Building of BRICS offers China cover for its new status



Every commentator dreams of inventing something that lodges in readers' brains and shapes their thoughts.

It might be a catchy book title - such as Soft Power or The End of History. Or it could be an acronym that acquires a life of its own.

In 2001, when Goldman Sachs chief economist Jim O'Neill selected four countries - China, India, Brazil and Russia - as the coming economic powers, he arranged their names to create the acronym BRIC.

The concept gained strength throughout the decade. Even though the somewhat random membership of this club was open to criticism, "BRIC" popularised the idea that wealth creation would in future take place in countries previously considered poor.

In 2008, when the "old economies" of the US and the European Union were struck by financial crisis, the grip of the new kids on the block seemed to grow stronger.

But there was a gaping hole in the membership: no one from Africa, a continent previously seen as a basket case but where many countries were developing rapidly. South Africa's president, Jacob Zuma, lobbied to join the club and was accepted in 2010, and the title added an 'S'. Now the BRICS have just held a summit meeting in South Africa.

It is the easy to poke fun at this gathering of disparate countries. The original four BRICs are not quite the stars they were. Economic growth is falling in all of them, and the fashion among commentators now is to question, rather than celebrate, China's rise to superstardom, a trend exemplified by the forthcoming book Stumbling Giant: the Threats to China's Future, by Timothy Beardson, an experienced investor in China. Shouldn't Mexico or Turkey be in the group, to pep up the parade of stars of yesteryear?

Even more glaring are the disparities and tensions among the five. China's economy is 20 times the size of South Africa's. India has a series of border disputes with China. Russia is eternally aware that China may one day covet its sparsely populated, resource-rich far eastern territories.

South Africa, which aspires to speak for Africa on the global stage, is in an economic mess. To redress the wrongs of the apartheid era, it has created a slew of black millionaires, but not created the foundations for real growth to raise living standards for all.

The labour unrest at the Marakana mine last year, where police shot dead 47 miners on unofficial strike, has shaken confidence. The public education system is underfunded, causing a dearth of qualified workers. Rather than investing at home, South African companies increasingly prefer to invest in more dynamic African countries.

One such is Nigeria, predicted to be the world's fourth-largest country by population by 2050, with 400 million people. This market will be sought out by every consumer- goods producer in the world, if Nigeria can sort out its politics, its Christian-Muslim tensions and its infrastructure problems.

(Two other African countries will also among the world's top 10 by population in 2050 - the Democratic Republic of Congo and Ethiopia, the former a byword for civil war and the latter repeatedly afflicted by drought. By then, more than 20 per cent of the world's population will be African.)

In any case, what purpose does the BRICS club serve? The simple answer is that it provides China with useful camouflage to hide the economic pre-eminence of a country that does not feel comfortable emerging as a superpower. Beijing is probably not planning, as some claim, to take over the world. Its goal is more likely to help China grow rich before it grows old, and that involves securing supplies of oil and minerals, largely from Africa. At this stage of its development, China is putting its own economic growth first.

But this creates a problem. China's imports from Africa are booming, providing much-needed growth in Africa, but this is mostly as a result of mineral extraction, which does not create many jobs, nor does it provide long-term stability. A downturn in China's manufacturing would lead to reduced demand for minerals. What Africa needs is jobs for its young labour force, increasing by 144 million per decade.

But at the same time that investment is pouring into mining, China is flooding the African countries with bargain-priced consumer goods, which destroy local industries. This is an issue raised with increasing frequency by African leaders who relish China's economic involvement and the $15 billion it has invested in African infrastructure over the past decade, but do not see any of this leading to economic take-off.

Western counties can hardly complain at China's tactics. They did their best to strip Africa bare, often with the help of local elites, when they had their day.

The BRICS club is not going to change the world. It is not a Non-Aligned Movement reborn for a globalised world economy. Its members are often in competition, for all that they proclaim their desire to collaborate.

