Wang Huiyao in dialogue with Lord Jim O’Neill and Leslie Maasdorp on the BRICS and global governance 2.0
CCG | December 02 , 20212021 marks the 20th anniversary of the coining of the “BRIC” acronym and the 15th anniversary of cooperation between the BRICS nations (Brazil, Russia, India, China and South Africa). Despite collaborative efforts that have been put into multilateral mechanisms including the New Development Bank, overall, there has been only limited cooperation between the BRICS nations towards shared goals of advancing trade linkages and tackling common challenges in global governance. What opportunities and challenges are there for BRICS cooperation in the next decade? What can be done if the BRICS can work as a more united group to rise to the occasion and play a more active role in advancing the global development agenda?
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On December 2, 2021, CCG hosted Lord Jim O’ Neill, coiner of the “BRIC” acronym and former Chairman of Chatham House and Commercial Secretary to HM Treasury of the UK, and Leslie Maasdorp, Vice President and CFO of the New Development Bank, to join an online dialogue with CCG President Wang Huiyao on topics related to the development of BRICS and the NDB, regionalization and globalization, and global governance issues including health policy.
BRICS cooperation is needed to improve global governance
Wang Huiyao: Hello everyone, you are watching CCG Global Dialogue series. My name is Henry Huiyao Wang, I’m the founder and president of the Center for China and globalization. At this special time, our global dialogue is joined by two special guests, to talk about the past, present, and future of the BRICS and also the future globalization development. This is really a right time to talk about this. I knew Lord Jim O ‘Neill actually just published a paper on the BRICS at the Financial Times 2 days ago, so it’s really great to have you. I’d like to first quickly introduce our distinguished guests today. Lord Jim O’Neill is a renowned economist and the creator of BRIC acronym, which later became BRICS. As we know the BRICS stands for Brazil, Russia, and India, China and South Africa. Jim was also the former chairman of the Royal Institute of international affairs in London (Chatham House) and he was also previously the Commercial Secretary to Her Majesty’s Treasury of the UK under former Prime Minister David Cameron. And for many years, he was the Chief Economist at Goldman Sachs. Recently, he became a member of the Pan-European Commission on Health and Sustainable Development. So you have many very important titles and your work has had a huge impact. Here in China you have been referred as “the father of the BRIC concept”. So, your name is no stranger here. I’m also very glad to have another friend of mine, Mr. Leslie Massdorp. He is leading the new Development Bank as its Vice President and CFO. He held numerous important positions both in the government of South Africa and also in the private sector, including the Managing Director and President of Bank of America Merrill Lynch in South Africa. In 2002, he was the first African to be appointed as International Advisor to Goldman Sachs International, where he and Jim worked together.
So this is a very fascinating in time. This year marks the 20th anniversary of the BRIC concept coined by Jim O’Neill and BRICS has evolved into international global player. It’s also the 15-year anniversary of the BRICS Corporation. The concept of BRICS has been widely accepted and is recognized around the world. At the same times, new countries like Indonesia, like South Korea and many others actually are doing quite well. So perhaps Jim, maybe you can say something to audience both in China and outside China. I know you just published the article in the Financial Times which is a really great. I have a piece of your article there, in which you reviewed the birth of the BRICS and mentioned your vision at that time. Now you want to expand BRICS row and maybe at IMF and the World Bank and even G7 – you were thinking of expanding that. So what’s your assessment?
Jim O ‘Neill: Thank you Henry. Today it’s a huge privilege to join you to speak at such a prestigious series and especially with my good friend Leslie. It’s a great honor to be part of this discussion. I could probably spend the whole hour just answering this first question. So let me try to be very selective and as brief as I can. As you mentioned I had an article published in the Financial Times two days ago and because it is the 20th anniversary, actually, a number of global media organizations are actually covering their own interpretation of the 20th anniversary throughout the week. I just think I heard this morning that very well-regarded Nature magazine actually got his own feature on the topic, which did include an interview with me, too. During the whole week, Bloomberg Television and their journalists have also been running a number of different pieces. So I’ll just try to select 3 opening comments, some of which I’m sure we will pursue in further parts of our discussion.
In contrast to that headline at the Financial Times chose, it’s important, as each of you know, when you write an article for a newspaper, you never have any control over the title or headline. You only have control over the content. And the FT chose to have a headline that the BRICS have been a disappointment which I think is has some truth on some levels, particularly for the policy coordination level, but of course, by definition, for any group that involves China over the past 20 years – a lot that is, that’s obviously very far from the truth. Because when I reflect on the economic developments of 20 years ago and compare it to what our famous projections showed, China has surpassed considerably more than any of the scenarios that I and my team assumed in the early days of the BRICS idea. In many ways and I’m sure it’s often a feature of many of your discussions with fascinating people. One of the most remarkable things of the economic history of my lifetime and before is the performance of China the past 30 years, 20 years of which has been one of the BRICS. It’s also true that by and large India has essentially achieved the broad growth path that we outlined and that’s why today China and India are so much bigger parts of the world economy than they were 20 years ago. It is the case, unfortunately that’s the other two in the original acronym of mine, Brazil and Russia, after having a very good first decade where they also surpassed all expectations of ours, have actually had an equally very poor second decade and ironically each of those countries share of global GDP is almost back to where it was 20 years ago. And in that sense the objective reality is when it comes to their economic performance they’ve been a disappointment and I would add, unfortunately, the same is of course, true for South Africa also. And whilst so many differences between them, I think at the core dilemma which relates to policy issues, each of those three show signs of the much discussed commodities curse which can often be a problem for many emerging economies that are trying to break through the middle income trap and this is a challenge that each of those three countries faces in the future in my opinion. Even though there are many differences between them.
