21

Achievement of sound fiscal basesSound fiscal bases are necessary for institutional reform and building social safety-net. Despite the improvement in recent years, state finances are still in a state of chronic deficit [Chart 4-14]

Brazil: Brazil achieved a primary balance surplus in the late 1990s. However, the percentage of public debt toGDP is still high at 51.4% (as of the end of 2004 [Chart 4-15]), revealing heavy interest payment burdens.

Russia: Russia succeeded in restoring its fiscal health, given the increase of reserves from export tariffs.India: India’s fiscal deficit and outstanding public debt as a percentage of GDP are both high.China: Even though China’s fiscal conditions are favorable compared to Brazil and India, there are strong

potential budget pressures such as underdeveloped social security and NPLs.The BRICs need to improve their fiscal bases through (1) the reinforcement of tax revenue bases and (2) the reduction of fiscal expenditures.

Chart 4-14 Fiscal balanceas a percentage of GDP

Chart 4-15 Outstanding balance of public debt as a percentage of GDP (end of 2004)

-12-10

-8-6-4-20246

98 99 00 01 02 03 04

Note: Figures on India pertain to the period from April through March of the follow ing year.Source: Statistics of each of the relevant countries.

(%)

Brazil

Russia

India

China

51.4

24.7

59.8

31.8

0

10

20

30

40

50

60

Brazil Russia India China

Source: World Economic Forum, "The Global Competitiveness Report 2005-2006."

(%)

22

Stability of macroeconomic management Stable macroeconomic management is indispensable for sustainable growth (World Bank, "East Asian Miracle”).The basic underpinnings of macroeconomic management among the BRICs [Chart 4-16].Causes for concern from the perspective of macroeconomic management are as follows.

Brazil: Although both public and external debt are contracting, the size of debt is still large [Chart 4-17].A derailment of fiscal restoration may cause interest rates to remain pinned at high levels [Chart 14-18].

Russia: Russia’s economic structure is easily influenced by international commodity prices such as petroleumprices (the highly volatile exchange rate and the "Dutch disease” caused by the appreciation of the ruble).

India: India’s chronic fiscal deficit and huge public debt is making it difficult to take flexible fiscal policy measures.China: China lacks flexibility regarding exchange rate and interest rate and its state-owned enterprises and state-

owned commercial banks are poorly adjusted to a market economy. Therefore, its macroeconomicmanagement relies upon administrative guidance.

Chart 4-16 Foreign exchange and monetary policy framework

Chart 4-17 Outstanding external debt (as a percentage of GDP) Chart 4-18 Real lending rate

Monetary policy framework Exchange rate regime Exchange rate anchor Monetary aggregate target Inflation targeting Others

De facto peg China

Managed floating with no pre-determined path India Russia

Independently floating Brazil Note: End of 2004. Source: IMF, "Classification of Exchange Rate Arrangements and Monetary Policy Framework -- as of December 31,2004".

-10

0

10

20

30

40

00 01 02 03 04 05Source: IMF, "International Financial Statistics."

(%)

Brazil

Russia

India

China

40

50

60

010203040506070

98 99 00 01 02

(%)

Brazil

Russia

India

China

Source: OECD, "External Debt Statistics 1998-2002."

23

Summary of the strengths and weaknesses of the BRICs

Items Brazil Russia India China

Labor force, human capital

● Wage levels are relatively low ▲Heavy social security burdens upon employers ▲Low level of education relative to stage of development

● Labor force with high education level, high quality of education system (science and mathematics)▲Paucity of labor force ▲ Short life expectancy

● Cheap and abundant labor force● High quality of education (science and mathematics, MBAs, etc.) ▲ Even though the spread of education is commensurate to the stage of development, the absolutelevel of education is still low

● Cheap and abundant labor force● Long life expectancy compared to the stage of development ▲Low quality and dissemination of higher education in comparison to the stage of development

Competitiveness of exports

●Agricultural & animal products, light industry products, certain automobiles and parts, aircrafts ▲Integral high technology products

● Natural resources such as minerals, iron & steel and lumber ▲Overall industrial products

● Primary commodities such as minerals, teal and cotton, labor-intensive products such as textiles and IT software & system development ▲ More advanced industrial products

● Labor-intensive products, fabricated products, relatively low level products ▲Integral high technology products, grains

Hard infrastructure

▲General lag in infrastructure development both in absolute terms and relative terms considering the stage of development

● In absolute terms, the best conditions among the BRICs ▲ In relative terms, there are lags in infrastructure development. There are also issues regarding aging infrastructure.

● In relatively good conditions in consideration of the stage of development ▲ In absolute terms, the state of infrastructure development ranks the lowest among the BRICs. Its electrical power infrastructure is also weak.

