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NEW INITIATIVES FOSTERING SOUTH-SOUTH COOPERATION : Experiences from BRICS

May 19, 2015

David Sinate & Sangeeta Sharma

Chief General Managers

Export-Import Bank of India

STRUCTURE OF PRESENTATION

1. Indian Merchandise Trade: A Perspective

2. South-South Cooperation – Select Initiatives

3. BRICS – An Overview

4. Trends in BRICS Trade

5. BRICS – Recent Developments

6. Exim Bank of India: Fostering South-South Cooperation

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INDIA’S INTERNATIONAL TRADE

Source: Ministry of Commerce & Industry, Government of India

Towards Increased Global Integration through Trade

India’s total merchandise trade increased from

US$ 467 billion in FY2010 to US$ 757 billion in

FY2015

Exports from India have increased at a CAGR of

11.6% from 179 billion in FY2010, to US$ 310 billion

in FY2015

The long term policy objective of the Government is

to double India’s share in global trade by 2020

India’s Export to GDP ratio increased from 13.3% in

FY2010 to 15.6% in FY2015

Share of India in world merchandise export – 1.7% in

2014; Rank– 19 (up from 29th in 2005)

Foreign Trade Policy 2015-2020 aims at increasing

India’s merchandise and services exports to

US$ 900 billion by FY 2020 3

17

8,8

24

9,8

30

6,0

30

0,4

31

4,4

30

9,6

28

8,4

36

9,8

48

9,3

49

0,7

45

0,2

44

7,5

467,1

619,6

795,3 791,1 764,6 757,1

-109,6 -120,0-183,3 -190,3

-135,8 -138,0

2009-10 2010-11 2011-12 2012-13 2013-14 2014-15

(US$

bn

)

India's Exports India's Imports

India's Total Trade India's Trade Balance

INDIA’S SHARE IN GLOBAL MERCHANDISE EXPORTS

Source: WTO4

Rankings Country 2005 Country 2010 Country 2012 Country 2013 Country 2014Grand Total 100.0 Grand Total 100.0 Grand Total 100.0 Grand Total 100.0 Grand Total 100.0

1 Germany 9.2 China 10.3 China 11.1 China 11.7 China 12.42 USA 8.6 USA 8.4 USA 8.4 USA 8.4 USA 8.63 China 7.3 Germany 8.2 Germany 7.6 Germany 7.7 Germany 8.04 Japan 5.7 Japan 5.0 Japan 4.3 Japan 3.8 Japan 3.65 France 4.4 Netherlands 3.8 Netherlands 3.6 Netherlands 3.6 Netherlands 3.66 Netherlands 3.9 France 3.4 France 3.1 France 3.1 France 3.17 UK 3.7 South Korea 3.0 South Korea 3.0 South Korea 3.0 South Korea 3.08 Italy 3.6 Italy 2.9 Russia 2.9 UK 2.9 Italy 2.89 Canada 3.4 UK 2.7 Italy 2.7 Hong Kong 2.8 Hong Kong 2.8

10 Belgium 3.2 Belgium 2.7 Hong Kong 2.7 Russia 2.8 UK 2.711 Hong Kong 2.8 Hong Kong 2.6 UK 2.6 Italy 2.8 Russia 2.612 South Korea 2.7 Russia 2.6 Canada 2.5 Belgium 2.5 Canada 2.513 Russia 2.3 Canada 2.5 Belgium 2.4 Canada 2.4 Belgium 2.514 Singapore 2.2 Singapore 2.3 Singapore 2.2 Singapore 2.2 Singapore 2.215 Mexico 2.0 Mexico 1.9 Saudi Arabia 2.1 Mexico 2.0 Mexico 2.116 Chinese Taipei 1.9 Chinese Taipei 1.8 Mexico 2.0 UAE 2.0 UAE 1.917 Spain 1.8 Spain 1.7 UAE 1.9 Saudi Arabia 2.0 Saudi Arabia 1.918 Saudi Arabia 1.7 Saudi Arabia 1.6 Chinese Taipei 1.6 Spain 1.7 Spain 1.719 Malaysia 1.3 India 1.5 India 1.6 India 1.7 India 1.720 Sweden 1.2 UAE 1.4 Spain 1.6 Chinese Taipei 1.6 Chinese Taipei 1.721 Switzerland 1.2 Australia 1.4 Australia 1.4 Australia 1.3 Australia 1.322 Austria 1.2 Brazil 1.3 Brazil 1.3 Brazil 1.3 Switzerland 1.323 Brazil 1.1 Malaysia 1.3 Thailand 1.2 Switzerland 1.2 Malaysia 1.224 UAE 1.1 Switzerland 1.3 Malaysia 1.2 Thailand 1.2 Thailand 1.225 Thailand 1.1 Thailand 1.3 Switzerland 1.2 Malaysia 1.2 Brazil 1.226 Ireland 1.0 Poland 1.0 Indonesia 1.0 Poland 1.1 Poland 1.127 Australia 1.0 Sweden 1.0 Poland 1.0 Indonesia 1.0 Austria 0.928 Norway 1.0 Indonesia 1.0 Sweden 0.9 Austria 0.9 Indonesia 0.929 India 0.9 Austria 1.0 Austria 0.9 Sweden 0.9 Czech Republic 0.9