Second thing to say, as you touched on Henry, especially in the very first paper of 20 years ago. My whole points of creating the acronym deliberately is a play on the English word bricks as in building BRICS is that it seemed already 20 years ago that global governance wasn’t adequately represented by big emerging economies and that was the basis of my paper especially coming two years after the creation of the Euro and the introduction of a single currency for every big continental on European country, it seemed to me very clear that there was no great case for single representation of each of Italy, Germany and France in global economic governance and so the G7 could be both consolidated and expanded to include important emerging economies. And whilst that never happened, of course, 7 years later in 2008, prompted by the global financial crisis, we had the advent of the G20, which at its core, was in reality to bring in these big emerging economies into the center of global economic governance. And at the time if we would have had this discussion in 2008 or even 2010. I would have been very excited about what this meant for more representative and more equitable global governance. And of course importantly with it as i mentioned in the FT story. We also had the introduction of the financial stability forum which became the financial stability board. And in 2010 we had the first significance reforming the voting shares and structure of the IMF and the World Bank and with it. The change in the basket of the SDR to include the Chinese RMB. Unfortunately, and hence why FT picked on this title. In the decades since and unfortunately so strongly exhibited during this crisis, there has not been any further significant improvements in global governance at all.
On the contrast between the G20 meeting of 2020 and 2021 and those of 2008 through 2010, in my opinion, is very disappointing and something that needs to be urgently changed for the future of all 7,000,000,000 people around the world. And then the third thing very quickly on the BRICS political group itself I think, as I know because I talked to Leslie about this quite often. on a sort of unnoticed level. There are very important positive developments that have taken place with a whole series of ongoing discussions between BRICS ministers whether they be economic or health or political that take place all the while. By definition that is a great development, and of course, was the development of the introduction of the new Development Bank that Leslie represents. But it is the case, in my opinion and one has to be careful, to be diplomatic, and I don’t want to offend anybody, but it is the case that the actual cooperation between the BRICS political leaders on an economic basis has not really demonstrated any evidence that is materially helped any of their economies. And I finished for now, with the rather sober reflection that if you look at the collective economic performance before and since the BRICS political group was established, it has weakened. Now that may have nothing to do with the introduction of the BRICS political group. But it certainly raises the possibility. As I’ve touched on – so far, they haven’t doing anything to ensure stronger economic performance between them.
Wang Huiyao: Thank you, Jim. As the creator of this BRICS concept, which actually led to the BRICS countries to form groups and summits and all those things, you are very visionary in terms of proposing this very practical idea, you are the champion for the BRICS countries. Actually, I use the title as a little sensational. Actually BRICS countries still, as an emerging power, particularly China, it’s doing still relatively well. But maybe just to follow up on your in this opening remark, you envisioned at that time that global governance system maybe can bring in more BRICS countries to participate. We shouldn’t let Western countries dominate the system. You recommended that at BRICS countries should have more share in the international mechanism like IMF, World Bank. And of course we see some ideological and political divide on the G20, but you mentioned about G7 can be expanded to G10, maybe to include a few BRICS countries. Those are really very good ideas. So, what do you see the BRICS countries in the global governance system? Now we have to really work together in terms of multilateralism. I think just not too long ago, we had this global BRICS Summit and President Xi actually mentioned about how we can continue support multilateralism. So, how do you see the BRICS countries’ role in the future in the global governance, any new ideas or recommendations?
Jim O ‘Neill：Again 3 very quick but, in this case, definitely much briefer responses. The first one is, I can’t resist repeating a joke that I’ve said for much of the past 15 years and discussed with Leslie and his colleagues at the New Development Bank. Given how the political group and the New Development Bank came about because of my acronym. I’m still waiting to be made honorary president of the New Development Bank. The second thing to say slightly more seriously, is that, it is remarkable when I look back 20 years ago, as to what was in my head and what I thought would be much more optimal for the world. How many of those thoughts are still in my head now even though the world is changed so much? If I just answered this part of the second thing with 2 subparts very quickly. You know, with the existence of the Euro and a shared monetary and fiscal policy in Germany, France and Italy I don’t really understand the logic as to why each of the 3 of them – all of which have very poor domestic economic growth performance warrants a seat separately at some kind of global table of economic policy affairs. It is completely lacking in any rationale other than economic history and perhaps of course, the fact they all come from the same continent and have the same shared democratic values.
And then the second part of answering that, I often think this is perhaps why we have some of the difficulties in the world, because, as great as the G20 development was, as anybody that participates in these G20 meetings will always say to me – it’s too many countries and too many people to be an especially useful framework for making tough decisions. I’m a big believer in deliberately recognizing the difference between compromise and conciliation. And the more people that are in a decision-making group aboard, by definition, the more people default to compromise – usually the weakest compromise instead of deliberately trying to conciliate. And I think a reformed smaller group inside the G20, which would still be along the lines of what I said 20 years ago would make a huge amount of sense.
And then the last part of answering you on this for now is I think it would help if the BRICS leaders themselves had a stronger shared collective priority more frequently on some key issues. You will know Henry yourself and Leslie will also that there have been occasions where there was a small window for important global leadership positions such as the IMF or the World Bank to come from a big emerging country. I’m thinking of particularly about 5-6 years ago, when the positions were up and there did seem to be a chance that we could break the mode of one coming from Europe and one coming from the US but one of the reasons why that never happened is because the BRICS countries themselves didn’t be strong enough to share who that person should be from the emerging world. And the third thing to say, and because you touched it on your intro. Again, I know because of my deep involvement in global health. In the past 2 months, some of the BRICS countries have been very opposed to the idea of the introduction of a global health board under the G20 despite it clearly being in their own very very strong interests and I think it partly reflects the difficulties of the BRICS leaders have themselves on sometimes coming to a common position, not just for themselves, but to contributes for the greater interest for the world.
