Image and Reputation: MSLGROUP Essays on the BRICS Countries
Image and Reputation:MSLGROUP Essays onthe BRICS CountriesApril 13, 2011
The MSLGROUP BRICS Blog Series: ExecutiveSummaryBy Sally O’Dowd, engagement editor, MSLGROUP, Paris Trade between India and South Africa is booming. Brazil wants a more level trading field with China. Devalued yuan, anyone? Next door, Russian President Medvedev is going against the grain (Putin), pledging to end corruption and lower the tax burden on small business. Needless to say, the leaders of the BRICS countries have important issues to discuss at their third-annual BRICS Leaders Meeting on April 14 in the island province of Hainan in southern China. And note the absence of the United States, the United Kingdom and every other European power.Image and Reputation: Policy MattersThis meeting got us thinking about image and reputation. When it comes to sovereign states, suchmatters are often a function of government policy. Brazilian President Dilma Rousseff and many otherpolicy makers around the world voice concerns about low-quality and unsafe goods from China…howwill this play out at the meeting and will Chinese regulations change? Conversely, is this an unfairportrayal of China, which produces a variety of high-quality goods? Should image, policy, trade getinto sync?In the case of Russia, if Forbes describes your country’s problems as “crime without punishment”and “punishment without crime” then you know you have an image problem. And that, in turn, is animpediment to growth. In a post-apartheid South Africa, the continent’s largest country is doing someexporting of its own. We led Brand South Africa in India and China: The campaign is just one elementof the African country’s multipronged approach to building ties with its Asian counterparts.It is with this context that we bring you a collection of essays written by four members of theMSLGROUP network. We asked our authors to use their unique perspectives to give you, the reader, ataste of what it’s like to be on the ground.We hope you find value in the MSLGROUP BRICS essays brought to you by:• Kirby Chien, head of content development and senior media strategist at MSLGROUP China. For nearly 20 years he worked for Reuters and Dow Jones, covering the companies, regulators and markets of Greater China. He studied in China, the US, France and Taiwan.• Paulo Andreoli, CEO of Andreoli MSL in Brazil, the agency he founded in 1994. No stranger to international commerce and politics, Paulo earlier in his career won the Brazil ESSO Journalism Prize (the Latin American equivalent of the Pulitzer) for his reporting on the export of Brazil uranium to Iraq.• Jaideep Shergill, CEO of Hanmer MSL in India and head of the financial communications practice for MSLGROUP Asia. With 15 years of banking and communications practice, he counsels many of the Indian companies making the I in BRICS a reality.• Lawrence McDonnell, who in 1998 founded Pravda PR in Moscow. Previously, he spent 10 years as a BBC correspondent and bureau chief for ITN Television News. Pravda represents the MSLGROUP network throughout Russia. Clients range from the Turkish Trade Mission to Caterpillar and the Ritz-Carlton.
A View from ChinaBy Kirby Chien, head of content development and senior media strategist,MSLGROUP China Since the term BRIC—Brazil, Russian, India and China—was first coined by a Goldman Sachs economist in 2001, the loose grouping has evolved rapidly from a catchy acronym to an emerging power broker with growing global aspirations. Indeed, it is now BRICS with the addition of South Africa. No BRICS nation has been more aggressive than China, the host of the group’s third summit, in deepening the group’s influence in global affairs. Most recently, 10 countries in the 15-member United Nations Security Council voted in favor of the resolution to establish a no-fly zone in Libya, but five nations—China, Russia (which have veto power) and non-permanent members India, Germanyand Brazil—abstained from voting. China has been a vocal critic of the coalition airstrikes in Libyasaying they violated international rules. The New York Times Room for Debate section offers a goodselection of opinion pieces on China’s reaction to recent events in the Middle East.BRIC economic growth contrasts sharply with the struggling economies of the United States andEurope, and has given the emerging markets an impetus to push for greater say in issues such asglobal climate change, reform of the United Nations, and poverty alleviation.The group accounts for more than a quarterof the world’s land area and more than40% of its population, which will continueto grow proportionally. Beijing lobbiedheavily last year in favor of admitting SouthAfrica into the club, although the Africannation does not fit the original model of alarge, fast growing economy. South Africa,the continent’s largest economy, producesmany raw materials coveted by China. Fulldisclosure: MSLGROUP China led the BrandSouth Africa campaign in our market, just asHanmer MSL did for the Indian market.While BRIC nations share a similar stageof economic development, they have nocommon political ideology and indeed thereare many contentious issues that separatethe four – not the least of which is China’spolicy of devaluing its currency to supportexports–a topic that my Brazilian colleaguediscusses here.Cooperation for a New World Lions in Beijing’s Forbidden City, constructed in the early 15thOrder century, are in pairs. The female extends her leg to play with a baby lion, symbolizing fertility of the royal family. The male lionThere are, however, many issues they can has a ball under its paw, representing the imperial power.cooperate on. The group worked in concert atthe Copenhagen climate conference in 2009 to endorse the Kyoto Protocols. BRIC nations are alllarge emitters of carbon – except for Brazil – but argue that developed nations have belched pollutionfor many decades and should therefore shoulder a heavier burden in cutting emissions.
