It is necessary to keep asking what is blocking this and who is stopping this?
How do you mobilize public and private sector leadership after a lost decade on global-age expansion? With some 100 elections in 2019 alone and million promises on podiums the realities are hidden in creating real grassroots prosperity, now pending Presidential Elections of 2020 USA the mother of all elections will provide massive debates amongst calls of Impeachments, while December 12th Election of UK amongst calls of Brexit and European Union with loud and restless citizenry, a new world is unfolding. The public is informed, and slowly realizing what’s working and what’s not… deep silence at the public sector is not good, a growing sign of lack of skills. Urgent debates needed as 2020 starts with some dramatic shifts of markets, ideas and visions. We are now in the age of national mobilization of entrepreneurialism and platform economies.
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