●Infrastructure development commensurate to the stage of development ▲Pressure upon infrastructure (such as electrical power and railways) in economic booms

Protection of private property

● Commensurate to stage of development

▲Low level of protection ● Favorable in consideration of the stage of development

▲Low level of protection

Economic freedom

● Relatively mild financial regulations such as regulations on capital transactions ● Relatively high level of trade liberalization ● Improvement of anti-monopoly law ▲Heavy tax burden ▲Cumbersome procedures for project approval

● Relatively high level of trade liberation ● Relatively few procedures for project approval ▲Heavy tax burden ▲Tight financial regulations

● Legal system and services are relatively well-equipped in light of developmental stage ● Relatively light tax burden ▲Lowest level of trade liberalization among the BRICs ▲Cumbersome procedures for project approval ▲Large number of subsidies

● Highest level of trade liberation among the BRICs. High level of domestic competition. ● Relatively light tax burden ● High level of flexibility in determination of wages ▲Tight financial regulations ▲ Ambiguity & unfairness of laws and policies

24

Summary of the strengths and weaknesses of the BRICs [continued]

Items Brazil Russia India China

Technological innovation capability, industrial

foundation

● Quantity and quality of local suppliers ● Relatively advanced indigenous sales and distribution networks ● Relatively high R&D incentive ▲Lack of original technology. Strength is comprised mainly of price competitiveness.

● High level of research institutions in the field of natural science ▲Low quality of local suppliers stemming from weak industrial infrastructure ▲Lack of original technology. Strength is comprised mainly of price competitiveness.

● High level of research institutions in the field of natural science. Availability of technical personnel ● Relative strength of R&D and enthusiasm toward business-academia collaboration, high technology absorption capacity among companies ● Quantity and quality of local suppliers ▲ Lack of original technology. Strength is comprised mainly of price competitiveness..

● High technology absorption capacity among companies ● Quantity of local suppliers ● Relative strength of R&D and enthusiasm toward business-academia collaboration ▲ Lack of original technology. Strength is comprised mainly of price competitiveness

Quality of government

● Freedom of speech is fairly well protected relative to its developmental stage ▲Challenges regarding absolute levels of political stability, rule of law and curbs upon corruption

▲Problems regarding the quality of government both in terms of its absolute level and relative level to its developmental stage

● High quality of government (such as the rule of law, freedom of speech) in consideration of the stage of development ▲ Challenges regarding prompt decision making and political stability

● High level of government efficiency and government stability in consideration of the stage of development ▲Low in absolute terms, with considerable restraints upon freedom of speech

Income gap ▲Large income gap ● The growth of the income gap is

slowing down. The gap is small in relative terms.

● Relatively small income gap ▲Large poverty ratio

▲Large and growing income gap

Tasks in macroeconomic

management

▲Public debt and external debt need further reduction

▲ Need to improve financial intermediary functions and to maintain financial system stability through NPL disposals

▲Reduction of public debt by eliminating the chronic fiscal deficit▲Reduce instability of the economy stemming from an industrial structure depending solely upon natural resources

▲ Departure from macroeconomic management dependent upon administrative guidance through further reforms of state-owned enterprises, state-owned commercial banks and government▲Further flexibility of exchange rate and financial policy

Note: ●=strength, ▲=weakness

25

(1) Trade

Chart 5-1 Volume of exports between the BRICs and Japan, the US and EU (2004)

V. External economic relations of the BRICs

Trade among the BRICs is only a small percentage of global tradeMajor trade partners of the BRICs are still predominantly developed countries. The US and EU are the major export destinations for Brazil, China and India. Russia's exports to EU are 10 times larger than exports to the US.Trade among the BRICs only amount to 0.5% of global trade (export-basis, 2004)[Chart 5-1]. However, the percentage has grown 2.5-fold from 1994.

Notes: 1. Trade between the BRICs and developed countries/regions are indicated by bidirectional arrows.Based upon exports. Unit: US$ billion.

2. The width of arrows indicating trade among the BRICs are proportionate to the value of exports.Source: IMF, "Direction of Trade Statistics Yearbook 2005."

Brazil($166.8 billion)

Russia($235.4 billion)

India($1.8 trillion)

China($1.4 trillion)

0.6

2.5

1.70.4

9.10.6

10.00.7

3.7

5.45.94.2

Japan($1.2 trillion)

EU($7.4 trillion)

US($2.3 trillion)

107.359.8

88.3

56.8

24.2

17.6

16.5

21.1

20.313.9

3.08.4

34.7

125.2

3.0

1.92.8

2.3

3.5

73.5

73.96.1

12.8

3.2

26

Chart 5-2 Trade between the BRICs and its neighboring countries (2004)

The BRICs are a major presence for neighboring countries [Chart 5-2]For neighboring countries, the BRICs are growing into a major presence as trade partners. Nevertheless, the US and EU are still a large presence for many countries, frequently surpassing the BRICs.Note that China’s presence is growing for all neighboring countries of the BRICs. Except for Southeast Asian countries, in many cases, China surpasses Japan as the major trading partner of all countries neighboring the BRICs.

(%)

MERCOSUR Brazil Chile Mexico US EU Japan China

Brazil 9.53 - 2.45 2.90 19.85 25.00 3.51 5.70

Argentina 26.10 23.27 7.45 2.95 12.62 20.92 1.50 7.02

Paraguay 55.31 26.48 1.52 0.48 3.77 6.82 2.45 11.31

Uruguay 38.86 17.64 2.08 2.48 8.53 18.79 1.64 4.60

Chile 15.96 7.31 - 3.31 14.04 20.03 7.85 8.78

Eurasian Economic

CommunityRussia Ukraine CIS Turkey US EU Japan China

Russia 10.01 - 6.33 17.86 3.01 4.79 49.49 2.24 6.08

Belarus 59.06 58.50 3.60 63.80 0.23 1.35 27.28 0.16 1.46

Kazakhstan 24.77 23.20 2.93 29.61 2.23 2.44 32.91 1.20 12.18

Kyrgystan 37.67 21.23 1.29 44.06 4.13 2.52 7.76 0.33 21.36

Tajikstan 22.19 13.78 4.10 44.11 13.32 0.35 23.74 0.08 N.A.