Wang Huiyao: Thank you Jim for those very stimulating ideas you proposed in the past and have continued to do so in that way. I agree that maybe G20 is a bit too many, and I also notice that the Chairman of the Council on Foreign Relations, Richard Haass, actually proposed a G6 – including EU, US, China, India and Japan and all the big countries.
Jim O ‘Neill: That idea would be very similar to the one that I suggested and still believe.
Wang Huiyao: Yes, so, your idea is actually to bring China, India and other emerging markets a bit more into this global government system. That would be really helpful. If all the global governance systems, including health system, is dominated by Western countries and sometimes gets politicalized, then those BRICS countries would probably be reluctant to play a part. I think we need to create a climate gradually, to improve that.
Leslie, you are the BRICS man and you are the man running the bank. So what do you think about setting up this New Development Bank, as one of the achievements of BRICS countries? I understand the NDB is headquartered in Shanghai and you are moving in soon to the new office. Also, during last several years, the New Development Bank has already lent 24 billion dollars and or so. So maybe you can give your perspective about BRICS and the New Development Bank.
New Development Bank will “morph and mutate into a more ‘emerging markets’ bank”
Leslie Maasdorp: Thank you very for having me and again, good seeing you Jim. First point I’d like to make, and I want to frame this around maybe 3 propositions. I think it is early days to assess the historical significance of BRICS. It is 20 years since Jim November 2001 wrote the paper. But it is only 12 years since the 5 BRICS leaders and the BRICS as we know it today in 2009, came together. And it’s actually only 6 years since the New Development Bank has been created.
So I think it’s important to look at it through that historical lens, the 20 years is more like the concept, that Jim conceptualized, have been in vogue. But the institutional formation is much younger. So we are very much in the early stages of its evolution. My proposition is, what BRICS have done is it created a platform for what later on could be the embryo for more emerging markets platform within these global governance structures. The G20 was only formed 22 years ago. But within the G20, these countries already have informal network amongst these large emerging markets, Indonesia, Mexico and others, were also part of that dialogue. They were at the forefront of articulating for reform within the World Bank and the IMF, which led to what is known as Voice Reform in 2009-10 as Jim referenced. So the BRICS countries played a much bigger role over the last period to help engineer those reforms to make the global governance system more credible and more legitimate. Because we do have still today, a mismatch between the economic power of the large emerging markets and their political weight as represented within the official structures. So the G7 is obviously being overtaken by the G20 and it is definitely democratized decision making in many respects.
But let me make the second proposition. Maybe there was a reason why Jim didn’t cover this in his article – I’m sure it’s just because of the length. There are some significant achievements of the New Development Bank and the institutions that BRICS have created. The first one is that many people don’t know that there’s another institution that BRICS created while it is a virtual institution. That’s called Contingent Reserve Arrangement. It’s a facility, a pooling of foreign exchange reserves of $100 billion. $41 Billion dollars from China, $18 Billion from India, $18 Billion from Russia (and Brazil), and $5 Billion from South Africa. Should any of our 5 countries have balance of payments pressures, this is an additional facility. Traditionally you go to the IMF if you have balance of payment liquidity challenges, but this is now put in place. The treaty was signed in 2014 already but not many people know about it because it is a virtual fund, it’s a pooling of reserves and will play a very important role in the event of a global liquidity crisis.
The second key and most significant achievement of BRICS has been the creation of the New Development Bank. This is an institution which has $50 Billion of subscribed capital. It has now approved, up until last week, $31 Billion of sustainable infrastructure. The fact that the bank has never financed a coal-fired power station is sort-of symbolic. It has a completely green and sustainable persona which I think is also very important in this age of climate change. So the second point I’d like to make is that New Development Bank is also at its early stages, but it will morph and mutate into a more emerging markets’ bank. A month ago, we admitted United Arab Emirates, Bangladesh as well as Uruguay, and we are in the cusp of introducing significant, new emerging markets over the next number of months and years to come. So the concept was born in 2001. We’re still a baby by 2015 when the institution was created. But one has to look at longer historical lenses to assess what potential impact this acronym that Jim is the creator of will have on the world.
Wang Huiyao: Thank you Leslie. We should be a bit more patient and then give a bit more time. The BRICS countries come along and formed this New Development Bank, which is a great achievement. Now they have done so many for the sustainable development. And they have a big facility set aside in case it’s needed. But of course, we will have more to come in the future. I’m glad to hear other emerging countries are joining the New Development Bank and they set very good examples of that. I’m sure Jim has high expectations as a creator but you must be very pleased to see the bank has done very well.
Now I’d like to change the subject. Recently we published a book called Consensus or Conflict?, to which Jim has actually contributed a paper, called “What is the Right Way to Structure Global Health: the Case for Radical New Organizations and Thinking”. Thank you Jim for contributing this paper to this book that myself and Alistair Michie co-edited. It was published internationally by Spring Nature and has been downloaded around 200,000 times already. This is a timely subject So you wrote about your experience in leading a group called “The Global Review on Antimicrobial Resistance”. So AMR investigated the lack of development of new useful antimicrobial, and excessive use of antibiotics, its risk and enormous economic cost from the global health threat, which has been proven by the Covid. So maybe it’s just in time we talk about the idea that you have in this book on the International Global Health System, with the recent outbreak of Omicron as another variant of Covid virus continues to spread after the Delta variant. So can you elaborate on your concept about this global health governance re-organization?
