Experts on regional strategic policy have urged BRICS member countries to step up efforts towards setting up its own credit rating agency as an effective mechanism to consolidate the bloc’s new multifaceted spheres of cooperation. BRICS (Brazil, Russia, India, China and South Africa) is currently working on a set of new proposals including the establishment of women business club and a rating agency, among others, for the 10th edition of BRICS Summit scheduled to take place from 25-27 July, 2018, in Johannesburg, South Africa.
As far back in 2015, Prime Minister Narendra Modi of India called upon members of BRICS to take begin the BRICS credit rating agency. India has long held the view that a new rating agency would provide an immense contribution to the existing knowledge of rating systems. Since then, there have been discussions at several conferences and forums, the latest was during the special panel session on the future prospects of BRICS at the St. Petersburg International Economic Forum late May.
“As a first step towards creating such an agency, we propose the countries offer their national agencies to form a network. Our partnership with one of the Chinese rating agencies, Golden Credit, could be used as a prototype of this network,” Ekaterina Trofimova, Chief Executive Officer of the Analytical Credit Rating Agency, said.
There are also similar views. “Many foreign countries most often consider or rate BRICS countries, enterprises and financial institutions get a biased evaluation. We would like to see more neutral ones that we can further relate to,” according to Sergey Katyrin, President of the Chamber of Commerce and Industry of the Russian Federation. It’s necessary to have unbiased ratings of institutions of BRICS countries as there are is open to the world and consistently expanding ties with concerned countries and seek integration into business associations, he explained.
Jayshree Sengupta, a Research Fellow from the Observer Research Foundation in New Delhi, India, thinks that BRICS want to have their own rating agency and are set to have it soon because the three international rating agencies Moody’s, Fitch and Standard & Poor that dominate the world sovereign rating market have been rather unfair to BRICS members and other developing countries. They frequently downgrade them on unjust grounds and criteria that serve western political interests. They downgraded Brazil and Russia in 2017 and keep changing their grading about India, creating much uncertainty.
Sengupta indicated in an email interview that “their ‘issuer paid’ model of rating is biased and BRICS members are perhaps contemplating having their own rating agency on ‘investor pays’ model which may be more appropriate for their Emerging Market economies.”
While expressing the fact that the idea is highly laudable, Francis Kornegay, a Senior Research Fellow at the Institute of Global Dialogue, University of South Africa, explained recently to me that “it has something to do with the global economic balance of power as to whether there is sufficient leverage among BRICS countries and other emerging powers to provide such an alternative.”
Kornegay specializes on global geopolitical and strategic trends and he is also a long-term analyst of global South and emerging power dynamics and US foreign policy. As such, he recently produced, as lead co-editor, Laying the BRICS of a New Global Order: From Yekaterinburg 2009 to eThekwini 2013 (Africa Institute of South Africa).
The BRICS economic growth rate is increasing. “Starting last year, all BRICS countries have demonstrated positive trend in economic growth. Moreover, we expect that the growth rate will be increasing through 2018 and 2019, especially in India,” according to Yaroslav Lisovolik, Chief Economist and Managing Director for Research at the Eurasian Development Bank.
Thus, a BRICS own rating agency has the benefit of reducing the dependency of sovereign and corporate ratings of the developing world on the verdicts of the “big three” referring to Moody’s, Standard & Poor and Fitch. “The fact that all five BRICS economies are to participate in launching the ratings agency serves as a wide enough base to create sufficient demand and use of its ratings compared to the relatively narrow potential of national rating agencies,” he explained.
In other words, an alliance among the largest developing countries is crucial in launching such an enterprise – on top of the possibilities of operating in the BRICS countries themselves and there may also be the possibility to expand the operations of such an agency to the regional partners of BRICS countries, Lisovolik suggested.