Ukraine 32.70 29.23 - 38.57 3.64 3.37 31.11 0.85 2.55

Azerbaijan 16.42 12.21 3.70 23.70 8.55 3.28 46.17 1.30 2.67

* Data on Russia and Tajikstan are as of 2003. Azerbaijan ’s trade with the CIS excludes Armenia. Uzbekistan is not included in the Eurasian Economic Community.

SAFTA India Singapore Hong Kong US EU Japan China

India 2.92 - 3.33 2.97 10.74 19.18 2.76 5.85

Bangladesh 10.47 9.45 4.73 3.19 10.25 25.73 3.52 7.70

Pakistan 3.36 1.97 1.41 2.23 15.61 21.09 4.23 5.80

Sri Lanka 15.12 13.30 5.70 5.00 15.32 22.68 4.14 3.45

ACFTA China Hong Kong Taiwan S. Korea US EU Japan India

China 9.17 - 9.76 6.78 7.80 14.72 15.36 14.54 1.18

Indonesia 28.12 7.37 1.40 3.47 5.74 10.18 12.16 18.67 2.77

Malaysia 32.82 8.15 4.51 4.27 4.18 16.90 12.37 12.80 1.86

Philippines 24.50 6.35 5.84 6.50 4.60 18.50 12.52 18.70 0.44

Singapore 35.92 8.91 6.01 4.99 4.04 12.42 13.54 8.65 1.96

Thailand 27.14 7.93 3.25 3.42 2.82 11.82 12.30 18.68 1.06

S. Korea 26.33 16.61 4.48 3.59 - 15.06 13.00 14.21 1.15

*Singapore’s trade with Indonesia is based upon data compiled by Indonesia..

Note: Share of trade (exports and imports) with trade partner.Source: IMF, "Direction of Trade Statistics Yearbook 2005."

27

The BRICs are a large presence in global FDIThe amount of inward FDI to the BRICs is 15% of total FDI and 41% of FDI to developing countries (2004, UNCTAD).China-bound FDI has been following an upward trajectory since the 1990s. Despite the sharp drop of FDI to Brazil since 2001 and the stagnant growth of FDI to Russia and India, they are picking up at the moment [Chart 5-3].

Trends in China’s FDI Asia is the main pillar of FDI to China. In particular, FDI from South Korea surged from 3.3% in 1996 to 10.3% in 2004. Meanwhile, FDI via Hong Kong fell from 49.6% in 1996 to 31.3% in 2004 [Chart 5-4].China’s outward FDI is on the rise. Outward FDI in 2003 increased 112% y-o-y, reaching $2.1 billion (flow, authorization-basis). The main investment targets are the EU (25% share), the US (5% share), Hong Kong (13% share), South Korea (9% share) and ASEAN10 (11% share). The share of other BRICs countries is 17%.

Chart 5-3 Trends in FDI to the BRICs

(2) Foreign Direct Investment (FDI)

Chart 5-4 Inward FDI to China (flow, cumulative total)

0

10

20

30

40

50

60

90 91 92 93 94 95 96 97 98 99 00 01 02 03 040

200

400

600

800

1000

1200

1400

1600

($ billion) ($ billion)

Source: UNCTAD

Global inward direct investment flows(right scale)

Brazil

China

IndiaRussia

($ million, %)

2000 2001 2002 2003 2004 00-04

Ratio Ratio

Total (World) 40,715 46,878 52,743 53,505 60,630 100.0 254,470 100.0

Asia 25,482 29,613 32,570 34,102 37,620 62.0 159,387 62.6

Japan 2,916 4,348 4,190 5,054 5,452 9.0 21,960 8.6

Hong Kong 15,500 16,717 17,861 17,700 18,998 31.3 86,777 34.1

S. Korea 1,490 2,152 2,721 4,489 6,248 10.3 17,099 6.7

Taiwan 2,296 2,980 3,971 3,377 3,117 5.1 15,742 6.2

ASEAN10 2,845 2,984 3,256 2,925 3,041 5.0 15,050 5.9

US 4,384 4,433 5,424 4,199 3,941 6.5 22,380 8.8

EU (15) 4,479 4,183 3,710 3,930 4,239 7.0 20,541 8.1

Latin America 4,617 6,309 7,551 6,907 9,044 14.9 34,426 13.5

Oceania 694 1,015 1,417 1,731 1,974 3.3 6,832 2.7

Other BRICs countries 31 46 85 87 177 0.3 424 0.2

Note: Flow, net, actual basis.Source: "China Statistical Yearbook."