A global health and finance board is urgently needed
Jim O ‘Neill: Thank you Henry, I’d be delighted to talk about this briefly, because it’s something I’ve become very passionate about. To make it easier to talk about antimicrobial resistance, which is even for those of us whose natural speaking language is English is quite a mouthful. So it often abbreviates to AMR. I also often say that it’s probably intellectually the most interesting thing I’ve ever done in my life. I’ve had a very fortunate professional career but leading a global independent review into the challenge of AMR was fascinating for many reasons at the core, because of its global importance. It’s often known particularly in contrast to Covid or because of Covid – it is the silent pandemic that is killing as many. My review became, in the world of global health, quite famous, for saying that if we don’t do something about the problem of antimicrobial, particularly resistance to antibiotics, about 2050, we can have 10 million people a year always dying because antibiotics won’t work anymore. And with it, a colossal loss of economic activity. And now, many of those few health specialists that looked at our numbers and occasionally said 5 years ago that maybe they were exaggerated. Now they realize that, on the contrary, if you don’t deal with global health threats, they can be worse than global financial threats. And the last time I looked, the loss of economic activity during Covid in the past 2 years around the world is 3 times worse than that in the financial crisis. And this came from a global health crisis, which takes me to the second core point of the chapter I had the privilege of writing for your book – by the way, congratulations to you and Alistair on such powerful sale so far. I hope it will become 10 times / 100 times bigger given the importance of the issues. The central idea is we need to stop treating health as some place in the corner that we only have a focus on when the problem becomes right in the middle of our face. Just as the FSB was created to try and anticipate that the global financial system will always have enough capital, and it will be ready for the next global financial crisis. We need to do the same thing with health. And the central proposition is to have a global health and finance board under the G20, which would be represented by both finance ministers an health ministers. In order to do that we will be able to have a truly effective global surveillance system for health, adequate financing of the WHO instead of this slightly bizarre voluntary based system.
Every week of our lives, take this so-called Omicron for example, the variants of Covid that we are currently dealing with. Leslie’s country, South Africa, is suffering because of the very rapid decision to impose travel constraints. If we had a proper global health and finance board, we would be prepared to think in advance all around the world together, to think how these things should be dealt with before they happen. By that, it would not stop global health problems, but it would stop them from having the economic and financial damage and the destruction which we’re still living through nearly 2 years after the onset of Covid. I’ve become very passionate about that. Together with some of the people led by Mario Monti on the Commission that I was part of, we are still trying to lobby very extensively for the initiatives introduced to have a task force to look at this under the G20 of Italy’s presidency, to have that taken up by the Indonesian presidency. And for this to become a central part of future global policy-making.
Wang Huiyao: Great Jim, that’s really a very important task you champion and has contributed so much to today’s international global health system. In the book we just mentioned, Consensus or Conflict?, you stated that the matching WHO’s role and responsibility with the global reality is very important. It is very true that lessons learned from Covid are desperately needed in terms to transform to reforms of global health governance system. On Wednesday just this week, members of WHO have agreed to set up an intergovernmental body to negotiate a draft of global pandemic treaty. Do you see a good sign? In terms of global health system reform and global governance, do you see countries like BRICS countries, EU, America work together rather than becoming so politicized like on problems of origin, either from nature or animal. Saying it is man made from lab really soured the mood to collaborate. So how we can better collaborate on those issues?
Jim O ‘Neill: I think there are some quite easy wins that can be made. I’m very grateful that you give me an opportunity to talk about this, particularly with the audience in China. Because China is in a position to take great leadership on this topic. Given its importance in itself, but also at the core of the BRICS countries. But I’d say three very easy things need to happen. As I said, there’s already been a task force now established following the G20 meeting. And I know that the WHO is in the center of trying to see how to implement two parallel things. Firstly, How to practically implement a global health and finance board. Secondly, how can we ensure representative financing of something like global vaccine distribution, or money for new antibiotics, or many other things. But crucially, the financing of the WHO itself, when we stand back from what’s going on and look at it from 40,000 feet. The WHO should be financed in the same sort of way that the IMF is for it to be a voluntary thing, which allows for example the brilliant contributions of the Gates Foundation to be a crucial thing for such a centrally important organization for world. It’s crazy, and hopefully we can get under the Indonesian presidency, some agreements to these simple things.
The final thing to say, which I’m describing it simple, but this part of it is going to emerge through time. I think involving the private sector, especially in the West, we need to rediscover what are described as “profit with purpose” ? In the world of high finance for much of my professional life, a lot of international business appears to be profit for the purpose of profits, which is great. Making a lot of money is great. Because that’s what generates wealth. But we have to make sure that societal challenges can’t just be regarded as the responsibility of other people. And have that at the center, of allowing and supporting our policy-makers to think more inclusively of what economists describe as externalities, and internalizing them to be part of regular thinking. That goes back to why a global health and finance board is so powerfully needed, which by the way is not that different than what we need to tackle climate change.
Wang Huiyao: I think you’re right on the climate change – China and the US actually just issued a joint statement. So it just shows that you can be collaborating and take some leads on those by these two big countries.
“There’s going to be a period of renaissance for development banks, because of the significant new focus on sustainable infrastructure”
Jim O ‘Neill: One important point I meant to mention very quickly is when I discussed
with an astute Chinese observer recently. When I was bemoaning the fact that I didn’t think China was enthusiastic yet for this idea as I hoped, this person pointed out that so far in the brief history of the Financial Stability Board, every leader – the 4 leaders of the FSB of all come from G7 countries. And therefore, going back to our earlier points, if you really want to create a new body that is a very sensible thing from Western countries is to consciously, deliberately encourage a leadership position in terms of a president or chair from an important emerging country.
