Laurence Daziano, an economist and a university lecturer at Sciences Po, created the acronym BENIVM with a view to identifying the next champions of global growth, according to 5 specific criteria. The current mistrust of China seems exaggerated to her and Daziano calls for caution as for India’s economic growth of which she thinks is still too weakly industrialized. Against this changing context, she said, Europe isn’t at risk of economic irrelevance thanks to its total population of 500 million consumers who generate USD 25,000 of annual GDP per capita. However, Europe must organize today in order to meet the huge challenge of Africa, concluded Daziano who answered our questions below:
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Economist, university lecturer at Sciences Po and a member of the scientific committee of the Fondation pour l’innovation politique, Laurence Daziano specialized in global economy and specifically in the economics of emerging countries. She has published several books: « Les pays émergents. Approche géo-économique » (Armand Colin, 2014), « La nouvelle vague des émergents : Bangladesh, Ethiopie, Nigeria, Indonésie, Vietnam et Mexique » (Fondapol, 2013) et « L’urbanisation du monde : une chance pour la France » (Fondapol, 2014). Also a columnist at l’Opinion, she regularly writes in the French press (Les Echos, Le Figaro, Le Point, latribune.fr).
1) The acronym BRICS, first created as BRIC by Jim O’Neill in 2001, would have lost its relevance, if not all of its relevance O’Neill said in 2013 considering that only the “C” (for China) would still make sense. You created the acronym BENIVM, can you sum up the sense and the criteria of it?
L.D.: The acronym BENIVM includes the following countries: Bangladesh, Ethiopia, Nigeria, Indonesia, Vietnam and Mexico. These are, in my opinion, the six next large emerging countries which I chose according to five cumulative criteria: a total population of around 100 million people in order to have an internal market of consumers and a large workforce for value creation; an average annual growth of 5% over 10 years as evidence of economic dynamism and of the country’s potential; a urbanization rate around 50% because the development of services (water, electricity, health, education) in urban areas benefits more people at a lower cost per head than in diffused housing areas and the development of these services is a strong indication of emergence; a need for infrastructure for transportation (roads, railways, harbors, airports), energy (plants but also transport and distribution of electricity), water (clean, sewage treatment) which allow a country to develop; and at last a stable political situation that draws long-term investors with a view to meeting these emerging economies’ huge financing needs.
2) Among the economies which constitute the acronym BENIVM, one finds indeed common criteria that are relevant, but these economies have cultural, political and geographic differences which make a priori unlikely a multilateral coordination between them. Beyond their economic significance, how will the BENIVM weigh on the international scene? Won’t their lack of strategic and diplomatic power hinder their future development?
L.D.: The BENIVM were first thought on the basis of economic criteria aimed at identifying the future champions of global growth, after the BRICS. This wasn’t about making them a political bloc able to weigh on the world scene. I think that these countries have first an ambition of economic development and not of global presence at the international level. Besides, the BRICS structured themselves only from 2009 and under Russia’s and President Vladimir Putin’s impetus at the first annual meeting in St-Petersburg. This relative “cohesion” was marked by the BRICS’s willingness to differentiate themselves from a western development model largely influenced today by the United States. The 2014 announcement in Brazil, at their annual meeting, of the creation of the new development bank, the BRICS’ bank, and of a currency clearing fund, showed this wish to free themselves from western economic powers. These two monetary tools are indeed considered as challengers if not rivals of the World Bank and the IMF. In fact, I’d say they’re complementary.
3) The combined effect of the drop in prices of primary materials and the end of quantitative easing by the US Fed seems to reshuffle the cards as if the United States had found there the means to thwart the increasing power of emerging economies of which you said they’ve become “emerged”, particularly China. In this context, the Chinese government responded with the creation of the AIIB and the start of the “new normal”. Is China still a land of economic opportunities for investors? Is India a convenient substitute?
L.D.: The mistrust of China seems exaggerated to me. One should consider the Chinese economy as a whole. It is today the world’s second largest economy with a GDP of more than USD 11 trillion, second to the United States and far ahead of France. The consumer market is huge. The currency reserves were reduced indeed by support measures to the Yuan, but they’re still significant. The Yuan was included into the IMF’s Special Drawing Right (SDR). China still offers huge opportunities for investors. India enjoyed a 7% growth rate in 2015. I think that one must remain cautious about the figure, India’s statistics like China’s must be read with care. Also, India is a net importer of oil products and benefits the most from the drop in oil prices. Finally, even if the internal market is very promising thanks to demographic dynamism since India’s population should exceed China’s by 2022 I remain interrogative on India’s growth in the medium run: the “Make in India” campaign of Prime Minister Narendra Modi failed to draw investors and India’s level of industrialization is still very weak.
4) In this new era in which the change in world equilibrium now takes years rather than decades, isn’t Europe at risk of irrelevance? Can it really believe in a prosperous future in face of the emergence of new Asian and African powers with dynamic demography and insolent growth?
L.D.: Europe is the world’s largest trade power and represents a consumer market of 500 million people with a GDP per capita of around USD 25,000, which is far from irrelevant! It’s also the largest development aid’s donor. I think that Europe must help the emerging countries to “emerge”. It will profit more from having, on its southern border, a prosperous Africa with a buoyant market and middle classes as consumers of European products. Africa’s demography is a real challenge: educated and working, it’ll mean huge wealth for African countries; without education and with no different prospect than unemployment, it will only find salvation through immigration to Europe which will be unable to welcome it as well. Europe must organize now in order to meet this huge challenge.