28

FDI to Brazil [Chart 5-5]Inward FDI (flow) to Brazil increased for the first time in four years (57% y-o-y, $20.2 billion).The main pillars of Brazil’s inward FDI are the US and the EU (80% of inward FDI on a flow basis in 2004). FDI from MERCOSUR and other BRICs countries remain low.

FDI to Russia [Chart 5-6]Russia’s inward FDI (flow) grew 69% y-o-y ($6.8 billion) in 2003 and 39% y-o-y ($9.4 billion) in 2004.The main pillars of Russia’s inward FDI are the US and Europe. The US, the Netherlands, the UK and France together make up 50% of outstanding FDI as of the end of 2004 ($36.1 billion). Outward FDI is also on the rise (outstanding balance as of 2004: $4.2 billion). Europe and CIS countries are the major pillars of Russia's outward FDI.

FDI to India [Chart 5-7]Even though inward FDI (flow) to India took a dip in 2003, it grew 53% y-o-y ($3.8 billion) in 2004.The US and the EU comprise the main pillars of FDI (45% of inward FDI in 2004). On the other hand, FDI from Asia only amount to a small percentage (Japan: 31%, ASEAN5: 1.9%, SAFTA excluding India: 0.1%, South Korea: 0.7%).

Chart 5-5 FDI to Brazil (flow)($ million, %)

2003 2004

Ratio

Total (world) 12,892 20,243 100.0

US 2,383 3,978 19.7

Canada 117 593 2.9

EU (15) 4,687 12,319 60.9

Netherlands 1,445 7,705 38.1

Spain 710 1,055 5.2

Germany 508 795 3.9

Portugal 201 570 2.8

Japan 1,368 243 1.2

Cayman Islands 1,910 1,522 7.5

MERCOSUR (ex Brazil) 303 267 1.3

BRICS (ex Brazil) 23 18 0.1

Others 2,101 1,304 6.4

Note: Based upon notifications, flow. Source: Central Bank of Brazil.

Chart 5-7 FDI to India (flow)($ million, %)

2003 2004

Ratio

Total (World) 2,494 3,810 100.0

US, EU 1,053 1,726 45.3

US 409 657 17.3

EU (15) 644 1,068 28.0

Mauritius 555 1,019 26.7

Japan 93 118 3.1

ASEAN5 86 74 1.9

S. Korea 24 27 0.7

Hong Kong 3 24 0.6

SAFTA (ex India) 4 3 0.1

Other BRICs 0.3 4 0.1

Non-resident Indians 45 55 1.4

Others 631 761 20.0

Note: Flow, actual basis. Source: Government of India Department of Commerce, "SIA Newsletter."

Chart 5-6 FDI to Russia (outstanding balance)($ million, %)

End of 2003 End of 2004

Ratio

Total (World) 26,131 36,147 100.0

Cyprus 5,037 10,094 27.9

Netherlands 2,796 8,805 24.4

US 4,297 4,310 11.9

Germany 2,542 2,550 7.1

UK 2,828 1,602 4.4

British Virgin Islands 718 1,144 3.2

Switzerland 822 957 2.6

France 331 433 1.2

Austria - 292 0.8

Luxembourg 222 263 0.7

Others 6,538 5,697 15.8

Source: JETRO(original source: Federal Sate Statistics Service, "Russian Socioeconomic Indicators.")

29

Brazil [Chart 5-8]Brazil: promotion of coordination among the countries of Latin America through initiatives such as the establishment of the South American Summit and the reinforcement of MERCOSUR.It is also promoting strong ties with extra-regional countries such as India, Africa and the Arab nations.

Russia [Chart 5-9]Russia is reinforcing its ties with certain CIS countries ("Eurasian Economic Community")At the same time, Russia is also looking for new forms of regional cooperation centering around stronger ties with China and extending over a wider area than the CIS framework ("Shanghai Cooperation Organization")

(3) Regional coordination and regional integration

Chart 5-8 Regional cooperation and integration: Brazil Chart 5-9 Regional cooperation and integration: Russia

Efforts to secure Brazil ’s ascendancy in regional coordination and unification of the Americas through solidarity with Latin American countries

Convening of the first South American summit meeting (Sep 2000)MERCOSUR (1991- )•Agreement on Peru’s associate membership to MERCOSUR (Aug 2003)•MERCOSUR signs FTA with Andean Community of Nations (CAN) (excluding

Peru) (Dec 2003)•Decision on associate membership of Mexico and Venezuela to MERCOSUR

(Jul 2004)Efforts to reinforce coordination with extra-regional developing countries

Formation of G20 at the WTO meeting in CancunPreferential tariff agreement with India January 25, 2004)Conclusion of framework agreement toward FTA (June 17, 2004)MERCOSUR concludes preferential commerce agreement with the Southern African Customs Union (SACU) (December 2004)Convening of "Summit of South American – Arab Countries" (May 2005)Conclusion of economic framework agreement between MERCOSUR and Gulf Cooperation Council (GCC)

Efforts toward reinforcement of coordination within the CISCIS economic alliance (FTA)······················· Signed in 1993 (still pending)

Consent to establishment of free trade zone in 2012 at the CIS Summit in June 2005

Unified economic zone································ Russia, Ukraine, Belarus a ndKazakhstan conclude agreement in 2003 on establishment of a unified economic zone

Eurasian Economic Community·················· Guarantee of free movement of goods, services and people among the CIS member states based upon the "Agreement on Establishment of the Eurasia Economic Community"

Regional cooperation and coordination over a wider area extending over the framework of the CIS

Shanghai Cooperation Organization (SCo) · Established in 2001 by China, Kazakhstan, Kyrgystan, Tajikstan, Uzbekistan and Mongolia (India, Iran and Pakistan are observers).