Wang Huiyao: I think this is again visionary. You’re absolutely right. As a matter of fact, China is doing quite a lot since the outbreak of the pandemic. President Xi pledged 2 billions US dollars to developing countries. President Biden pledged 2 billion dollars too at the G7 summit and President Xi pledged again another 2 billion dollars. So I’m glad to see that kind of healthy competition, but also China has donated almost 2 billion doses of vaccine and just this week, President Xi announced at FOCAC that China donates another billion and there will be joint production of another billion vaccines to African countries. And you’re absolutely right. The financial board is not really letting China play an active role there, it’s not fair. That’s a problem and one of the reasons why when there are discussions in international mechanism, China is always on the side and not playing an active role. But China actually does a lot already. We should work on promoting heathy cooperation. So talking about corporation, Leslie, this week, EU President announced that Europe is providing 35 billion euros on the EU gateway, on the infrastructure. And of course, President Biden passed a law on a 1.2 trillion infrastructure bill and G7 also proposed to Build Back Better World – B3W. This is the eighth year of China’s BRI. So, infrastructure is really that I can see as the largest straw, the largest common denominator and attraction for the world. For the next 7 decades probably, we can still be working on for many developing countries and maybe another amassing plan, or the new Marshall Plan, or maybe a global stimulating plan for the world to work together rather than getting to geopolitical fights and arguments. As a banker, what’s your assessment on the infrastructure opportunities in the developing countries for BRICS countries, and for the US, EU and other Western countries?
Leslie Maasdorp: Firstly ,the recent pronouncements in the lead-up to COP 26 is a clear
indication and because of all the announcements you’ve just made reference to. There’s going to be a period of renaissance for development banks, because of the significant new focus on sustainable infrastructure, there is so much new financing needed to replenish existing infrastructure and to build new infrastructure that is resilient and sustainable. I think one of the first key points to make in this regard and Jim already touched on it is that traditionally people have always looked at infrastructure as hard economic infrastructure in terms of ports, airports, high-speed rail and so on – power infrastructure, but social infrastructure is also now becoming very critical. Jim just mentioned the Commission that he was part of which looks at health and sustainable development in the EU. Within multilateral banks, we are also now placing huge emphasis on that component.
Coming back to to infrastructure, I think one of the most biggest significant developments here in China is the increasing focus now on greening the Belt and Road. In fact, I’m hoping that many people hope that maybe the words will be used—Green Belt and Road and not just making reference to try to green the Belt and Road. Because that would send a very powerful signal and China has already done this to a degree if you look at the announcement that it will no longer finance coal-fired power outside of China. The announcement was made in the build-up before COP26, so infrastructure can play a very critical role going forward to greater sustainable development. One other point I wanted to make which is also very critical is that our institutions that we have right now are not necessarily fit for purpose for the new realities that we are confronted with. Jim made reference to recall externalities because of the pandemic we just lived through and there there’s climate change. There’s a whole range of other issues that are transnational across borders or spillovers as it is often called. Our institutions are not necessarily suited to deal with these. This might be a moment to go back to ask the questions whether we in fact have the right institutions in place and whether we should reform and innovate, in order to make sure we can tackle these new challenges that we are confronted with.
The last point I want to make is that the biggest potential, game-changing potential for the infrastructure is mobilizing capital from the private sector. As you know, public sector is very constrained fiscally; multilateral banks have capital adequacy limitations. The biggest pools of capital is out there in institutional in terms of the pools of savings are in private hands. We need to find a way to derisk infrastructure in such a way that we cam make it attractive for these institutional investors to invest in sustainable infrastructure and a lot of that is being done at the moment and I think we’re going to see a significant movement toward crowding in private capital in the next 5 to 10 years.
Wang Huiyao: Great, that’s absolutely right, I mean, there’re many
important social infrastructures – the health system, financial system. I think we’re under the consensus now the world needs infrastructure and of course so are hard infrastructure. We are in the consensus now that the world needs infrastructure among the US, EU and China. China probably does the best now – the total length of the speed railway in China is equal to the next 10 countries combined whereas probably the US military budget is equal to the next 10 countries come back. Maybe we should spend more on infrastructure worldwide and that’s why I think that Jim is really visionary when he talks about how we can reform, IMF, World Bank and have more emerging countries participation, which I think is really a very wise suggestion. Apart from World Bank, now we also have other development banks. We have AIIB and NDB. Can we have some kind of International Bank Board, some kind of consortium or alliance? Can we combine B3W and BRI, or maybe upgrade the AIB to go GIB, a global infrastructure bank. How we can multilateralize this global initiative on infrastructure? Maybe it’s time now. If this is the consensus of every major countries, why can’t we work on this together? Now you see the WTO actually is getting us together although because of this virus, we’re postponing the MC12. But infrastructure seems every country has the consensus. But how can we tackle that? How we can really work with BRI and B3W. Jim, your opinion, please?
Jim O ‘Neill：I love the spirits of how your mind approaches this question. It’s very consistent with the spirits of how my own mind is especially since I led the AMR review. We need to have people open their minds to think a bit more – let’s call it laterally, instead of in a such a narrow conventional way, because otherwise as the past 20 years or longer as shown, we cannot deal with the challenges that the world is faced with. And 3 specific quick things in this regard. First of all, I can’t miss the opportunity in the spirit of Leslie’s comments about social infrastructure spending, but linking it to global health. One thing that all 5 BRICS countries share very clearly is a significant challenge with drug resistant TB. And I have said for many, many years, an obvious simple clear area of genuine fruitful policy cooperation for the BRICS countries is to try and finance new effective vaccines or drugs to deal with TB, because otherwise the BRICS countries will not reach their potential. But that’s just one simple example. Secondly, in the broader spirits, arguably as both of you would know, the World Banks investing on the IFC already could be the basis for exactly such a more ambitious global entity. But the IFC and all these other ones need to think in a truly global public purpose sense. The last thing to say in the context of this is throwing it back to the wonderful spirit of how your mind is approaching it. The idea of a global health and finance board should be seen really ultimately sometime in another decade or longer – a global public goods board. We have a world in which economic policy is not just trying to deal with very narrowly measured outcomes that are defined by conventional macroeconomics, because what we have found in our lifetime is they generate these enormous externalities and they become so big that they threaten the very framework in which we all live on. So you are exactly right about the kind of degree of open mindedness and the degree of thinking of these things in a different framework than we have done for much of certainly of my professional lifetime.
