BRICS Consolidation Transforming Global Economic and Development Landscape

Musa Jega Ibrahim

22 Mar, 2023

Introduction

BRIC is an acronym for Brazil, Russia, India, and China that was coined in 2001 by Jim O’Neill, the then Chief Economist of Goldman Sachs, to reflect the combined growing influence of these four countries in the contemporary global economic disposition as they are projected to attain absolute group dominance in the global economy by 2050. This coinage raised global consciousness, which motivated the countries to formalize into an official group with an inaugural summit on 15-16 June 2009, in Yekaterinburg, Russia. The summit discussed global economic issues and underlined the determination of the BRIC countries to assert their influence in the global economy. In 2010, South Africa joined the group and the acronym changed to BRICS. Since then, the BRICS countries have been holding regular summits, with the recent one (the 14^th) held on 23 June 2022 hosted by China.

Even though the five countries have varying economic strengths, they have demonstrated that it is possible to achieve their common aspirations by intensifying their mutually beneficial investment and trade policies. Each has a relative strategic advantage which, if effectively harnessed, could bolster their collective gains through cooperation and strategic alliance. China has the capital; Brazil and Russia have the natural resources; and both China and India have large markets and industrial production wherewithal that is driven by technological progress and innovation.

Since inception, the BRICS have held more than 60 important events in key areas such as global governance, epidemic prevention and control, digital economy, sustainable development, and people-to-people and cultural exchanges, which are yielding positive impacts. The group is seeking to expand into “BRICS Plus” by inviting more countries to join. There is speculation that Iran and Argentina have applied to join, while reports suggest that Saudi Arabia, Türkiye, and Egypt are pondering to express interest in joining.   

Principles and Strategic Partnership Agenda

It is noteworthy that the BRICS do not have a convergent perspective on global economic issues as their strategic priorities are different. For instance, during the first summit in 2009, Russia was more concerned with the need to reduce the dominance of the US dollar as an international reserve currency while China, which was holding substantial US dollar bonds, only favoured the idea in the long run. This led to the resolution to diversify into IMF bonds and promote one another’s currency. Hence, their long list of declarations (resolutions) from the first summit centred on core principles, objectives, and partnership agenda; dwelling mainly on their common economic interest with the intent of reshaping the global economic and financial system to increase the stake of developing countries. The declarations could be summarised into three main aspects as follows:

• Pursue for a multipolar world order that hinges on fair and balanced representations of countries in global financial and economic institutions.
• Diversify their reserves from the US Treasury Bills into IMF bonds; and
• Promote regional currencies, including investing part of their reserves in one another’s currency to reduce their dependency on the US dollar.

Based on these initial declarations, the BRICS have evolved stronger, with some successes in asserting their influence in the global economic and financial landscape. Thus, despite their divergent priorities in the global system, they have made efforts through regular summits and other mechanisms such as Working Groups and Ministerial Meetings, to converge on crucial strategic goals and priorities.

 Accordingly, in 2020, they adopted the Strategy for BRICS Economic Partnership 2025 anchored on: (i) consolidating trade to prop up investment activities while providing requisite financial services; (ii) leveraging digital economy opportunities by implementing policies and strategies to achieve digital transformation for industrial growth through innovation and technological progress; and (iii) striving to achieve sustainable development by implementing climate change mitigation and adaptation measures and investing in energy, infrastructure, and human resource development, among other interventions.

The BRICS recognized that one of the cornerstones of cooperation is achieving connectivity to enhance competitiveness and positive impact within the group. The group seeks to strengthen physical linkages, institutional cooperation, and people-to-people exchanges.

Growing Global Influence of the BRICS

Collectively, the landmass of the BRICS is about 30 percent of the world’s land surface, and they constitute 41 percent of the world’s population. Their share of world GDP increased from 16 percent in 2000 to 22 percent in 2008, and to 24.42 percent in 2022 with nominal GDP estimated at US$16.04 trillion. Furthermore, their share of world trade is estimated at 18 percent and together they hold about US$5 trillion (43 percent) of global foreign reserves.

In 2014, during the 11^th summit in Brazil, the BRICS created the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA). The significance of these two institutions is far reaching in terms of alternatives to existing similar global arrangements as well as in helping to accelerate economic growth and socioeconomic progress of the BRICS. For instance, during the last five years, NDB has approved 70 infrastructure and sustainable development projects amounting to US$25.07 billion, including NDB Emergency Assistance Facility, to the benefit of the BRICS with India having 18 projects amounting to US$6.9 billion.

At their 12^th summit in 2020 hosted by Russia, the BRICS added world stability, shared security, and innovative growth to their list of global agenda, indicating their increasing assertiveness in global affairs. Even during the COVID-19 pandemic, the BRICS used their cooperation platform to mutually help one another to mitigate the impacts of the pandemic. Recently, the BRICS Vaccine Research and Development (R&D) Center was officially launched in March 2022; the BRICS Women Innovation Contest, which was introduced in 2020, has been successfully organized in 2021 and 2022; the BRICS Technical and Vocational Education and Training (TVET) Cooperation Alliance was inaugurated in April 2022, with more than 60 vocational schools from the BRICS joining and several thousand contestants signing up for the 2022 BRICS Skills Competition.

As part of their strategies to consolidate in global affairs, the BRICS have agreed to increase cooperation with other emerging markets and developing countries (EMDCs) to enhance the group’s representation and influence in major international and regional issues to advance the common interest of both the BRICS and other EMDCs. Furthermore, the BRICS have reached a consensus to expand into a “BRICS Plus” by admitting more like-minded countries.

Implications for Global Economic and Development Landscape

The emergence of the BRICS reflects the dynamics of the evolving global economic and development landscape. By taking steps to establish the NDB and other institutions, in addition to establishing cooperation with other EMDCs and even inviting like-minded ones into a “BRICS-Plus,” they provide alternatives in global development assistance with different principles and policies.

The BRICS have created a new frontier that reduces the concentration of global economic policy decisions to emerge as a stabilizer on international and regional issues to help improve fairness and justice in the international development system. 

During major shocks to the global economy, the BRICS coordinated effectively to safeguard the stability of the global market.  For instance, in April 2020 the BRICS approved a joint allocation of US$15 billion to fight the COVID-19 pandemic in addition to NBD approval of US$1 billion project for India to combat COVID-19.

By seeking to improve global economic governance through the promotion of more balanced international multilateral institutions such as the WTO, the World Bank, IMF, among others, the BRICS is gaining the support of most of the developing world with optimism that these efforts will lead to more open, inclusive, and balanced economic globalization that will be beneficial to all. In this context, BRICS has become an important mechanism for cooperation among emerging markets and developing countries, and a key platform for South-South cooperation.

A key challenge for the BRICS is pursuing a viable global strategic agenda along with the existing global status quo, especially as some of the members are also members of other arrangements for which the BRICS agenda seek to provide alternatives. For instance, all BRICS countries are members of G-20 and belong to other global organizations that take decisions on global economic and political issues, such as the WTO, the World Bank, and the United Nations, as well as regional organizations that are peculiar to different members of the BRICS such as the Asian Development Bank, and the African Development Bank, among others. Therefore, the BRICS need to pursue their agenda with due consideration of the resolutions and agreements with these organisations.

Another challenge is managing the possible backslash from other groups such as the EU and the G7. Despite their strategic global advantages, some of them are significantly interlinked with G-7 countries for trade and investments, such that they need to avoid retaliatory measures that could be detrimental to their respective economies.