In addition, as the recent financial crisis has undermined the legitimacy of the G7 and their largefinancial institutions, the second BRIC summit held in Brazil last year was dedicated to financialreform. And at the London G20-meeting in 2009, the BRIC states issued a separate declarationcalling for reform of the International Monetary Fund, for changes in choosing the leaders of the IMFand the World Bank.China’s growing presence on the international stage was underlined by Foreign Minister Yang Jiechi,who in his 2011 New Year message emphasized China’s role during the first decade of the new centuryas a regional and global actor. Yang particularly noted the increasing importance of diplomacy inensuring state interests such as security, sovereignty, and development.While BRICS nations are not close to establishing any formal alliance – China has outstanding borderdisputes with both India and Russia, and Brazil’s industrial sectors fret about China’s competitivestrengths – Beijing will be looking to further the group’s cohesion at this year’s summit.
Brazil and China: Crossing the DivideBy Paulo Andreoli, CEO of Andreoli MSL, Brazil The Chinese were trading long before Christopher Columbus was born. For us Brazilians, they have a historical and cultural richness worthy of admiration, even if it is sometimes in the context of concerns about their economic might. In 2009, China replaced the US as Brazil’s biggest commercial partner. Chinese- Brazilian trade in 2010 jumped 53 percent to US$56 billion, compared with $45 billion with the US. Brazil exports mainly iron ore and agricultural products to China, whereas China exports many more things to our country: cars, electronics, even “knick knacks” in the words of Brazilian President Dilma Rousseff.It is as part of this scenario that Rousseff is attending the April meeting of the BRICS countries in China.She hopes to clarify the China-Brazilian relationship, because former President Lula left a somewhatunfortunate inheritance: he showed that Brazil was willing to recognize China as a pure market economy—and sometimes he gave too much—in hopes that the Chinese would support Brazil in its efforts to becomea permanent member of the UN Security Council.But Brazil’s industrial sectors are genuinely worriedby China’s competitive strengths. Brazilian toymanufacturers are forced to pay taxes and produceunder strict child-protection standards that are notthe norm for their Chinese counterparts. Likewise,manufacturers of electronics, cars and other durablegoods here in Brazil complain about a non-levelplaying field: The Chinese have devalued theircurrency, making their products cheaper.According to the Economist Intelligence Unit, “Voiceswithin the administration have started to expressconcern about the risk of dependency on China,not only for trade but also foreign direct investment(China became Brazil’s top foreign investor in 2010).The finance minister, Guido Mantega, has criticizedChina’s weak-currency policy in particular, and haswarned of a looming trade war.”Meanwhile, Bloomberg reported that Rousseff has Christ the Redeemer (Christo Redentor), a statue overlooking Rio de Janeiro, was constructed between 1922 and 1931.a shared sense with President Obama “that China Considered the second largest Art Deco statue in the world, itis harming the economic interests of both their is 39.6 metres (130 ft) tall and weighs 635 tonnes.countries by undervaluing the yuan.”The Brazilian president’s mission to China will clearly be fraught with challenges. The biggest one isestablishing clearer rules for fairer and more transparent commercial cooperation that would subjectChinese manufacturers to the same standards set for Brazilian companies. This will be a small butsignificant step. Brazil intends to show the Chinese that it wants a more robust trading relationship, beyond exporting primary products and importing China’s finished goods. We hope that good diplomacy from both sides will lead to a positive outcome, resulting in our ability to export more Brazilian goods and providing more consumer choice to China’s growing middle class. Naturally, this would be good for Brazilian businesses, which would be able to hire more workers and help Rousseff achieve her goal of raising people out of poverty. As the Chinese government has likewise taken steps to help its poor, let’s hope that this shared and noble endeavor can facilitate talks at the negotiating table.
India and South Africa Get Down to Businessby Jaideep Shergill, CEO of Hanmer MSL in India and head of the financialcommunications practice for MSLGROUP Asia The global community in less than 25 years has evolved from the Cold War— where political loyalties rested with one of the two distinct super powers—to a system based on multipolar relationships. And even those dynamics are changing quickly. What used to be taken for granted, even a few years ago, has been turned on its head. The power equation is shifting from the G8 to other powerful groups in the making. Competition and collaboration run a parallel course, often resulting in strange permutations and recombinations. Russia, part of the G8, is also a member of the BRICS category (Brazil, Russia, India, China and nowSouth Africa). Yet PricewaterhouseCoopers reports that the gross domestic product of sevenemerging markets, not five, (Brazil, Russia, India, Indonesia, Mexico and Turkey) will replace the GDPof the G7 (the G8 minus Russia) economies by 2032.With all of these shifts, it’s important to “follow the money”—as dizzying as that may be. It really is adifferent world from the one we knew just two decades ago.Follow the Money: India andSouth AfricaHere in India, we’re pleased to welcomeSouth Africa into BRIC, for we’ve beencarrying on trade with the largest Africaneconomy since the early nineties. Manyof our clients—Ashok Leyland, BhartiAirtel, Cipla, Mahindra & Mahindra, ONGC,Reliance and Tata—invest in South Africain the areas of agriculture, infrastructure,investment banking, pharmaceuticals andtelecom. India’s rail network traverses the length and breadth of the country,Since the establishment of diplomatic covering 64,015 kilometres (39,777 mi) and transporting more thanrelations in 1993, commercial relations 6 billion passengers and 350 million tonnes of freight annually.between the two countries have flourished.Bilateral trade increased from about US$4.7 billion in fiscal year 2006-07 to $7.5 billion in 2008-2009. India and South Africa are expected to sign a trade agreement reducing tariffs later this year.We at Hanmer MSL have had the opportunity to help foster good diplomatic relations with SouthAfrica. We played host last year to President Zacob Zuma during an official visit to our country and ledthe Brand South Africa campaign for the Indian market.Financially speaking, India’s future looks bright. The country’s gross domestic product (GDP) has maintained a healthy 9.2 per cent in the current fiscal year (2010-11). With the right economic reforms we can aim for higher growth in the future. It is with this sense of optimism that we await the outcome of the BRICS talks. In the new global order, it is up to the emerging markets to support companies—and indeed millions of people—in their pursuit of prosperity and economic development.