Wang Huiyao: Thank you. Jim, you are right. One of China’s transformations is that it was able to lift 800 million people out of poverty. There’s this great infrastructure transformation is taking place in China. So now they want to collaborate with the world on those infrastructure. The BRI has been implementing for the last 8 years now. As a matter of fact, tomorrow, the China-Laos Railway will be open, we’re connecting the ASEAN countries. So you see that kind of infrastructure activity will really be the drive and peacemaker for the world. I’ve seen and all the other international financial institutions. Can we really reinvigorate, revitalize those institutions with AIIB and NDB? Leslie, how do you think we can get all the development banks to work together on BRI and other initiatives?
Leslie Maasdorp: I think there’s already very deep collaboration amongst the development banks. It’s now deepening because of the climate change agenda. As you might know, recently at COP 26 the Multilateral banks issued a joint statement where essentially almost half of all of their future development assistance and exposures lending whether it’d be loans, guarantees, equity – will be towards climate finance. Most of the of the institutions had targets before 25, 30 or 40% – it is now progressively moving up. So that deep collaboration is already happening but we haven’t yet consolidated as a system. We still function as individual institutions and we could probably act as a system if we act in a more complementary fashion. But I think about what the climate change agenda has done is being a catalyst for that greater collaboration. There’s already discussion for example, Kenneth Rogoff argued recently in a Project Syndicate article for the creation of the world carbon bank, because if each country put in place their own carbon policies like the European Union is putting place a carbon board adjustment mechanism set of proposals, we will have very inefficient outcomes. So I think some institutional reform might still be necessary, Henry, but, what I could definitely indicate is that multilateral institutions have deepened their collaboration over the last couple of years more so recently because of the collective agenda on climate change.
Trade agreements have to ensure equal opportunities for every country involved
Wang Huiyao: Great thank you. I want to come back to Jim for another question. You served as the Commercial Secretary for the UK government. All those new international trading schemes, RCEP will be effective on January 1st. CPTPP is also emerging, at least for the Asia Pacific trading system and UK is applying for joining and China is also applying. So what do you think of this new 21st century high-standard trading system that can really revitalize the global system, including the WTO reforms? How do you think those initiative can happen? How can China and the UK work on these new initiatives?
Jim O ‘Neill：Thank you, Henry, this is another question that could take more than an hour to answer but I’ll say 2 things, which are contradictory. First of all, this is talking very much as an economist. Quite often, I think, people over-exaggerate the importance of legal trade deals. If you look at patterns of global trade, or the best example I can ever give you is that at least until the past 2 years, Germany had started to export more to China than it did to its neighbor Italy. Even though it was part of the same EU with a common free trade deal and the same monetary system and it’s because of the enormous rising domestic demand in China on demand for the kind of goods that Germany is so powerful at. The truth of the matter is global trade is really driven by relative rates of domestic demand.
As part of that, and link to aspects of your previous question that I didn’t have a chance to talk about. I would love to see within the BRICS and separately, China and India cooperating on some of these things a lot more. Because if you look at how they’ve emerged the past 20 years, and if you look at the world the next 20 years, if China and India get their own trade cooperation right, it would literally transfer, without any exaggeration, transform patterns of global trade. And that would be the basis of so many other positive things that would happen. The contradictory part is of course, and that’s my second point is that we need to have more and more sophisticated trade agreements to deal with the rules, in which we all engage with each other around the world, but it is not as important as making sure the countries that are behind those trade deals want to see the opportunities being equally shared between them around the world.
The “BRICS” is a group with great cultural and geopolitical strength that can generate societal and economic benefits
Wang Huiyao: Absolutely. The BRICS countries should really have further collaboration. They are already very important players, and particularly, as you mentioned, China, India being two largest neighbors – we have 1.3 or 1.4 billion people and there are so many things similar. I’ve been to India a few times, and I saw so much potential for Chinese companies to work there. There’s so much to invest and to collaborate and of course, I think if we can really get these 2 countries collaborate, you are right, the global trade pattern could be changed as well. Because Chinese has already become the second largest economy and you predicted that India could someday took over Japan to be the third largest economy. And there’re all sorts of reasons that we should collaborate for the BRICS countries like what President Xi said, you know, at the BRICS Summit and we should support and collaborate and work together. I think we almost have come to the end of the discussion. I know you have been quite busy, but we still have two or three questions from the media. My staff was showing me there is almost 100,000 people watching us online and so this is a very important session. There’s one question from China News Agency – the BRICS Corporation involves countries in South America, Europe and Asia. What is the significance of cooperation between Europe and Asia and the culture exchanges between East and West?
