BRICS: The driver of global growth and governance?

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Notwithstanding the ‘imaginary’ foundation of the BRICS and challenges the grouping is facing internally and externally, it’s 10 year short journey has indeed achieved remarkable growth and is increasingly been seen as a major economic grouping contributing tremendously to the global economic growth and governance.

BRICS achievements

With the establishment of mechanisms like the stock exchanges of the BRICS emerging markets (2011), agreements to promote trade in local currencies (2012), BRICS University League (2013), BRICS New Development Bank (2014), BRICS Contingency Reserve Arrangement (2015) BRIC first Regional Center of the New Development Bank in South Africa (2017) etc. have demonstrated that the BRICS has emerged as a fine example of multilateralism. It has also demonstrated the desire of the emerging economies to assume greater responsibilities in global financial governance albeit it’s power of discourse remains limited as it holds only 13% and 15% of the voting rights in the World Bank and the International Monetary Fund respectively. It was agreed during the 8th summit in Goa, India that an independent BRICS Rating Agency would be established to transform global financial architecture based on the principles of fairness and equity. It is believed that the West lead agencies such as S&P, Fitch and Moody’s that account for 90% of the rating market are biased towards the developing countries. For example in May 2017, Moody’s ratings agency downgraded China’s credit score, warning that economy-wide debt is expected to rise as potential economic growth slows over the coming years. Both India and China had slammed the Moody’s ‘inappropriate methodologies’ at that time.

On economic front, the BRICS has become an important engine of global economic growth. If we see its performance since inception, we will find that grouping’s GDP share in the world economy rose from 12% in 2006 to 23% in 2016; the proportion of total trade increased from 11% to 16%; and the proportion of foreign investment increased from 7% to 12%. Today BRICS contribution to the global economic growth has been more than 50%. Notwithstanding these impressive figures, BRICS intra trade has been abysmal around $250 billion. During the last BRICS summit in Goa, Prime Minister Modi called for doubling this figure by 2020, however, it appears as a far cry given the asymmetries and reluctance of aligning their development strategies.

9th BRICS Summit in Xiamen, Fujian

Xiamen is one of the earliest SEZ of China. The city of 3.80 million people with over $13,000 per capita is one of the ‘pivot cities’ for the construction of the Belt and Road Initiative. Together with two more pivot cities in Fujian, namely Fuzhou and Quanzhou, the pivots add $224 billion and $400 billion GDP of Fujian province, where Xi Jinping spent 18 years of his career. No wonder it is one of the ‘pilot free trade zones of China, a ‘demonstration district for cross-strait emerging industries and modern service cooperation,’ an international shipping centre in southeast China, a regional financial service centre and trading centre of the two sides of the Taiwan straits.   Of late, Fujian has taken the lead in declaring three important projects funded by the China-ASEAN Maritime Cooperation Fund: China-ASEAN Marine Products Exchange, China-ASEAN Maritime University, and China-ASEAN Marine Cooperation Center respectively. In 2016, the province’s total import and export trade with the BRICS amounted to 67.9 billion yuan, accounting for 6.6 % of the province’s total foreign trade. Fujian boasts of well developed tertiary industries, Yama Ribbon manufacturing, if the sources are to be believed, has decided to invest around $30 million in Andhra Pradesh.

Globalization vs. de-globalization

The retrenchment of the West led by the US; fissures in the Western alliance; doubts over the success of the European Union following the BREXIT and economic slump in most of the countries, and the refugee crisis etc. issues in the West have increasingly made these countries protectionist, so much so the US has pulled out of the Paris Climate Change Agreement. On the contrary the BRICS including many developing countries have remained committed to the globalization and connectivity initiatives in the region and beyond albeit some members are reeling under the economic stagnation. However, the BRICS remains committed to the Paris Climate Change Agreement as well as multilateralism. In the face of such a scenario, the BRICS faces new opportunities but entails greater responsibilities too. Since all BRICS countries have initiated their own connectivity projects, it remains to be seen if some unanimity is reached on some of these, for it is projected that these will essentially push the economic growth in the region as well as the world.