30

India [Chart 5-10]Reflecting the steps toward regional integration in East Asia, India is expediting the formation of multilateral and bilateral FTA networks with the countries of ASEAN through political initiatives.The moves toward the formation of a free trade area in Southeast Asia are also materializing. The reinforcement of India’s economic coordination with Japan, China and South Korea is also progressing.

China [Chart 5-11]Starting with the agreement (2001) toward the conclusion of a free trade agreement (FTA) with the ASEAN, China is accelerating its efforts toward regional cooperation and integration in the Asia and Oceania region.China is also stepping up its efforts to promote economic coordination with Latin America, the petroleum-producing countries and African countries for the purpose of securing natural resources and export markets.

The BRICs are also stepping up coordination among themselvesBrazil, India and South Africa for the G3 (2003), Indo-Russian declaration on strategic partnership (2005), Sino-Indian agreement on formation of a strategic partnership for peace and prosperity (2005), Sino-Russian final accord on border negotiations (2004) and joint military exercises (2005) for the first time in 20 years.

Chart 5-11 Regional cooperation and integration: ChinaChart 5-10 Regional cooperation and integration: IndiaReinforcement of relations with ASEAN countries

ASEAN······Signing of "Framework Agreement on Comprehensive Economic Cooperation" (2003) / Conclusion of Agreement in 2006, to take effect in January 2007

Thailand·····Signing of "Framework Agreement for Establishing Free Trade Area"(2003)

Singapore··Signing of agreement for comprehensive economic cooperation (2005)

Actions toward reinforcement of regional economic coordination in Southwest AsiaSouth Asia Free Trade Agreement (SAFTA) takes effect (Jan 2006)

Actions toward reinforcement of regional economic coordination with Japan, China and S. Korea

Commencement of joint research with Japan, with the intention of an Economic Partnership Agreement (EPA)Agreement on establishment of a joint research group with ChinaAgreement to conclude a Comprehensive EPA with S. Korea by the end of 2007

Reinforcement of coordination with extra-regional countriesSigning of Preferential Trade Agreement (PTA) with MERCOSUR, agreement on commencement of negotia tions on PTA with the Southern African Customs Union, establishment of joint committee on the possibility of a Free Trade Agreement (FTA) with the Gulf Cooperation Council

Asia Pacific Region: efforts toward regional cooperation and coordinationRegional cooperation forums············ APEC, ASEAN+3 and the East Asian

SummitASEAN ································ ············· "Framework Agreement on Comprehensive

Economic Cooperation” takes effect (2003) – abolition of intra -regional tariffs with the ASEAN nations by 2010

Hong Kong, Macau··························· Closer Economic Partnership Agreement (CEPA) (2003)

Japan, S. Korea ······························ Commencement of talks for framework for investment with Japan (2005) / Commencement of private sector joint research with S. Korea (2005)

India ································ ················· Agreement on establishment of joint research workshop (2005)

Oceania································ ············ Agreement on commencement of FTA negotiations with Australia and New Zealand

Reinforcement of coordination with extra-regional countriesLatin American countries··················· China and Chile sign FTA (2005)Middle East oilo producing countries· Agreement on commencement of

negotiations with Gulf Cooperation Council (2005)

Africa ································ ················ Agreement on commencement of negotiations with Southern African Customs Union (2004)

31

Attachment 1 BRICs Basic DataData items Unit Brazil Russia India China Data year Source

Basic dataNational land area km2 8,459,420 16,888,500 2,973,190 9,327,420 - WDIPopulation 10 thousand 17,660 14,343 106,440 128,840 2003 WDI

Macroeconomic dataNominal GDP [Dollar-denominated] $ billion 603.8 581.8 665.1 1,653.7 2004 WEONominal GDP [Dollar-denominated, PPP] $ billion 1,461.6 1,449.2 3,290.8 7,334.3 2004 WEOPer capita GDP [Dollar-denominated, PPP] $ 8,048.9 10,179.4 3,079.7 5,641.6 2004 WEOInflation, consumer prices [annual %] % 14.7 13.7 3.8 1.2 2003 WDIUnemployment rate % 9.4 8.6 N.A. 4.0 2002(a) WDISavings rate [as a percentage of nominal GDP] % 21.5 31.2 22.3 47.0 2003 WDIInvestment rate [as a percentage of nominal GDP] % 17.8 20.3 23.8 44.4 2003 WDI

Agriculture % 5.8 5.2 22.2 14.6 2003 WDIIndustry % 19.1 34.2 26.6 52.3 2003 WDIValue-added, by industry

[as a percentage of GDP]Services % 75.1 60.7 51.2 33.1 2003 WDIAgricultural raw materials % 4.5 3.2 1.3 0.6 2003 WDIFood % 28.7 2.0 11.3 4.4 2003 WDIFuel % 5.2 53.0 5.7 2.5 2003 WDIManufactures % 51.8 21.1 76.5 90.6 2003 WDI