Jim O ‘Neill：If I realized there was going to be 100,000 people, Henry, I would’ve gone to the hairdresser’s and made myself look much better. I’m very grateful, you know. I have a simple part of answering that. I’m a very fortunate person that are at least until Covid and for much of the previous 30 years traveled around the world frequently and in my view, one of the greatest things that ever happened to me was the good fortune and the ability to be able to travel to countries in Africa, Latin America, of course, Europe, North America and, in particular, to Asia. And you can only really think truly globally, if you experience how people in local societies feel. Because that only gives you a flavor of being able to understand the way people think and the cultural differences. And so of course, and I would argue one of the great strengths of the BRICS group, which is often overlooked. The fact that it does include Brazil from Latin America, two countries from Asia and Russia that’s in the middle of them, itself is a source of great cultural and geopolitical strength. And so the more these cultural exchanges can take place, and the societal and economic things that can be thought of for shared benefit that go with it. It’s what I would sometimes lazily call, it would be a no-brainer. It’s one of those free lunches in life.
Wang Huiyao: You mentioned in your recent FT article that South Korea become very successful, and China, for that matter as well. Indonesia is also raising very quickly. So do you think this kind of Asian culture – diligence hardworking, central government, coordination, would make BRICS countries a little different? I mean, even given the number of BRICS countries, it seems that BRICS countries in Asia performed relatively well compared with others.
Jim O ‘Neill：I mean, this is a fascinating issue and my original contribution to the FT was a longer length, where I actually tried to have a paragraph on this exact topic. Back in the 2003 BRICS paper, we studied 50 years earlier, what a similar analysis would’ve suggested about 2003 and what is fascinating is that already a number of North Asian societies reach the potential such an analysis would show – Japan, Hong Kong and of course, South Korea, which my opinion is arguably the most interesting country in the world of more than 45 million people since I was starting professional life. Because today it’s the only one that has a GDP per capita, as those of European G7 members. It is an astonishing achievement. And it is a shining example as is much of North Asia, for so many other ambitious countries around the world. And frankly, including Leslie’s own South Africa, which has a similar population so that of South Korea. How can you achieve the shared prosperity in order to deliver a better life? There are great virtues about the interconnection between some greater involvement of governments, enormous use of education, and technology. And I think it’s something that many North Asian countries share really powerful evidence of which – whether it be Latin America or many countries in Africa – need to understand what they can adopt for their own societies and implement.
Wang Huiyao: Leslie, do you have any comment on those questions? Of course, New Develop Bank is doing all those great things and so what do you think about the BRICS？There’s actually a question about the concept. When it was firstly proposed, it included 5 rapidly developing emerging countries, but now we have South Korea that Jim mentioned, Indonesia and many other countries like Mexico you mentioned. So, you talked about other countries joining your bank – what do you see its potential as a whole for those emerging economies?
Leslie Maasdorp: Thanks. As I mentioned early on, I think one of the contributions that BRICS and this is what Jim always be credited for – what the New Development Bank has done, is to create a coordinated voice for emerging markets. Because all the other banks, all of them, Asian Development Bank, European Investment Bank, IFC, EBRD – all of them have a control structure in terms of who is the most votes dominated by the developed world. The NDB of the BRICS is a unique construct also from a global governance perspective in the sense that you have 5 countries coming together, very different sizes of the of economies and yet have an equal say, China has got a GDP of 15.6 trillion for example, it is 31 times bigger than South Africa but South Africa also contributed $2 Billion in equity and China has no biggest say, it has no veto power. If you look at the control structures in the world after the Second World War in the IMF, the World Bank, and so obviously, the US was the biggest economy way back at 50% in the 1944 so they entrench control structures for themselves. But today you (China) have the second largest economy, sitting as an equal partner with a much smaller economy. So, from a governance perspective, you also have a unique experiment, which one can see as reasonably successful. Clearly what is required now is to take a fresh look at globalization for countries like South Africa and Brazil to see how we can become the South Koreas in the next couple of decades. Time is too short to make the case, but it was a favorable periods of globalization, which enabled the rise and growth of South Korea. Favorable factors were also in Asia, which encouraged and enabled the industrialization of Korea over the 1970s, 80s, 90s into, as Jim said, one of the top 10 countries in terms of GDP per capita. But there are a lot of lessons we could certainly learn from Korea as a shining example of a country that was transformed from developing country GDP per capita in 1960s, In fact, I think Korea, had the same GDP per capita with Ghana for example. Today and if you now look at the countries in economic size, it is just so different. So, in short, I think that the world has changed quite fundamentally, and we need to derive lessons and extract what we can learn from those success stories and try to reproduce them.
Cooperation on health and sustainable development can help to overcome challenges posed by the pandemic
Wang Huiyao: Yes, the world has changed profoundly. And I think the government system of the New Development Bank – every country is relatively equal and have an important role to play – really fits Jim’s vision that new emerging countries should be more engaged into the globalization. After the Bretton Woods System, we should really reform that and participate more so that we can really reduce our geopolitical tension and there will be more economic benefits. So that’s really the spirit that Jim has already demonstrated 20 years ago. And Leslie, what you have been practicing that at the NDB is a new governance style that other countries, particularly the developed countries – the G7, should think about.
Now, I do have a final question actually from the Brazilian Newspaper, O Global’s Marcelo Ninio. He’s the chief correspondent based here in China and he heard about Jim will be appear on my program and raised two questions for O Global, which is one of the major Latin American Media. The first question is, comparing your expectation 20 years ago to the reliability today, which of the BRICS countries disappointed you the most and why do you think that had happened? And the second question: what should be the BRICS’ main focus today to help with a better global governance? So, Jim, we will let you to answer these questions raised to you.
