TRANSPORT: Major Hurdle for IBSA Initiative

Inter Press Service News Agency, May 14 , 2008

By Paranjoy Guha Thakurta

NEW DELHI, May 14 (IPS) – As the foreign ministers of India, Brazil and South Africa (IBSA) met in Cape Town on Monday, to take forward a unique initiative in South-South economic cooperation, a gathering of hard-nosed corporate captains from the three countries discussed the absence of adequate transportation facilities among the ‘IBSA’ members.

Brazil’s foreign minister Celso Amorim, who doubles up as his country’s trade minister, had told IPS in an earlier interview that what makes the IBSA grouping unique is that India, Brazil and South Africa (IBSA) are not merely diverse, multi-cultural developing countries but the three countries are all strategically located and important in their respective geographical regions.

However, what the group of businesspersons pointed out was that although there is considerable scope for economic and technical cooperation among the three countries in areas such as energy, mining and aerospace, logistical drawbacks were hampering expansion of trade.

They urged their respective governments to improve air connectivity, maritime transport facilities and ease visa restrictions before the forthcoming IBSA Business Summit that would be held in New Delhi later in the year.

Speaking at a session on tourism organized by the Confederation of Indian Industry (CII), R. Jaishankar, managing director and chief executive officer, UB Group, South Africa — a large Bangalore-based Indian multinational with interests in liquor and aviation — pointed out that of the nine million tourists who visited South Africa in 2007 (of which 4 million flew into the country), barely 50,000 tourists came from India.

Over and above high fares, poor air connectivity between India and South Africa discouraged tourists. There is only one flight by one airline between the two countries because of landing rights. Shortage of aircraft, high fuel costs and intense competition on indirect flights compounded the problem.

The session organised by the CII suggested that representatives of the national airlines in the three countries to discuss the issue of limited landing rights given the likely growth in the demand for air travel among the countries.

Specific destinations in the three countries should be marketed more effectively and promoted by the media since tourism has a huge potential to create jobs in all the countries, participants in the session argued, adding that growth in tourism would lead to growth in trade and investment.

It was also recommend by the session that a special IBSA business travel pass be created along the lines of the APEC (Asia Pacific Economic Cooperation) pass to ease issuance of visas, including transit visas.

Not just businesspersons, representatives of civil society organisations also hold similar views. “Economic cooperation between and among countries cannot be successful unless there is a better people-to-people interaction and this can happen only through increased investment and tourism,” says Bipul Chatterjee, deputy executive director of CUTS International, a Jaipur (India) based non-governmental think-tank on economic issues.

“IBSA countries should have a policy to issue long-term business visas to investors and to encourage tourism,” Chatterjee told IPS in an interview. CUTS (acronym for Consumer Unity and Trust Society) was recently associated with research organisations in South Africa and Brazil to prepare an advocacy document on the IBSA initiative.

Leven Moodley, a representative of Reatile Resources PTY Limited, a South African energy company, said huge opportunities existed among the three countries for cooperation in energy development. Brazil had considerable expertise in production of bio-fuels while India and South Africa had knowledge in generating electricity using coal, wind and water, he said.

All three countries are currently working on technologies for generation and transmission of renewable energy (using the rays of the run, wind and water) and should be exchanging information that would be of great mutual benefit to all, given the sharp increase in world oil prices in recent months.

Sreenivas Kondepudi, vice president, Maytas Infra, part of the India’s Satyam group, said that despite possessing substantial mineral resources, India needs more minerals to cope with the growth in internal demand. While India can invest in iron ore mines in Brazil, it can import coal from South Africa for thermal power projects. He said logistics was the biggest hurdle to be crossed. India could assist Brazil in linking its iron ore mines to ports through railways.

The business delegation presented a memorandum to the Foreign Ministers of the three countries — Nkosazana Dlamini Zuma of South Africa, Pranab Mukherjee of India and Celso Amorim of Brazil -– recommending government intervention to improve maritime connectivity by having a fresh look at regulatory restrictions. Detailed studies on shipping routes and freight rates should be conducted, it was argued.

Consignments from India and Brazil to South Africa first travel to Europe before reaching their destination because of low volumes of trade, thereby increasing freight costs. Because of similar considerations, that is, low traffic, it is less expensive to fly from India to the United States than to Brazil — although Brazil is closer in terms of distance.

The other area of cooperation identified by the group of businesspersons was skill development by providing incentives and subsidies to educational institutions in each country. More training programmes could be organized, it was stated.

On the trade and investment front, automobiles and pharmaceuticals were identified as two industries with considerable scope for trilateral cooperation. Despite differing consumer preferences for automobiles in the three countries, there was a case for reduction of tariffs and removal of non-tariff barriers. The corporate executives requested their respective governments to continue to negotiate and ratify trade agreements that would strengthen the economic relationships between the three countries.

This is a complex multilateral process since the agreements would not just relate to the three IBSA countries but many others in regional groupings, such as SACU or the South African Customs Union comprising South Africa, Botswana, Lesotho, Swaziland and Namibia and MERCOSUR or Mercado Común del Sur comprising Brazil, Argentina, Uruguay and Paraguay.

(Bolivia, Chile, Colombia, Ecuador and Peru currently have associate member status of MERCOSUR while Venezuela signed a membership agreement on June 17, 2006 -– however, before becoming a full member its entry has to be ratified by the Paraguayan and the Brazilian parliaments.)

It was in June 2003 that the Foreign Ministers of India, Brazil and South Africa first met in Brasilia to set up the IBSA ‘dialogue forum’. This forum became a formal initiative with a high level summit meeting in New Delhi in March 2004, followed up by meetings in Cape Town (March 2005), Brasilia (March 2006), New Delhi (July 2007) and most recently, Cape Town (May 2008). The three heads of state met in September 2006.

Intra-IBSA trade is currently barely 2-3 per cent of the total volume of trade among the IBSA countries. No single IBSA country is among the top ten trading partners of the other two countries. Yet trade among the three countries and regional groupings has gone up considerably in recent years and is expected to continue to expand rapidly.

Despite the fact that the three countries have been acting closely with one another during trade negotiations at the World Trade Organisation, the IBSA nations also compete in international markets to export leather, garments and agricultural commodities like cotton and sugar to developed countries.

Investment relations among the three countries have been ad hoc and erratic: Indian pharmaceuticals producer Ranbaxy has a presence in both South Africa and Brazil and vehicle manufacturers Tata Motors and the Mahindra group have invested in South Africa. India, in turn, has received investments from South Africa’s diamonds major De Beers and SAB Miller in alcoholic beverages.

However, there have not been any major investments by Brazilian firms in either India or South Africa. While Brazil is the second largest recipient of foreign direct investment after China, India and South Africa are both conspicuous by their absence in that country. Language and cultural barriers have also to be overcome to enhance economic relations.

Brazil’s President Luiz Inacio Lula da Silva has said the IBSA initiative has the potential to alter the world’s commercial geography. But much needs to be done to remove transportation and logistical bottlenecks before such an ambitious goal is realised.

This news item, can also be viewed at:

Related Images: