BRICS: ‘Stronger partnership for a brighter future’

By Prashansa Srivastava

The five major emerging economies—Brazil, Russia, India, China and South Africa—opened the 2017 BRICS summit on Monday to map out their future course. The summit started with host Chinese President Xi Jinping calling on members to play a bigger role in world governance, reject protectionism and confront the gap between the world’s wealthy and developing nations. President Jinping emphasised on the need to make the international order more just and equitable.

The journey so far

BRICS was formed as an association of fast-growing large economies. It aims to advocate for better representation of developing countries and challenge the post-Second World War Western-domination. Together, the five countries now account for 40% of the world’s population. They also account for 45% of the increase in world growth since 2009, driven mainly by China and India.

The BRICS group has also achieved landmark agreements to increase the share of voting rights for emerging markets in world financial bodies like the International Monetary Fund and World Bank. The BRICS nations also established the multilateral ’New Development Bank’. The bank aims to contribute to development plans through sustainable projects.

Why is BRICS important for China?

Ensuring that the BRICS summit is a success is vital for China’s bold bid to become the leader of the global economy. China’s gross domestic product (GDP) is already the world’s second largest. By allying with another major American nemesis—Russia—and the rapidly growing economies of Brazil and India, China hopes to bypass the U.S. in world influence.

Trade within BRICS has been heavily in favour of China. The key development strategy of One Belt, One Road or the Belt and Road Initiative (BRI) by President Jinping also aims to put China at the forefront of fostering economic connectivity and industrialisation, by leveraging China’s infrastructural excellence. The strategy underlines China’s push to take a larger role in global affairs with a China-centered trading network.

The agenda for this year

The summit’s agenda—under the theme “Stronger Partnership for a Brighter Future”—includes discussions on economic collaboration, political and security cooperation and people-to-people exchanges.

President Jinping called on his BRICS partners, Brazilian President Michel Temer, Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, and South African President Jacob Zuma to oppose a growing surge of protectionism across the world. He hopes to challenge America’s traditional and growing dominance in world economic affairs. President Jinping said, “Our goal is to build a big market for trade and investment, promote the smooth flow of currency and finance, improve connectivity of infrastructure and build close bonds between the peoples.”

The five nations broadly support free trade and oppose protectionism, although China has been accused of erecting barriers to foreign competition as its own companies buy up others overseas. But Xi has positioned himself as a champion of globalisation at a time when his U.S. counterpart, Donald Trump, is renegotiating the North American Free Trade Agreement and has pulled the U.S. out of a planned trade deal with Pacific nations.

Exports driven solely by raw materials have adversely impacted the South African economy. Hence, the BRICS nations were called to invest in development programmes in Africa. President Jinping recommended skills development and technology transfers, and engagement in projects “that would support inclusive development and equal partnerships.”

A mishmash of styles

Stark political and economic differences prevail among the BRICS countries. They range from democratic to autocratic, with some maintaining heavy government control over the economy and civil society. The economies of Brazil, Russia and South Africa are driven largely by raw material exports and have been hit by slumping commodity prices. China and India are oriented more toward manufacturing and services. However, BRICS nations have a demographic advantage. Marked economic growth, and in some cases rising military power is also in favour of the nations.

Promises of more cooperation between the five nations lie ahead. Of the $197 billion outbound investment made by BRICS in 2016, only 5.7% was within the five countries. There is a need for more cooperation in finance, connectivity, sustainable development, innovation and industrial cooperation among the five nations to achieve goals of equitable growth.

Challenges to BRICS

Brazil, Russia, India, China and South Africa (BRICS) are rapidly emerging as protagonists in international development cooperation. Positive spillovers of their cooperation have been higher productivity, higher export rates and diversification of industries. There has also been an intensification of regional trade linkages between the five countries.

However, the diversity of the nations may hinder the promises of economic prosperity. China contributed about half of the club’s GDP in 2001 and now accounts for two-thirds of it. China is also home to most of the group’s biggest companies. Eight out of the ten largest stocks in the Morgan Stanley Capital International(MSCI) Emerging Markets index are from China, including Baidu, Alibaba, and Tencent. As Chinese markets rapidly grow and open up to capital inflows, the Chinese economy seems hard to contain in a “holistic” emerging-market fund, let alone a narrower five-country vehicle.

The five nations have also failed to formally show their support to China’s Belt and Road Initiative, fearing China’s rising dominance in trade. The biggest threat to the success of the BRICS nations may just be the singular success of its largest member. Divergent growth trends, weak geopolitical links, complicated internal and external relations, and inadequate governance capabilities also pose challenges for BRICS.

There is much for BRICS to achieve, from jointly promoting global trade to enhancing the transparency of regional trade agreements. But to do this, they must make use of internal exchanges, share knowledge and project a more unified stance to ensure their voice is louder, clearer and fully reflected in other international arenas.

Featured Image Source: PMINDIA