On his part, Brazilian Ambassador to Russia, Jose Vallim Antonio Guerreiro questioned how the procedures of existing rating agencies could be applicable to all economies. “The question is whether this procedure includes all the relevant factors. You may need to look for alternative indicators and broad approaches to assess the health of economies,” he argued. “I do not believe that the new agency will be something to resist the existing institutions. They do their job, and certainly, there is a demand for their services. But it is possible that the BRICS countries will elaborate a different approach.”
Some experts still cast doubts about the feasibility of the project. “As far as I know, this endeavour was considered too expensive and not feasible at the moment,” Professor Georgy Toloraya, Executive Director at the National Committee on BRICS Research in Russia, wrote me simply without detailed discussion on the topic.
But, an Associate Researcher at the South African Institute of International Affairs (SAIIA), who requested for anonymity, strongly suggested that the BRICS credit rating agency as a business project could be well-managed if given to India, or at best, to China that previously offered a larger part of seed capital for the establishment of the New Development Bank.
The Financial Times reported that BRICS countries have long deliberated on plans to establish their own rating agency along with the formation of the New Development Bank. The BRICS member countries (namely Brazil, Russia, India, China and South Africa) collectively represent about 26% of the world’s geographic area and are home to 2.88 billion people, about 42% of the world’s population.
*Kester Kenn Klomegah frequently writes about issues connecting Russia, Africa and BRICS.
Global Migration Can Be a Potent Tool in the Fight to End Poverty Across the World
Global migration has lifted millions out of poverty and boosted economic growth, a new World Bank report finds. But destination countries risk losing out in the global competition for talent and leaving large gaps in their labor markets by failing to implement policies that address labor market forces and manage short-run economic tensions.
Large and persistent differences in wages across the globe are the main drivers of economic migration from low- to high-income countries, according to Moving for Prosperity: Global Migration and Labor Markets. Migrants often triple their wages after moving to a new country, helping millions of migrants and their relatives at home escape poverty. Destination countries often benefit as migrants fill critical roles, from advancing the technological frontier in Silicon Valley to building skyscrapers in the Middle East.
Despite the lure of higher wages, rates of migrants as a share of the global population have remained mostly unchanged for more than five decades, even as global trade and investment flows have expanded exponentially during this time. Between 1960 and 2015, the share of migrants in the global population has fluctuated narrowly between 2.5 and 3.5 percent, with national borders, distance, culture, and language acting as strong deterrents.
Highlights of key findings from the report include:
-Migration flows are highly concentrated by location and occupation. Currently, the top 10 destination countries account for 60 percent of around 250 million international migrants in the world.
-Surprisingly, concentration levels increase with skill levels. The United States, the United Kingdom, Canada and Australia are home to almost two-thirds of migrants with tertiary education. At the very peak of talent, an astonishing 85 percent of all immigrant Nobel Science Prize winners are in the United States.
-Education levels of women are rapidly increasing, especially in developing countries, but opportunities for career growth remain limited. As a result, college educated women from low and middle-income countries are the fastest growing group among immigrants to high-income countries.
“The number of international migrants continues to remain fairly modest, but migrants often arrive in waves and cluster around the same locations and types of jobs,” said Shantayanan Devarajan, World Bank Senior Director for Development Economics and acting Chief Economist. “Better policies can manage these transitions in a way that guarantees long-term benefits for both citizens and migrants.”
The report recommends various policy measures to ensure the benefits of migration are shared by host and immigrant communities for generations to come. Key among them:
-Effective migration policies must work with rather than against labor market forces. For example, where there is large unmet demand for seasonal work, temporary migration programs, like those in Canada or Australia, could address labor market shortages while discouraging permanent undocumented migration.
-Quotas should be replaced with market based mechanisms to manage migration flows. Such tools can pay for the cost of government assistance to support dislocated workers. In addition, the most pressing needs of the labor market can be met by matching migrant workers with employers that need them the most.
-Creating a pathway to permanent residency for migrants with higher-skills and permanent jobs creates incentives for them to fully integrate in the labor markets and make economic and social contributions to the destination country.