Share of exports[goods](i)

Ores and metals % 8.2 6.9 4.0 1.6 2003 WDIAgricultural raw materials % 1.7 1.2 3.3 3.8 2003 WDIFood % 7.1 19.3 5.8 3.6 2003 WDIFuel % 15.8 2.3 31.5 7.0 2003 WDIManufactures % 72.0 65.8 54.3 80.0 2003 WDI

Share of imports [goods](i)

Ores and metals % 3.3 2.2 4.3 5.3 2003 WDIHealth, education, income distribution

Average life expectancy Years 68.7 65.7 63.4 70.8 2003 WDILiteracy rate (ii) % 86.4 99.6 61.3 90.9 2002(b) WDIAverage number of years of schooling Years 4.88 10.03 5.06 6.35 2000 Barro and LeeCorruption index (iii) - - 0.15 - 0.72 - 0.31 - 0.51 2004 Kaufmann et al.Poverty ratio (iv) % 8.2 2.0 35.3 16.6 2002(c) WDIGini coefficient [income-based] (v) - 59.3 31.0 32.5 44.7 2002(d) WDI

Fiscal conditionsNational burden rate [as a percentage of nominal GDP] % 44.8 24.4 10.7 19.3 2003(e) IMD

Of which are taxes % 32.7 15.0 10.1 17.1 2003 IMDOf which is social security % 12.1 9.3 0.6 2.2 2003(f) IMD

Individual income tax % 15, 27.5 13(A) 10, 20, 30 5 45(B) - Various sources (1)Corporate income tax % 15, 25 24 30 15, 33(C) - Various sources (1)Tax rateIndirect tax % 18 25(D) 18(E) 12.5(F) 0, 13, 17(G) - Various sources (1)~

~

32

Attachment 1 BRICs Basic Data [continued]Data items Unit Brazil Russia India China Data year Source

(1) Central governmentFiscal revenue and expenditure [as a percentage of nominal GDP] % 2.8 4.9 - 4.8 - 2.4 2004(g) IFSOutstanding government debt [as a percentage of nominal GDP] % 34.1 30.2 47.5 5.3 2004(h) IMD

As a percentage of nominal GDP % N.A. 13.2 9.1 8.3 2003(i) WDITax revenuesAs a percentage of total revenues (vi) % N.A. 48.3 78.4 94.2 2003(i) WDISocial security % N.A. 32.5 9.1 0.8(H) 2004(j) Various sources (2)Military expenditure % N.A. 10.8 7.6 10.1 2004(j) Various sources (2)Education % N.A. 3.1 8.7 1.3(I) 2004(j) Various sources (2)

Constituent ratio of expenditures[as a percentage of totalrevenues] (vii)

Scientific technology % N.A. N.A. 0.7(J) 2.5(K) 2004(j) Various sources (2)(2) State and local government

Fiscal revenue and expenditure [as a percentage of nominal GDP] % - 1.9 0.2 - 4.4 0.0(L) 2004(j) Various sources (3)Outstanding government debt [as a percentage of nominal GDP] % 18.9 N.A. 33.0 0.0 2004(j) Various sources (3)Tax revenues [as a percentage of nominal GDP] % N.A. 14.3 11.3 7.3 2004(j) Various sources (3)

Social security2000 % 5.4 12.3 4.9 6.8 2000 UNRatio of population aged 65 or above2030 [median forecast] % 12.5 19.3 9.3 16.3 2030 UN

Age at which pensions are payable Years 65(M) 60(N) 55 60 - SSASocial security-related government expenditures[as a percentage of nominal GDP] % 16.1 8.1 2.3 3.6 2003(k) Various sources (4)

Of which are pensions % 10.7 6.1 1.7 2.7 2003(k) Various sources (4)Of which are medical insurance etc. % 4.7 1.1 0.7 0.7 2003(k) Various sources (4)Of which are employment insurance etc. % 0.7 0.9 N.A. 0.2 2003(k) Various sources (4)

Social security tax rate % 27.65 28.20 23.00 36.11 2003 SSAFinance

Money supply [as a percentage of nominal GDP] % 29.2 25.7 60.2 174.9 2003 WDIDomestic bank lending [as a percentage of nominal GDP] % 61.1 27.6 57.3 177.9 2003 WDITotal market value of stocks [as a percentage of nominal GDP] % 47.6 53.3 46.5 48.1 2003 WDI

Balance of payments, external debtExchange rate [average dollar exchange rate] Domestic currency/$ 2.925 28.8137 45.317 8.277 2004 IFS, WEOTrade balance [as a percentage of nominal GDP] % 5.6 15.0 - 1.5 3.6 2004(l) IFS, WEOCurrent account balance [as a percentage of nominal GDP] % 1.9 10.3 1.2 4.2 2004(l) IFS, WEO

$ million 150,965 98,444 38,676 245,467 2004 UNCTAD, WEOOutstanding inward direct investment [actual value, as a percentage of nominal GDP] % (25.0) (16.9) (5.8) (14.8) 2004 UNCTAD, WEO