Jim O ’Neill: Thank you. I know O Global as a financial newspaper very well. Amongst the other great things about the BRICS acronym, I can admit, it’s allowed me to travel to that beautiful country, Brazil, many times. In the spirit of trying to balance everything else, I’m going to contradict myself, but it within a sense of humor. China is obviously being the most successful BRICS but for me personally in the spirit of what Brazil also represents, which is probably the greatest soccer/football playing nation in the world. China is also the biggest disappointment because it never took ownership of my own obsession of Manchester United Football Club in England and in the days of the brief period of the golden era between the UK and China, I had the privilege of being on that tour with President Xi. His advisors allowed him to be succumbed to going to visit Manchester City’s ground and not Manchester United’s ground. I don’t know how I failed in my in my ambition there. Second thing to say is, of course, Brazil and Russia, as the journalist asking the question knows well, equally share the position of being the most disappointing. And in many ways, Brazil’s is more than Russia’s because Brazil has better demographics than Russia. But I quickly add, again as people at O Global and many other Brazilian newspapers know, Brazil is often, in some ways, the most unpredictable of the BRICS. I will never forget when I was there in 2010, when Brazil was doing so well. Many people, including representatives from O Global would ask me whether they thought Brazil could grow as strongly as China in the next decade, literally, seriously. And I had looked at them and said you must be mad. But that year and of course 2009, they kind of had done nearly. And today, many people probably think Brazil can never grow ever again, which of course is equally ridiculous. So what I would say is, to finish for now, I think both deserve, especially Brazil, certainly will not be anything like as disappointing as it’s being the last decade. And maybe that’s the case with both South Africa and Russia also, hopefully.
Wang Huiyao：Great, thank you, Jim. So we are coming to the end and we had a very exciting discussion. You gave us the history, your review and prospects of the BRICS countries and also the role of how BRICS countries can play in the global governance system, global health system, global economic system. And you have been giving high credit for China’s development and also other countries like South Korea. So I think we have touched on many subjects and particularly how the developed world, Western countries, can really work with China you gave a lot of good advice on that and I really appreciate that. So, let’s start with Leslie for concluding remarks.
Leslie Maasdorp: Thanks very much. We’re at an interesting period, a historic crossroads really where I think this whole drive towards a green transition will provide fresh impetus for institutions like ourselves. We are obviously hugely excited about becoming a much bigger, more emerging markets focused institution, becoming much bigger than what Jim dreamed off in in 2001. Over the next 5,6 years, I would anticipate that this bank is likely to have 25, 30, 40, 50 members and become a bigger emerging markets block. It will make a profound contribution to the world of multilateralism. Within the space of 5,6 years, this institution has already made its mark in terms of its contribution. So I’m very excited and I think I share this with my colleagues about what this new phase entails. Now the global pandemic is kind of depressed sentiment very much, but it seems to us that if we integrate our approaches around health and integrate that into sustainable development, we might be able to conquer this global pandemic through more coordinated global multilateral efforts. Thank you.
Wang Huiyao：Thank you. So, Jim, we started with your Financial Times Paper just 2 days ago on some of the disappointment you have with the BRICS – the editor gave you a very sensational title. But China, being the least disappointing – China actually probably outperformed expectations in terms of global development. So now we are having a large audience of China today to hear from you. So what’s your expectation for China? How can China play a better role? You have always championed BRICS’ role for the global development and global governance in the future.
Jim O ‘Neill: Thank you, Henry. Thank you so much for including me, I just wanted to also say one thing to reiterate in my own mind, something that Leslie said early on in this discussion that is so important. Even though 20 years is a long time in my life time, but in the history of man and women and life, it’s not. And as Leslie said the BRICS New Development Bank has only been in existence for 6 years. So, I look forward to the discussion the 3 of us have in another decade, when it’s 13 years or 16 years. Because it’s important to keep that in perspective. Because we live in an era where there is a lot of negative mood about so much.
Second thing and why I say it that way is one thing I learned throughout my life at Goldman Sachs, in particular, is never let a crisis go to waste, never. And that the making of how most of us are as individuals or any countries or any governments is how you deal with the crisis. Crises will always happen. They are unavoidable because they are a consequence of human beings, and the key issue is we all need to respond to them properly. And again, Leslie is right about this one in Covid – this creates enormous opportunities for things to be thought about doing differently, including corporation. Thirdly, it leads me lastly to your specific point about China. I think as we can see and hear, again, I hope I tread carefully in my words, we can see in recent years, China sometimes finds itself a little bit surprised about the scale of global focus on China. And, of course, it’s understandable because China’s emergence as being so new. But as China gets more and more bigger, it has to find a better way of integrating its own thinking and what’s right for its own citizens with the desires of the rest of the world. And every time, the 30 or 40 times that I’ve been to China in my life, I’m always so remarkably impressed with the educational and technical abilities of so many people I meet. But I think in order for China to deal well with this next decade and beyond, it’s got to find a slightly different way of positioning how it thinks and integrates with the rest of the world, which by the way, is just as important for the rest of the world as it is for China’s 1. 3 billion people.
Wang Huiyao: Thank you, Jim. We are entering a very challenging time and a challenging world with a once-in-a-century crisis- the pandemic. As you said rightly, we should not let crisis go wasted. We should really give a new birth to the system and make improvement in our current global governance system. And for the last 7,6 years after the Second World War, we’ve had global governance 1.0, of course. Now we are heading to global governance 2.0. I really thank you for proposing the BRICS and giving credit to China’s performance. But I think the world should really work together – the developing countries and all the G20 countries. And I think that development banks actually have set a very good example of how we can work together. So thank you for creating this concept 20 years ago, and now we have the chance to talk, and I hope that actually, after another decades, we can come and talk again. So really appreciate your time and thank you, Leslie, for sharing your wisdom. And also thank our audience tonight. Thank you, goodbye.
Jim O ‘Neill: It’s an absolute pleasure to be part of this, thank you very much and best wishes to everybody.
Note: The above text is the output of transcribing from an audio recording. It is posted as a reference for the discussion.