“We have to implement policies to address the short term distributional impact of migration flows in order to prevent draconian migration restrictions that would end up hurting everyone,” said Asli Demirguc-Kunt, Director of Research at the World Bank.
The report argues that migration will be a fundamental feature of the world for the foreseeable future due to continued income and opportunity gaps, differences in demographic profiles, and the rising aspirations of the world’s poor and vulnerable.
“The public debate over migration would benefit from recognizing data and research,” said Caglar Ozden, Lead Economist and the lead author of the report. “What this report tries to bring to the debate is rigorous, relevant analysis to support informed policy making.”
Moving for Prosperity: Global Migration and Labor Markets is the latest in a series of Policy Research Reports that comprehensively review the latest research and data on current development issues. The new report presents the key facts, research, and data on global migration gathered from the World Bank, U.N., academia, and many other partners.
You can read the full report and accompanying datasets, based on extensive existing literature.
Sweden well ahead in digital transformation yet has more to do
Sweden’s efforts to embrace the shift to digital have been a key driver of economic growth in recent years, yet more needs to be done to get remote areas of the country online, bring digital technology to small firms, upgrade skills and meet security and privacy challenges, according to a new OECD report.
OECD Reviews of Digital Transformation: Going Digital in Sweden finds Sweden is among the top OECD countries in deploying digital technology across households and business, with widespread Internet use across the country and narrower digital divides by age, education, income and firm size than most countries. The availability, quality and affordability of high-speed Internet in Sweden is among the best in the OECD.
Sweden’s economy has the highest share of value added coming from information and communication (ICT) technologies of OECD countries and is among the top ten exporters of ICT services. Use of digital technologies has helped Swedish firms to integrate into global value chains in manufacturing and move up the value chain to focus on high value-added services like product design and marketing. Sweden is also a leader in the Internet of things.
While Sweden is on a solid path to reach its goal of having 98% of households and firms connected to 1 gigabit per second Internet by 2025, it should now focus on enhancing co-ordination among national, regional and local broadband deployment strategies and expanding networks in sparsely populated areas. The use of digital technologies by people with lower levels of income or education could be further increased. Sweden also lags other countries in opening up government data to citizens.
On the business side, while digital tools are widely used in Swedish firms, most are slow to seize opportunities to analyse big data. There is also a limited supply of advanced ICT skills in the Swedish workforce. The report also notes that as an international hub of scientific and technological leadership, Sweden should strengthen its policy priorities and publicly funded programmes for digital innovation.
Concerns about digital security are higher among Swedish people than in many other OECD countries. The government should promote a clear vision of digital security risk management as an economic and social responsibility of all and provide stronger policy leadership.
The report is the first in a new series of OECD reviews that will analyse development of the digital economy, review policies and make recommendations to improve performance as part of the Organisation’s Going Digital project.
Finding Jobs in South Africa: Two Actionable Ideas that Work
Recent studies show that better job search planning and including a reference letter from former employers, significantly increases responses from potential employers in South Africa.
The World Bank’s Africa Gender Innovation Lab and Jobs Group, in collaboration with researchers from Middlebury College, Stellenbosch University and University of Cape Town, conducted several experiments investigating the roles of skills certificates, referral letters, and providing better information about workers in the labor market.
One experiment involved the design and testing of an action-planning tool to promote greater job search intensity. The tool layered on top of a 90-minute career-counseling workshop offered by the government of South Africa helped unemployed youth follow through on their job search intentions and adopt a more efficient and effective search strategy. Improved search strategy led to job seekers receiving 24% more responses from employers and 30% more job offers. Five to 12 weeks after the workshop and action planning, these job seekers were 26% more likely to be employed.
A second experiment, tested the impact of reference letters from former employers. Including a reference letter in a job application increased the likelihood of getting a response to an application (by 60%). Interestingly, reference letters may be even more important for women job seekers. Women with better reference letters were more likely to receive responses from employers and interview requests (the same was not true for men). Women who received reference letter templates were approximately 50% more likely to be employed with employment rates doubled for those who used the letters.
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