$ million 57,439 42,385 27,555 50,043 2003 JointBank loans% (25.8) (30.9) (33.8) (39.3) 2003 Joint

$ million 87,798 42,535 3,489 11,954 2003 JointBonds% (39.5) (31.1) (4.3) (9.4) 2003 Joint

$ million 16,068 0 0 0 2003 JointBrady bonds% (7.2) (0.0) (0.0) (0.0) 2003 Joint

$ million 8,112 38,402 3,445 15,286 2003 Joint

Outstanding external debt[actual value, constituent ratio](viii)

Non-bank trade credits% (3.6) (28.0) (4.2) (12.0) 2003 Joint

33

Attachment 1 BRICs Basic Data [continued]Data items Unit Brazil Russia India China Data year Source

$ million 48,946 11,358 29,798 25,506 2003 JointMultilateral claims% (22.0) (8.3) (36.6) (20.0) 2003 Joint

$ million 4,151 2,290 17,147 24,507 2003 JointOutstanding external debt[actual value, constituent ratio] Official bilateral loans

[DAC creditors] % (1.9) (1.7) (21.1) (19.3) 2003 Joint$ million 69,196 103,692 9,568 N.A. 2004 IFSDirect investment

% (46.6) (26.0) (5.7) N.A. 2004 IFS$ million 2,352 169 396 N.A. 2004 IFSPortfolio investment, equity

% (1.6) (0.0) (0.2) N.A. 2004 IFS$ million 7,001 8,504 410 N.A. 2004 IFSPortfolio investment, debt securities % (4.7) (2.1) (0.2) N.A. 2004 IFS$ million 1,230 86,087 1,523 N.A. 2004 IFSPublic sectors

% (0.8) (21.6) (0.9) N.A. 2004 IFS$ million 52,740 120,809 137,008 614,500 2004 IFS

Outstanding external assets[actual value, as a percentage of totalexternal assets] (ix)

Foreign exchange reserves% (35.5) (30.3) (81.0) N.A. 2004 IFS

No. of immigrants [net = inflow – outflow, percentage of total population] % - 0.1 1.6 - 0.1 - 0.2 2000 WDIEnvironment, energy

Actual Million tons 351 1,606 1,025 3,541 2003 DCECO2 emissions [actual, per capita] Per capita emissions Ton 1.97 11.21 0.96 2.72 2003 DCEActual TOE 187.7 668.6 375.8 1386.2 2004 BPPrimary energy consumption Unit energy consumption TOE/GDP($ million) 313.0 1147.4 568.5 840.4 2004 WEO

34

Attachment 2 Relations between BRICs and JapanData items Unit BRICs total World Data year Data source

Brazil Russia India ChinaJapan’s exports to the BRICs $ million 82,465 2,347 3,157 3,044 73,917 565,487 2004 IMF

(% of total exports) % 14.6 0.4 0.6 0.5 13.1 100.0 "Japan’s imports from the BRICs $ million 106,289 3,650 5,693 2,611 94,335 454,816

(% of total imports) % 23.4 0.8 1.3 0.6 20.7 100.0Trade

Trade balance $ million - 23,824 - 1,303 - 2,536 433 - 20,418 110,671Current account balance $ million - 15,070 - 252 - 2,339 1,248 - 13,726 172,090 2004 Bank of JapanCapital account balance - 4,910 550 - 322 - 2 - 5,136 16,055

Japan’s FDI to BRICs $ million 5,989 - 66 49 139 5,867 30,952(% of total FDI) % 19.4 - 0.2 0.2 0.4 19.0 100.0

Japan’s inward direct investment from BRICs$ million 10 19 0 0 - 9 7,816Direct investment

(% of total inward direct investment) % 0.1 0.2 0.0 0.0 - 0.1 100.0Japan’s external investment toward BRICs $ million 3,417 - 156 23 90 3,461 174,780

(% of total) % 2.0 - 0.1 0.0 0.1 2.0 100.0Japan’s inward investment from BRICs $ million 1,667 - 1 0 0 1,668 196,411

Portfolio investment

(% of total) % 0.8 - 0.0 0.0 0.0 0.8 100.0No. of Japanese visitors to BRICs 1,000 - ( 42.8 ) 92.0 96.9 3,334.3 - 2004 Japan National Tourist OrganizationNo. of visitors to Japan from BRICs 738.6 13.1 56.6 53.0 616.0 6,137.9

Tourism 234.7 6.4 27.2 11.4 189.7 3,839.7Business 184.8 3.3 16.1 24.2 141.2 1,383.1

No. of visitors

Others 319.1 3.3 13.3 17.4 285.1 915.1No. of Japanese residents in BRICs 1,000 172.1 69.0 1.9 2.0 99.2 961.3 2004 Ministry of Foreign Affairs

Permanent residents 68.1 66.9 0.0 0.2 1.0 302.3Long-term residents 104.0 2.1 1.9 1.8 98.2 659.0

No. of BRICs citizens in Japan 1,000 758.1 274.7 6.7 14.2 462.4 1,915.0 2003 Ministry of JusticePermanent residents 130.5 41.8 0.4 1.5 86.7 743.0

No. of residents

Non-permanent residents 627.6 232.9 6.3 12.7 375.7 1,172.1No. of Japanese corporate subsidiaries in BRICs

Corporate entities 4,551 269 50 192 4,040 20,563 2004 Toyo Keizai Inc.

