BRICS: Achievements, Failures and Future – an Analysis

  • Category
    India & world
  • Published
    26th Nov, 2019

Issue

Context

Recently 11th BRICS Summit held in Brasilia, Brazil.

Background

  • BRICS is an informal group of Brazil, Russia, India, China and South Africa (joined in 2010).
  • The BRICS leaders’ summit is convened annually.
  • BRICS does not exist in form of organization, but it is an annual summit between the supreme leaders of five nations.
  • The Chairmanship of the forum is rotated annually among the members, in accordance with the acronym B-R-I-C-S.
  • Together, BRICS accounts for about 42% of the world’s population and about 23% of the global GDP (Gross Domestic Product), and 17% of the world trade, making it a critical economic engine.
  • The five nations account for 50 per cent of the world economic growth, 27% of the world area and 13.24% of World Bank voting power. 
  • Pitted as a counterweight to G7, the combine of developed economies, BRICS represents the world’s top emerging economies and claims to serve as a bridge between the developed and developing world.

                                            Facts & Figures

Brief History:

  • The acronym "BRICS" was initially formulated in 2001 by economist Jim O'Neill, of Goldman Sachs, in a report on growth prospects for the economies of Brazil, Russia, India and China – which together represented a significant share of the world's production and population.
  •  In 2006, the four countries initiated a regular informal diplomatic coordination, with annual meetings of Foreign Ministers at the margins of the General Debate of the UN General Assembly (UNGA).
  • This successful interaction led to the decision that the dialogue was to be carried out at the level of Heads of State and Government in annual Summits.
  • The first BRIC Summit took place in 2009 in the Russian Federation and focused on issues such as reform of the global financial architecture.
  • South Africa was invited to join BRIC in December 2010, after which the group adopted the acronym BRICS. South Africa subsequently attended the Third BRICS Summit in Sanya, China, in March 2011.
  • 11th Summit was held in Brasila Brazil in 2019 and its theme was  ‘BRICS: Economic Growth for an Innovative Future’
  • 12th BRICS Summit will be held in Russia in 2020 under the slogan ‘Partnership for global stability, common security and innovative growth’.

Objectives

  • The BRICS seeks to deepen, broaden and intensify cooperation within the grouping and among the individual countries for more sustainable, equitable and mutually beneficial development.
  • BRICS takes into consideration each member’s growth, development and poverty objectives to ensure relations are built on the respective country’s economic strengths and to avoid competition where possible.
  • BRICS is emerging as a new and promising political-diplomatic entity with diverse objectives, far beyond the original objective of reforming global financial institutions.

    Analysis

    • The BRICS Outreach Dialogue is a regional cooperation format, launched by South Africa during its presidency in 2013 that aims at involving regional neighbors of the host country in BRICS activities.
    • The BRICS Plus concept, meanwhile, envisions a more global format of cooperation that allows the engagement of countries from all over the world.

    BRICS Cooperation Mechanism: Cooperation among members is achieved through:

    • Track I: Formal diplomatic engagement between the national governments.
    • Track II: Engagement through government-affiliated institutions, e.g. state-owned enterprises and business councils.
    • Track III: Civil society and People-to-People engagement.

    Areas of Cooperation

    Political Cooperation:

    • BRICS’ political and security cooperation is aimed at achieving peace, security, development and cooperation for a more equitable and fair world.
    • BRICS provides opportunities for sharing policy advice and exchange of best practices in terms of domestic and regional challenges as well as advancing the restructuring of the global political architecture so that it is more balanced, resting on the pillar of multilateralism.
    • BRICS is utilised as a driver for South Africa’s foreign policy priorities including the pursuit of the African Agendaand South-South Cooperation.
    • BRICS Parliamentarian Forum (BRICS PF) helps in consultations among membere to present a common agenda in the BRICS parliament meetings.
    • The BRICS Outreach Dialogue and Plus aim at involving regional neighbors of the host country in BRICS activities.
    • AfghanistanArgentinaIndonesiaMexicoand Turkey have expressed strong interest in full membership of the BRICS, while EgyptIranNigeriaSudanSyria and most recently PakistanBangladesh and Greece have also expressed interest in joining BRICS
    • BRICS plays an important forum for all the member countries in promoting South-South cooperation and North-South dialogue
    • In recent years, BRICs have come together in a political grouping in a way that has far exceeding expectations.