INDIA’S EXPORT: Shifting Southwards

India’s Export Destinations 2004-05 (US$ 83.5 bn) India’s Export Destinations 2014-15 (US$ 309.6 bn)

Direction of exports moving towards the Southern countries Share of Asia, Africa and LAC regions increased sharply from 58% in 2004-05 to 66% in 2014-15; Of this, share of Asia

region rose from 48% to 50% during this period Future trade flows to be geared towards the developing nations (buttressed by GOI policies)

Source: Ministry of Commerce & Industry, Government of India 5

Europe 18%

Africa 11%

North America 14%

LAC5%

Asia 50%

CIS & Baltics 1%

Others1%

Europe 24%

Africa 7%

North America 17%

LAC3%

Asia 48%

CIS & Baltics 1%

Others0.5%

INDIA’S IMPORT: Shifting Southwards

India’s Import Sources 2004-05 (US$ 111.5 bn) India’s Import Sources 2014-15 (US$ 447.5 bn)

Direction of imports also moving towards the Southern countries, particularly Asia, Africa and LAC

Share of Asia, Africa and LAC regions increased sharply from 41% in 2004-05 to 74% in 2014-15; Of this, share of Asiaregion rose from 36% to 59% during this period

Source: Ministry of Commerce & Industry, Government of India 6

Europe 23%

Africa 3%

North America 7%

LAC2%

Asia 36%

CIS & Baltics 2%

Others27%

Europe 16%

Africa 8%

North America 6%

LAC7%

Asia 59%

CIS & Baltics 2%

Others2%

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BRICS INITIATIVE

BRICS is an acronym for the group of five leading emerging economies, namely, Brazil, Russia, India,

China and South Africa.

Initially called BRIC, without South Africa, this group was dubbed by Goldman Sachs in 2001, in a

paper titled ‘Building Better Global Economic BRICs’.

This paper concluded that over 10 years the weight of the BRICs and especially China in world GDP

will grow, raising important issues about the global economic impact of fiscal and monetary policy in

the BRICs.

In 2003, their report, ‘Dreaming with BRICs: The Path to 2050’ stated that by 2050 these economies

together would be larger in US Dollar terms than the G-6, consisting of the United States, Germany,

Japan, the United Kingdom, France and Italy.

South Africa was added to the list in April 2011 creating ‘BRICS’ (Brazil, Russia, India, China and South

Africa).

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RISING TREND IN BRICS TRADE

1,31,6

1,9

2,4

1,9

2,5

3,1 3,23,4 3,5

1,01,3

1,6

2,01,6

2,2

2,8 3,0 3,1 3,0

2,3

2,8

3,5

4,3

3,5

4,7

5,96,2

6,5 6,5

0,2 0,3 0,4 0,4 0,3 0,2 0,2 0,3 0,3 0,4

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(US$

trn

)

BRICS Exports BRICS Imports

BRICS Total Trade BRICS Trade Balance The total trade of BRICS has increased nearly

three-times from US$ 2.3 trillion in 2005 to 6.5

trillion in 2014.

BRICS exports have grown at a CAGR of 12% to

US$ 3.5 trillion in 2014 from US$ 1.3 trillion in

2005

BRICS imports grew at a CAGR of 13% to

US$ 3 trillion in 2014 from US$ 1 trillion in 2005

BRICS has consistently maintained a trade surplus

over the 10-year period

Trade surplus increased from US$ 0.2 trillion in

2005 to US$ 0.4 trillion in 2014.

Source: ITC, derived from UNComtrade

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BRICS cumulatively accounted for 17.3% of world trade

in 2014

Share of BRICS in global exports increased from 12.1%

in 2005 to 18.3% in 2014; while share in global imports

increased from 9.8% in 2005 to 16.2% in 2014

China is the largest exporter in BRICS, accounting for

12.4% of global exports in 2014; followed by Russia

(2.6%), India (1.7%), Brazil (1.2%), and South Africa

(0.5%).

China is also the largest importer in BRICS, accounting

for 10.3% of global imports in 2014; followed by India

(2.4%), Russia (1.6%), Brazil (1.3%), and South Africa

(0.6%).

Rest of the world81,7%

China (12.4%)

Russia (2.6%)India (1.7%)Brazil (1.2%)

S. Africa (0.5%)

BRICS18.3%

Share of BRICS in World Exports

Rest of the world83,8%

China (10.3%)

Russia (1.6%)

India (2.4%)

Brazil (1.3%)_S. Africa (0.6%)

BRICS16.2%

Share of BRICS in World Imports

SHARE OF BRICS IN GLOBAL TRADE

Source: WTO

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BRICS SUMMITS

The four emerging markets (Brazil, Russia, India, and China), then BRIC, agreed to hold regular summits starting in

2009 to discuss a broad range of issues.

First BRIC Summit (Russia, June 16, 2009) – Focused on issues such as the global financial crisis, global development,

and further strengthening BRIC as a group.

Second BRIC Summit (Brazil, April 16, 2010) – Focused on various issues such as global development, furtherance of

the BRIC as an international body, the global economic situation, reform of financial institutions, the financial G20,

and cooperation and issues related to global governance.

Third BRICS Summit (China, April 14, 2011) – Under the theme ‘Broad Vision, Shared Prosperity’, South Africa was

included as the fifth member of BRICS. The summit discussed on international situation; financial, development,

climate and security issues; and outlined future cooperation.

Fourth BRICS Summit (India, March 29, 2012) – Main agenda was the creation of a New Development Bank.

Fifth BRICS Summit (South Africa, March 26–27, 2013) – Centered on the setting-up of the development bank, with

focus on infrastructure, as a follow up from the previous summit.

Sixth BRICS Summit (Brazil, July 14–16, 2014) - Signed an agreement for creation of the New Development Bank .

Seventh BRICS Summit to be held in Russia during July 8-9, 2015

INDIA – Increasing Trade with BRICS India has emerged as a major trading partner

to BRICS countries

India’s trade with BRICS increased nearly four-

times from US$ 26 billion in 2005 to

US$ 102 billion in 2014.

India’s exports to BRICS has increased at a

CAGR of 12% to US$ 28 billion in 2014 from

US$ 10 billion in 2005

India’s imports from BRICS grew at a CAGR of

19% to US$ 74 billion in 2014 from US$ 16

billion in 2005

China is India’s largest trading partner in BRICS

China accounts for nearly 50% of India’s

exports to BRICS, followed by Brazil, South

Africa and Russia

As regards imports, China accounted for nearly

80% of India’s imports from BRICS, followed

by South Africa, Brazil, and Russia

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10

,3 12

,3

14

,4

16

,9

15

,1 26

,2

28

,3

28

,0

30

,7

28

,0

15

,8

21

,0 31

,3 42

,7

42

,0 55

,0 72

,6

72

,2

66

,6 74

,1

-5,5 -8,7-16,9

-25,8 -26,9 -28,8

-44,3 -44,2-35,9

-46,2

26,033,3

45,8

59,7 57,1

81,1

100,9 100,2 97,3102,1

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

(US$

bn

)

India's exports to BRICS India's imports from BRICS

India's Trade Balance with BRICS India's Total Trade with BRICS

Source: ITC, derived from UNComtrade

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BRICS Interbank Cooperation Mechanism

Five member development banks include: Banco Nacional de Desenvolvimento Econômico e Social (BNDES), for Brazil;

Vnesheconombank, for Russia; Export-Import Bank of India, for India; China Development Bank, for China; and

Development Bank of Southern Africa (DBSA) for South Africa

Following the First BRIC Summit, development banks, one each member country, were nominated under the InterbankCooperation Mechanism.

BRIC Banks entered into an MOC, laying the foundation of an Inter-Bank Cooperation Mechanism, on April 10, 2010, in

the presence of Heads of States/ Governments .

During the third BRICS Summit in 2011, framework agreement on Financial Cooperation signed on April 14, 2011, by theChairmen/ Presidents of the five nominated member development banks

During the fourth BRICS Summit in 2012, two multilateral agreements were signed:

a) Master Agreement on Extending Loan Facility in Local Currency, and

b) BRICS Multilateral Letter of Credit Confirmation Facility Agreement

During the fifth BRICS Summit in 2013, two agreements were signed

a) BRICS Multilateral Infrastructure Co-financing Agreement for Africa, and

b) BRICS Multilateral Cooperation and Co-financing Agreement for Sustainable Development

During the sixth BRICS Summit in 2014, a Multilateral Cooperation Agreement on Innovation was signed.

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BRICS led New Development Bank

The New Development Bank (NDB), is a multilateral development bank operated by

the BRICS states (Brazil, Russia, India, China and South Africa), to foster greater financial

and development cooperation among the five emerging markets

The New Development Bank was agreed to by BRICS leaders at the fifth BRICS summit held in Durban,

South Africa on March 27, 2013

During the Sixth BRICS Summit, an agreement was signed among the BRICS nations on July 15, 2014, to

create the US$ 100 billion BRICS Development Bank

The Bank will be headquartered in Shanghai, China

Mr. K.V. Kamath (India) has been appointed as chief of the New Development Bank of BRICS countries.

EXPORT-IMPORT BANK OF INDIA: Fostering South-South Cooperation

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EXPORT-IMPORT BANK OF INDIA

Set up in September 1981 under an Act of Parliament to finance, facilitate and promote India’s

international trade and investment

Instrumental in building India’s export capability and promoting international trade and investment

Wholly owned by Government of India

Commenced operations in March 1982

Objectives:

“… for providing financial assistance to exporters and importers, and for functioning as the principal financial

institution for coordinating the working of institutions engaged in financing export and import of goods and

services with a view to promoting the country’s international trade…”

“… shall act on business principles with due regard to public interest”

(Export-Import Bank of India Act, 1981)

Development Financial Institution for Export

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LINES OF CREDIT – Promoting South-South Trade

LOC is a proactive mechanism to promote exports of

goods and services from India to target countries

Exim Bank extends and operates LOCs at the behest

of the Government of India besides its own LOCs to

overseas entities

LOCs serve as a market entry mechanism to Indian

exporters and provide a safe mode of non-recourse

financing option to Indian exporters

During 2014-15, 17 LOCs amounting to

US$ 1,669.5 million were extended

Operative LOCs – 194 covering 63 countries across

continents, aggregating US$ 11.7 billion (as on March

31, 2015)

LOC - A Catalyst for Trade Promotion

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Geographic Distribution of LOCs

Africa58.1%

Asia37.8%

LAC1.7%

CIS1.3%

Oceania 1.1%

* Developing Countries

PROJECT EXPORTS – Promoting South-South Trade

Exim Bank plays the role of a coordinator and facilitator for the promotion of project exports from India

Such projects have supplemented the efforts of the host country Governments in achieving their

developmental objectives

As on March 31, 2015, 414 project export contracts valued at ` 1,89,736 crore (approx. US$

30.45 billion), supported by the Bank, were under execution, in 81 countries across Asia, Africa and CIS by

139 Indian companies. During 2014-15, 105 project export contracts valued ` 49,781 crore were secured by

Indian companies.

Sector-wise Country-wise

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Engng.&

Constn.38%

Power Gen & Trans.28%

Oil & Gas14%

Infra.11%

Railway4%

Others5%

Qatar17%

Saudi Arabia

11%

Libya8%

Kuwait8%

UAE7%

Sri Lanka

5%Bhutan

5%

Oman5%

Others34%

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PROJECTS SUPPORTED – Promoting South-South Trade

The 27.5 km long Madhu Road to Talaimannar railway

line project in Sri Lanka was completed and was

flagged off by Hon’ble PM of India, Mr. Narendra Modi

in March 2015.

IRCON International had undertaken the execution of

this project.

Two LOCs aggregating US$ 80 mn were extended to the

Government of Rwanda for financing the 28 MW

Nyaborongo Hydro-power project in Rwanda.

The project is slated to be Rwanda’s biggest hydroelectric

power plant and would be a boost to Rwanda’s national

power grid.

Would cater to 25% of total electricity demand of Rwanda

BUYERS CREDIT UNDER NEIA – Promoting South-South Trade

Under the Programme, the Bank finances and facilitates project exports from India by way of

extending credit facility to overseas sovereign governments and government owned entities for

import of goods and services from India on deferred credit terms.

As on March 31, 2015, the Bank has sanctioned US$ 2.68 billion for 18 projects valued

US$ 4.40 billion.

The Bank has also given in-principle commitments for supporting several projects and the current

active pipeline includes 25 projects aggregating US$ 3 billion under BC-NEIA, at the behest of several

leading Indian project exporters.

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BUYERS CREDIT UNDER NEIA – Promoting South-South Trade

BEML equipments exported to Zimbabwe

Exim Bank has also supported by way of a Buyer’s Credit

facility of US$ 13 million for a contract for supply of mining

equipment and blast hole drill along with spares parts by

BEML Ltd. to Hwange Colliery Company Limited, Zimbabwe.

VA Tech’s Dambula project

Exim Bank has supported by way of a Buyer’s Credit facility

of US$ 60.7 million for a contract for supply, erection and

commissioning of 30 million litres per day (MLD) water

treatment plant and distribution to 9 reservoirs across

Dambula region in central Sri Lanka.

The project valued USD 81.7 million is being executed by VA

Tech Wabag Ltd., for National Water Supply & Drainage

Board (NWSDB), a Government of Sri Lanka undertaking.

OVERSEAS INVESTMENT FINANCE – Promoting South-South Trade

Equity investment: INR/ FC funding to Indian parent company for its equity/ capital investment in its

overseas JV/ WOS

Funding to Overseas Indian Ventures (OIF): Foreign currency loans directly extended to the overseas

venture of the Indian company for capex, working capital, acquisition etc

Direct Equity Investment: Direct equity participation in Indian ventures abroad

The Bank has so far provided finance to 533 ventures set up by 530 companies in 91 countries.

Aggregate assistance for overseas investment amounts to ` 432.1 billion as on March 31, 2015

Exim Bank’s OIF Programme in BRICS – Provided finance to 17 ventures set up by 17 companies in BRICS

countries; aggregate assistance for overseas investment amounts to ` 10.6 billion as on March 31, 2015

Sectors covered under OIF Programme in BRICS include

Promoting Overseas Investments/ Acquisition from India – funding options available

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Agro & Food Processing (Brazil, China)

Auto & auto components (South Africa)

Chemicals & dyes (South Africa)

Engineering Goods (Brazil, China)

Financial Services (Russia)

Metals & metal processing (China)

Pharmaceuticals (Brazil, China)

Plastics & packaging (China)

Power (Brazil)

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NEW INITIATIVES - Focus on Enhancing Project Exports

Project Development Company for Promotion of Trade & Investments in CLMV Countries

Exim Bank under the GoI’s ‘Act East Initiative’ had undertaken a Mission to Cambodia, Lao PDR,

Myanmar, Vietnam (CLMV countries), consequent to which a Project Development Company is

being set up, to be followed by a Project Development and Facilitation Framework.

Project Development Company in Africa

Exim Bank, IL&FS, AfDB and SBI have floated a Project Development Company in Africa, based in

Mauritius. Two projects in the energy sector, have been identified, one each in Tanzania and

Nigeria.

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RESEARCH & ANALYSIS

Research studies are undertaken on products, sectors, countries, macro economic issues relevant

to international trade and investment; a total of 16 studies brought out in 2014-15.

1. Outward Direct Investment from India: Trends, Objectives

and Policy Perspectives

2. East African Community (EAC): A Study of India’s Trade and

Investment Potential

3. Trade Liberalisation, Product Variety and Growth

4. Enhancing India’s Bilateral Ties with Cambodia, Lao PDR,

Myanmar, Vietnam (CLMV): A Brief Analysis

5. Potential for Enhancing India’s Trade with Australia: A Brief

Analysis

6. Potential for Enhancing Intra-SAARC Trade: A Brief Analysis

7. Strategic Development of Ship Building Sector: Comparison

of Institutional Support Systems and Policy Framework in

India and Select Countries

8. Potential for Enhancing India’s Trade with Korea

Republic: A Brief Analysis

9. Indian Capital Goods Industry: A Sector Study

10.Research & Development in BRICS: An Insight

11.Global Economic Outlook and Intra-Asian Trade: Recent

Trends and Prospects: An Update

12. Indian Handloom Industry: A Sector Study

13. Indian Electronic Goods Industry: Neutralizing Trade

Deficit with China

14.Bangladesh: A Study of India’s Trade and Investment

Potential

15.The Indian Pharmaceutical Industry

16.Turkey: A Study of India’s Trade and Investment Potential

Promoting

South-South

Cooperationwww.eximbankindia.in

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