(% of total overseas subsidiaries) % 22.1 1.3 0.2 0.9 19.6 100.0No. of BRICs corporations in Japan Corporations 77 3 N.A. 13 61 4,276 2004 JETRO

Japanese businesses in BRICs

(% of total) % 1.8 0.1 N.A. 0.3 1.4 100.0Value of Japan’s ODA to BRICs $ million 924 42 N.A. - 82 965 5,954 2004 Ministry of Foreign Affairs

ODA(% of total) % 15.5 0.7 N.A. - 1.4 16.2 100.0

Notes 1. Data on the number of outbound Japanese (by country of destination) are not available in Ministry of Justice statistics from 2001. The number of Japanese visitors to the BRICs are based upon statistics of the host

country. Brazil: 2003 (no. of people arriving a t borders, statistics based upon resident areas), 2004 for all others (no. of people arriving at borders, nationality-based statistics).2. Visitors from the BRICs to Japan (others) include disembarking on a temporary basis.3. Of those foreigners registering in Japan with BRICs nationalities, non-residents include spouses of Japanese, fixed domicile residents and those visiting for other purposes.4. The number of local subsidiaries of Japanese corporations in the BRICs is derived by tallying the number of overseas subsidiaries, branckes and representative offices of 6,090 Japanese corporations. Local

subsidiaries in which the capital contribution by the Japanese corporation (including investment via overseas subsidiaries) is less than 10% are excluded.5. The number of BRICs corporations in Japan is based upon the results of surveys of branches in Japan of companies in which more than 10% of the shares are owned by a single foreign investor.

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Attachment 3 Relations between BRICs and the IMFHistory of Lending Arrangements

Brazil Russia India China

Start End Facility Amount agreed

(Million SDR)Start End Facility

Amount agreed

(Million SDR)Start End Facility

Amount agreed

(Million SDR)Start End Facility

Amount agreed

(Million SDR) 1983/ 3 1986/ 2 EFF 4,239 1992/ 8 1993/ 1 SBA 719 1981/ 11 1984/ 5 EFF 5,000 1986/ 11 1987/ 11 SBA 598 1988/ 4 1990/ 2 SBA 1,096 1995/ 4 1996/ 3 SBA 4,313 1991/ 1 1991/ 4 SBA 552 1992/ 1 1993/ 8 SBA 1,500 1996/ 3 1999/ 3 EFF 6,901 1991/ 10 1993/ 6 SBA 1,656 1998/ 12 2001/ 9 SBA, SRF 13,025 1998/ 7 1999/ 3 EFF, SRF*3 6,306 2001/ 9 2002/ 9 SBA, SRF 12,144 1999/ 7 2000/ 12 SBA 3,300 2002/ 6 2005/ 3 SBA, SRF 27,375

Transactions with the IMF (General Resources Account (GRA)) Brazil Russia India China

Disbursements(Million SDR)

Repurchases (Million SDR)

Charges paid(Million SDR)

Disbursements(Million SDR)

Repurchases(Million SDR)

Charges paid(Million SDR)

Disbursements (Million SDR)

Repurchases(Million SDR)

Charges paid(Million SDR)

Disbursements(Million SDR)

Repurchases(Million SDR)

Charges paid (Million SDR)

1984 1,370 0 199 0 0 0 0 100 336 0 0 0 85 0 64 332 0 0 0 0 175 360 0 0 0 86 0 526 303 0 0 0 0 331 296 598 0 0 87 0 877 234 0 0 0 0 638 232 0 0 37 88 365 691 186 0 0 0 0 788 192 0 0 37 89 0 633 202 0 0 0 0 738 166 0 0 52 90 0 564 170 0 0 0 0 531 113 0 299 48 91 0 415 110 0 0 0 1,989 363 149 0 299 17 92 128 411 64 719 0 0 1,109 275 190 0 0 0 93 0 360 28 1,078 0 56 462 138 199 0 0 0 94 0 94 10 1,078 0 122 0 822 161 0 0 0 95 0 32 7 3,594 0 194 0 797 139 0 0 0 96 0 48 3 2,588 360 324 0 881 70 0 0 0 97 0 24 2 1,467 360 423 0 495 41 0 0 0 98 3,419 16 1 4,600 674 529 0 305 23 0 0 0 99 4,450 1,446 339 471 3,101 528 0 246 8 0 0 0

2000 0 5,074 255 0 2,189 524 0 39 1 0 0 0 01 5,277 0 104 0 2,998 398 0 0 0 0 0 0 02 12,274 3,588 361 0 1,148 162 0 0 0 0 0 0 03 12,635 8,899 780 0 1,356 101 0 0 0 0 0 0 04 0 2,940 815 0 1,117 76 0 0 0 0 0 0

Notes: 1. 1 SDR = $1.43 (end of 2005). 2. Type of loan facilities: SBA (Stand-by Arrangement), EFF (Extended Fund Facility), SRF (Supplemental Reserve Facility) 3. Increase of EFF approved in March 1996.

Source: IMF website.