If the BRICS grouping is to have any meaning, it must be in Africa where the five display the goal, expressed by the former Chinese leader Hu Jintao last year, to promote "the development of the whole world".

It is reasonable to ask if South Africa is the right partner for the other four, given that it trades on its heroic past rather than offering an economic model for the future. But however South Africa tackles its domestic problems, China, India, Russia and Brazil cannot escape more responsibility for the sustainability of African economies as a whole.

On Twitter: @aphilps

DMZ facts
  • The DMZ was created as a buffer after the 1950-53 Korean War.
  • It runs 248 kilometers across the Korean Peninsula and is 4km wide.
  • The zone is jointly overseen by the US-led United Nations Command and North Korea.
  • It is littered with an estimated 2 million mines, tank traps, razor wire fences and guard posts.
  • Donald Trump and Kim Jong-Un met at a building in Panmunjom, where an armistice was signed to stop the Korean War.
  • Panmunjom is 52km north of the Korean capital Seoul and 147km south of Pyongyang, North Korea’s capital.
  • Former US president Bill Clinton visited Panmunjom in 1993, while Ronald Reagan visited the DMZ in 1983, George W. Bush in 2002 and Barack Obama visited a nearby military camp in 2012. 
  • Mr Trump planned to visit in November 2017, but heavy fog that prevented his helicopter from landing.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
 
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
 
Round 3: February 7-9, Dubai Autodrome – Dubai
 
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
 
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
ICC Awards for 2021

MEN

Cricketer of the Year – Shaheen Afridi (Pakistan)

T20 Cricketer of the Year – Mohammad Rizwan (Pakistan)

ODI Cricketer of the Year – Babar Azam (Pakistan)

Test Cricketer of the Year – Joe Root (England)

WOMEN

Cricketer of the Year – Smriti Mandhana (India)

ODI Cricketer of the Year – Lizelle Lee (South Africa)

T20 Cricketer of the Year – Tammy Beaumont (England)

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The Sand Castle

Director: Matty Brown

Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea

Rating: 2.5/5

German intelligence warnings
  • 2002: "Hezbollah supporters feared becoming a target of security services because of the effects of [9/11] ... discussions on Hezbollah policy moved from mosques into smaller circles in private homes." Supporters in Germany: 800
  • 2013: "Financial and logistical support from Germany for Hezbollah in Lebanon supports the armed struggle against Israel ... Hezbollah supporters in Germany hold back from actions that would gain publicity." Supporters in Germany: 950
  • 2023: "It must be reckoned with that Hezbollah will continue to plan terrorist actions outside the Middle East against Israel or Israeli interests." Supporters in Germany: 1,250 

Source: Federal Office for the Protection of the Constitution

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

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The specs
 
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Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
The specs

Engine: 3-litre twin-turbo V6

Power: 400hp

Torque: 475Nm

Transmission: 9-speed automatic

Price: From Dh215,900

On sale: Now

Dubai World Cup Carnival Thursday race card

6.30pm: Dubai Millennium Stakes Group Three US$200,000 (Turf) 2,000m
7.05pm: Handicap $135,000 (T) 1,600m​​​​​​​
7.40pm: UAE Oaks Group Three $250,000 (Dirt) 1,900m​​​​​​​
8.15pm: Zabeel Mile Group Two $250,000 (T) 1,600m​​​​​​​
8.50pm: Meydan Sprint Group Two $250,000 (T) 1,000m​​​​​​​
9.25pm: Handicap $135,000 (D) 1,400m
10pm: Handicap $135,000 (T) 1,600m

Biography

Her family: She has four sons, aged 29, 27, 25 and 24 and is a grandmother-of-nine

Favourite book: Flashes of Thought by Sheikh Mohammed bin Rashid

Favourite drink: Water

Her hobbies: Reading and volunteer work

Favourite music: Classical music

Her motto: I don't wait, I initiate