The ‘BRICs Decade’ Will Continue

Around 150 economists and agricultural economists from more than 20 countries all over the world came to IAMO Forum 2011 “Will the ‘BRICs Decade’ Continue? Prospects for Trade and Growth’ from 23-24 June 2011.

Altogether, nine keynotes were held and 30 papers were presented – dealing with economic and social developments in Brazil, Russia, India and China. These emerging economies, also referred to as BRIC, had a major impact on the world economy of the last decade due to their high growth rates.

“I’m very contented with the great quality of the contributions, our highranking keynote speakers and the strong commitment of the audience”, says Thomas Glauben, Director of the Leibniz Institute of Agricultural Development in Central and Easter Europe (IAMO). IAMO had organized this conference in collaboration with GIGA German Institute of Global and Area Studies and Kiel Institute for the World Economy (IfW). Glauben is convinced that the BRIC will consolidate their strong economic and political position in the future: “These countries are not yet fully industrialized economies, and during the conference you could learn a lot about the serious problems they have to handle with. Nevertheless, the next decade will also be a ‘BRICs Decade’, that’s for sure.”

Growth with obstacles
After Thomas Glauben’s introductory remarks, Scott Rozelle, Stanford University, held the first presentation in the plenary session “Growth and Development in the BRICs”. It dealt with China’s growth opportunities and obstacles. Rozelle is working for the Freeman Spogli Institute for International Studies of Stanford University – one of the leading partners of the Rural Education Action Project (REAP) in China, IAMO is also taking active part in this project. China’s annual economic growth rates of 10 % are enormous, said Rozelle. But it is far from being certain that it will go on this way and that, on the long run, this growth will have a considerable effect on the welfare of China’s population. Rozelle referred to Mexico as a negative example: In the 1980s, the country’s growth was impressive, but later it turned into stagnation and crisis. Rozelle’s forecast: The declining labor supply due to falling birth rates on the hand and the higher labor demand due to ongoing growth on the other hand will lead to rising wages. Therefore, China has to become more productive and competitive in more technology-based industry sectors such as luxury fashion and electronics. But at the moment, the poor rural population is not prepared for these challenges. China should urgently invest in the improvement of health, nutrition and education in rural areas, Rozelle demands.

The following keynote speaker Arvind Panagariya, Columbia University, talked about the future of the Indian economy. With 8 to 9 % annually, its growth rates are also impressive. But unlike China, India is much more likely to experience a labor backlog: labor demand in agriculture is decreasing, at the same time there are hardly large scale industries that would allow India to raise its export rates. In addition to that, an inflexible labor market and declining investment in education on the part of the government cause further problems.

Russia, which doubled its GDP within the last ten years, was in the focus of the presentation of Andrei Yakovlev, Moscow Higher School of Economics. Yakovlev investigates the role of business associations in the Russian economy. Companies that are export-oriented and active in terms of innovations and investments are especially often members of such associations. Furthermore, business associations are kind of a channel for elite exchange. Members are in close contact with regional and local authorities, give them advice and, in turn, look to them for advice.

Rising prices and food security
Another highlight was the plenary session “Food security and sustainable development” on the second day of the conference. First, Francisco Ferreira, World Bank, was dealing with income effects of rising food prices in Brazil during the crisis 2007/2008. Especially poor people suffer from the rise of food prices, because the share for food of their total expenditures is particularly high. At the same time, rising food prices have positive effects on the income of those who produce food or work in agriculture. Furthermore, Ferreira included the welfare program of the Brazilian government into his analysis. Proportionaly the middle class experienced the greatest income losses – but at the same time it must be presumed that it were Brazil’s urban poor who suffered most.

Klaus Schumacher, Head of the Economics, Public Affairs and Corporate Communications Division at Nordzucker AG, gave a talk on the reasons of increasing instability and volatility on agricultural commodity markets. Commodity prices underlie deviations – that is no new phenomenon, but new are the dimensions of these deviations and the complexity of their causes. Besides demand, supply and weather conditions, political factors like biofuel promotion and changes on other commodity markets, especially the crude oil price, are of growing importance. There are also new market actors like hedge funds exerting influence. Schumacher considers it a duty of the G20 countries to limit the leverages of financial markets on food prices.

The promotion of food production in emerging economies was in the center of the presentation of Heike Harmgart, European Bank for Reconstruction and Development (EBRD). Emerging economies are vitally important for future food security. One the one hand, they suffer from unstable food prices, on the other hand, they contribute to their development via market constraints like export quota or bans. Obstacles to a further development of food production in EBRD-attended countries are for example insulated land markets, bad infrastructure, unavailability of credits, and an unstable political environment. Stimuli and investments coming from the private sector can help to improve the situation but also be supported by the local governments.

Finally, David Orden, International Food Policy Research Institute (IFPRI) spoke about the agreements within the World Trade Organization (WTO) concerning agricultural support. The aim of these agreements is to limit policy decisions potentially leading to economical deformations in agricultural production and trade. An annual report is providing an overview on every member’s compliance. WTO would appreciate the admission of Russia, which is the only non-member among the BRICs, Orden said.

Little encouraging: Africa
A look beyond the geographical horizon of the BRICs delivered the special session about Africa, organized by Awudu Abdulai, University of Kiel. Economic growth is a necessary condition for poverty reduction, said Augustin Fosu, World Institute for Development Economics Research, United Nations University, in his speech. But economic growth does not lead automatically to a real poverty reduction. Unlike in India, in Sub-Saharan Africa there are hardly any changes to observe. Adusei Jumah, United Nations Program for Development, reported on the continent’s progress in reaching the “Millenium Development Goals” of the United Nations (MDGs). These MDGs are a a “measurable set of human development benchmarks” to evaluate poverty-reduction efforts, with deadlines for achieving them – unless their non-achieving will not be sanctioned. Concerning poverty reduction, the continent as a whole made a step forward. The access to education and clean drinking water improved as well. The situation is little encouraging concerning MDGs in relation to the population’s health, e.g. the fight against HIV/Aids, Malaria and the decreasing of infant mortality. This applies in general to Sub-Saharan Africa, as these countries are far from reaching all their MDGs. Jumah also explained that emerging economies like China, India and Brazil became important trade partners for Africa within the last years. If this collaboration is equitable and advantageous for both sides, was subject of a critical discussion after Mr. Jumah’s presentation.

Since 2003, IAMO Forum is annually organized by Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO). The conference aims to present and discuss up-to-date research findings together with renowned scholars, policy makers and industry representatives. At the same time, talented young academics are given the opportunity to present their work and to link in the global scientific community. The next IAMO Forum will take place from 20-22 June 2012 in Halle (Saale), Germany. The topic of this upcoming conference will be “Land use in transition: Potentials and solutions between abandonment and land grabbing”.

About IAMO
The Leibniz Institute of Agricultural Development in Central and Eastern Europe (IAMO) is an internationally renowned research institution. With more than 60 scientists and in cooperation with further leading research institutions, it is addressing urgent scientific and social issues in agricultural and food economics and rural areas. Main regions under review include Central and Eastern Europe as well as Central and Eastern Asia. Since its foundation in 1994, IAMO is part of the Leibniz Association, a German community of independent research institutions.