South-South cooperation

It is evident that the developing countries would like to break free from the subservient role they had with the industrialized economies and forge stronger economic and political relations among themselves, which are based on mutual respect, equality and win-win cooperation. The establishment of the BRICS and its affiliated institutions such as the BRICS New Development Bank (NDB) and Contingency Reserve Fund should be seen in this light. China’s connectivity initiative appears to offer such a model for cooperation, which is seen as less exploitative and more relevant to mutual development. No wonder, over 70 countries are on board China’s BRI initiative, albeit some smaller BRICS countries have apprehensions about the ultimate goals of the connectivity. Nonetheless, it is the fact that the BRICS countries, especially China has been instrumental in south-south finance flows; today China’s policy banks lend more capital than any other bank in the world. The cooperation has resulted in foreign direct investment, trade, transfer of technology especially in mining, energy, infrastructure etc. sectors. Therefore, South-South Cooperation will be one of the major themes of the summit. It was this thinking that China floated the notion of BRICS + aimed at expanding the BRICS ‘friends circle’ thus giving a fillip to the South-South cooperation.

Counter terrorism

BRICS countries remain committed to combat terrorism in any shape and form, and believe that there is a need to expand practical cooperation in intelligence sharing, capacity building, and providing security to their sprawling interests abroad. In this context a Counter-Terrorism Working Group was established during the 8th summit in Goa and held its first meeting. The group agreed to expand counter terrorism cooperation further to include measures for denying terrorists access to finance and terror hardware such as equipment, arms and ammunition. The second meeting was held in Beijing on 17th May 2017 and conducted extensive discussions on the issue affecting region and beyond. India have been urging the BRICS nations to back its efforts for the adoption of a comprehensive convention on terrorism at the UN and shed the ambiguity on ‘good’ and ‘bad’ terrorists.

Combating global warming

At a time when President Donald Trump is withdrawing the US from multilateral arrangements such as the Paris climate agreement the BRICS countries have repeatedly expressed their commitment towards the Paris deal and the emission cuts they have undertaken for combating the global warming. No one denies the fact that the combined population of 3 billion people and a GDP of $16 trillion will have a huge impact on global emissions; however, can the BRICS initiate joint research and development into new energy technologies? It has been expressed by some of the BRICS countries like Russia and Brazil that they do not want to be seen as exporters of their natural wealth.

People to people exchange

As regards the people to people exchanges between the BRICS nations, I believe, even if there are various exchanges such as cultural festivals, media and film exchange, BRICS scholarships etc. programs, however, there is a huge scope to strengthen and broaden the scope these exchanges. The establishment of BRICS University League is an excellent example. There is a need to institutionalize these mechanisms and establish even more at various levels. China has initiated various scholarships, seminars and workshops in this regards thus providing opportunities to people from all walks of life, while it could do more owing to its economic size, other members too need to initiate similar programs whatever the scale may be.

The Way ahead

It is owing to the robust economic growth in India and China that the BRICS has been able to contribute to the global economic growth and governance. I believe the slide in India’s economic growth to 5.7% is a temporary phenomenon owing to its adjustment to the demonetisation and the Goods and Services Tax. The weak economic indicators will certainly impact on the bilateral, regional and global posturing of a country or the grouping. It is owing to strong domestic drivers that emerging economies would be able to support the ideas such as global infrastructure hub and global infrastructure fund mooted by the 2014 G20 Brisbane summit and the World Bank. China has supported such moves and had rendered support for the same through the ‘Belt and Road’ initiative, the AIIB, the Silk Road Fund etc. mechanisms. In order to build capacities the India, China and Russia owing to their geographical proximity could be instrumental in driving regional growth, prosperity and stability provided they align their development strategies. Needless to say, they need to take a holistic and long term view of their relations as well as the global shift from the Atlantic to the Pacific. The BRICS will cease to exist if India and China cannot hold together. Perhaps this was one of the reasons that paved way for the disengagement at Doklam. It is up to the member countries whether they would like to have a benevolent or malevolent relationship, and determine future of the BRICS.