Ending Corruption in Russia, Da or Nyet?By Lawrence McDonnell, CEO and founder of Pravda PR, Moscow With just a year to go before Russia elects a new president there are signs of a rift between the incumbent Dmitry Medvedev and his Prime Minister, Vladimir Putin, the man whom many regard as the natural leader currently on sabbatical, more a tsar than head of the administration. If we are to take Medvedev at his word, then the initiatives outlined in a recent speech in Magnitogorsk are nothing short of revolutionary and strike at the heart of the ruling elite, the state officials who sit on the boards of some of the largest and richest companies in Russia and who remain fiercely loyal to the prime minister who put them there.The president’s speech was focused on improving the investment climate in Russia. Amongst anumber of initiatives designed to stimulate growth, two stand out: breaking corruption and reducingthe heavy tax burden on small and medium-sized businesses. It’s not the first time the president hasfocused on corruption but this time he focused specifically on the crony capitalism that replaced theoligarchs’ hold on the economy in the 1990s. During his own term in office President Putin, in oustingsaid oligarchs to foreign lands or gaol, appointed his own trusted officials to the boards of Russia’sblue chips to keep them in line and loyal to the state.Officialdom, however, has inmany ways proved more of ascourge to Russia’s developmentthan the oligarchy it replaced.The oligarchs were replaced bya new class, aptly tagged by theEconomist as the bureaucrat-entrepreneur. Such individualsare interested only in securinga position in the state apparatuswhere they can manage andapparently siphon off large partsof the state budget. Accordingto the Economist the numberof civil servants in Russia isbooming, rising from 500,000people to more than 800,000 inthe last three years alone. St. Basil’s Cathedral, constructed in the mid-16th century, acquired its vividBreaking a System colors in several stages from the 1680s to 1848. The church has been part of the Moscow Kremlin and Red Square UNESCO World Heritage Site since 1990.that Stifles GrowthThis class not only stifles the trickle-down financial benefits from Russia’s growing income in thenatural resources sector to the wider economy but also takes its money abroad. An emerging marketis not a very good emerging market when money is flowing out rather than in and when the middleclass is being squeezed out of business by government bureaucrats. So when the president promisesto lower taxes he is appealing directly to the middle classes to support him in breaking the systemcreated by his own prime minister and predecessor. In any other democracy this may sound likeeveryday politics but in a country that understands only the power vertical it is akin to shooting yourold boss—and all his relatives.
Should we believe this break in the ranks? Or more importantly, should the Russian people believeit? Do they care? If they do, then they haven’t got many places to talk about it. No surprise that inthe absence of an independent media they are logging on. More than 40 million Russians use theinternet, giving Russia the 2nd highest penetration in Europe. President Medvedev twitters. Hebelieves in social media and wants to be part of it.In style and content, Medvedev’s campaign looks like any other presidential race; a candidate reachingout to engage with a middle class electorate on a promise of lower taxes, less bureaucracy (andcorruption) and a higher standard of living.Russians today understand choice, it arrived with shopping; the opportunity to see, touch, try and buy.And this is a campaign platform that could catch the public imagination. But fashion and foreign carsare easier to introduce than a civil society with genuine political choice, genuine political opposition.It is also difficult to define or quantify a modern Russian middle class. It isn’t a class that survives wellunder communists, oligarchs or a single-party corrupt state apparatus. If Medvedev does manageto give voice and economic stimulus to the masses under his promised reforms, then he may wellcreate a stable environment for investment and economic growth through small and medium-sizedbusinesses—the framework for the sustainable development of a dynamic market economy.If he doesn’t then Russia faces stagnation and an uncertain future under the same old ruling elite.
Thank you for reading.If you would like more information on MSLGROUP’s international communicationscapabilities, please contact Chief Strategy Officer Pascal Beucler email@example.com.We can also be found on:MSLGROUP Blog | Facebook | YouTube | LinkedIn