The countries constituting the BRICS have come a long way since the coining of the BRIC abbreviation by Jim O’ Neil (Goldman Sachs) in 2001. This acronym triggered the seeds of partnership among the BRIC, facilitating the metamorphosis into a unique cooperation mechanism with a potentially transformative impact on the global economy, given the sheer economic and political weight of these countries. Together, the BRICS accounted for nearly 41.1 per cent of world population, 29.6 per cent of the world’s geographical area, 22.2 per cent of global GDP and 16.4 per cent of world trade in 2016.
BRICS has been rapidly increasing the degree of its institutionalisation since the initiation of the Annual Summit process in 2009 in Brazil (then BRIC). The induction of South Africa into the grouping was formalised during the 2011 Summit in China, a landmark meeting which initiated the evolution for the BRICS grouping from a dialogue forum towards a full-fledged poly-centric international institution.
Institution development within the mechanism: The official outcomes of the BRIC/BRICS Summits during the period 2009-2015 resulted in the formation of the BRICS-led New Development Bank (NDB) in 2015. In addition, the BRICS launched its own monetary instrument —Contingent Reserve Arrangements (CRA), showcasing their potential for joint institutional development. The BRICS are now deliberating upon establishing a new independent credit rating agency in response to the need for a credit evaluation framework that benchmarks risks across emerging markets, as well as exploring options for domestic currency exchanges in order to further strengthen their influence on international trade and finance.
Through the establishment of new institutions and instruments, and the expansion of ministerial dialogues into related working group mechanisms and subsequently engagement platforms, the BRICS Summit process has been finding increasing relevance in facilitating multi-faceted cooperation in niche areas and sectors. There has been a horizontal extension of this process across both established and new areas of dialogue, increasingly characterised by deeper integration of people-to-people exchanges. Post-2015, this has led to a greater emphasis on a bottom-to-top approach through track-II and track-III channels of diplomacy, complementing the official diplomatic functioning of the BRICS cooperation mechanism.
Cooperation in research and education: While financial cooperation has been the catchphrase in the BRICS mechanism, cooperation in terms of exchanges in the areas of research and education has become a pivotal element of this poly-centric grouping. This has resulted in working initiatives, forums and conclaves providing significant contributions towards the development of a shared knowledge capital, including the development of a BRICS Network University. A diverse range of fine arts, cultural and humanities-based exchange networks have been launched during the 2016 and 2017 BRICS Summits, with strong prospects for establishing long-term and tangible people-to-people linkages. A number of these outcomes can be credited to the successful dialogue and deliberation within the BRICS Academic Forum, BRICS Think Tank Council, BRICS Business Council and the Contact Group on Economic and Trade
Challenges to the cooperation: While the Summit process has witnessed substantial intensification in various areas of cooperation, the BRICS have also encountered a number of obstacles in their growth. The existence of geopolitical differences in the case of India-China and China-Russia bilateral relationships pose certain challenges for the BRICS cooperation mechanism. Additionally, the increasing penetration of Chinese business in the BRICS has intensified economic competition in regional markets.
Official perceptions with respect to Brazil, Russia, India and South Africa’s role in their respective neighbourhoods indicate an overwhelming regional presence, both in political and economic terms. However, the expansion of Chinese business into each of these regions has been identified as a challenge with regard to the contemporary engagement of these countries with China. According to data from fDi Markets of the Financial times, China accounted for approximately 42 per cent of BRICS greenfield foreign capital investment in Africa, and approximately 48 per cent of BRICS greenfield foreign capital investment into Latin America and the Caribbean during the period January 2003- April 2018, indicative of the growing influence of China in these regions.
Another challenge is with respect to the increasing developmental cooperation extended individually by the BRICS, which are sometimes also in the nature of mixed credits, bringing about significant foreign policy gains. These countries have utilised development cooperation as an instrument for advancing their own vision of regional integration and influencing geopolitical and commercial engagement in their international relations. Working towards development cooperation through multilateral channels could potentially erode these foreign policy gains.
The recent divergence in economic growth within the grouping is another obstacle to the BRICS mechanism. Downward economic trends in Brazil, Russia and South Africa have persisted through 2012-2017. The mechanisms underlying the NDB and CRA have linked financial contributions from the BRICS to their respective degrees of administrative and executive power. While the BRICS mechanism has been able to transcend this perceived threat in equitably organising the individual countries within the NDB, challenges could emerge in case of global economic volatility.
Way ahead In spite of the various challenges, the BRICS have overcome inherent geopolitical rivalry, economic and political asymmetry, competition and recession to expand the ambit and working mechanisms of the BRICS Summit. While this progress has been exemplified by the establishment of the NDB and CRA as institutional extensions of the grouping, it has been driven by the consistent intensification of track-II and track-III exchanges.
Looking forward to the 10th BRICS Summit later this month, the BRICS is expected to build on the success with the anticipated establishment of the BRICS Energy Cooperation Platform, BRICS Customs Training Centre; BRICS Working Group on Regional Aviation; BRICS Cultural Council and the BRICS Council of Regions.
Initially conceived as a grouping of high-yielding emerging market countries, BRICS has indeed come a long way, finding increasing relevance as a comprehensive governance network and platform for government officials, business delegations, civil society groups, academics and students. This consolidated approach has facilitated the growth of this grouping, and is expected to strengthen the South-South Cooperation process, reflecting the theme for the upcoming 10th BRICS Summit – “BRICS in Africa: Collaboration for Inclusive Growth and Shared Prosperity in the 4th Industrial Revolution”.
(With Shaantanu Shankar)
(The writers are economists with the Export-Import Bank of India)