    Economic Cooperation:

    • There are rapidly growing trade and investment flows between BRICS countries as well as economic cooperation activities across a range of sectors.
    • Agreements have been concluded in the areas of Economic and Trade Cooperation; Innovation Cooperation, Customs Cooperation; strategic cooperation between the BRICS Business Council, Contingent Reserve Agreement and the New Development Bank.
    • These agreements contribute to realization of the shared objectives of deepening economic cooperation and fostering integrated trade and investment markets.
    • ‘BRICS’ Cryptocurrency: BRICS nations discussed the creation of New Cryptocurrency for Unified Payment System in 2019 BRICS Summit.

    People-to-People Cooperation:

    • BRICS members have recognised the need for strengthening People-to-People exchanges and to foster closer cooperation in the areas of culture, sport, education, film and youth.
    • People-to-People exchanges seek to forge new friendships; deepen relations and mutual understanding between BRICS peoples in the spirit of openness, inclusiveness, diversity and mutual learning.
    • Such People to people exchanges include the Young Diplomats Forum, Parliamentarian Forum, Trade Union Forum, Civil BRICSas well as the Media Forum.

    Education and Research Cooperation:

    • Russia expects the fellow BRICS nations to finalize the formation of their national expert groups for the BRICS Energy Research Platform by the end of 2019, so that the new entity could present priority areas for cooperation in 2020.  It will pay way for technological cooperation on reducing the dependence on energy equipment imports which all developing countries are submerged in.
    • BRICSMATH, the international Mathematics competition was inaugurated at the 11th BRICS summit in Brazil in 2019. The competition is meant to create a sense of unification among the BRICS countries and more than 2 million children are expected to participate in the competition.
    • Educational programmes to take students from the member countries have been developed.

    Achievements

    • Impact of BRICS on global institutional reforms
    • The main reason for co-operation to start among the BRICs nation was the financial crises of 2008. The crises raised doubts over sustainability of the dollar-dominated monetary system.
    • The BRICs called for the “the reform of multilateral institutions in order that they reflect the structural changes in the world economy and the increasingly central role that emerging markets now play”.
    • BRICs managed to push for institutional reform which led to International Monetary Fund (IMF) quota reform in 2010 (finally implemented in 2016). Thus the financial crises had momentarily reduced western legitimacy and briefly let the BRICs countries become “agenda setters” in multilateral institutions.
    • New Development Bank
      • NDB is headquartered in 
      • At the Fourth BRICS Summit in New Delhi (2012) the possibility of setting up a new Development Bank was considered to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies, as well as in developing countries.
      • During the Sixth BRICS Summit in Fortaleza (2014) the leaders signed the Agreement establishing the New Development Bank (NDB).
      • Fortaleza Declarationstressed that the NDB will strengthen cooperation among BRICS and will supplement the efforts of multilateral and regional financial institutions for global development thus contributing to sustainable and balanced growth.
      • NDB’s key areas of operation are clean energy, transport infrastructure, irrigation, sustainable urban development and economic cooperation among the member countries.
      • The NDB functions on a consultative mechanism among the BRICS members with all the member countries possessing equal rights.
      • Equal capital infused in NDB by BRICS members.
      • NDB’s achievement has 44 projects with its lending touching $12.4 billion, in just five years.
    • Contingent Reserve Arrangement
    • Considering the increasing instances of global financial crisis, BRICS nations signed BRICS Contingent Reserve Arrangement (CRA) in 2014 as part of Fortaleza Declaration at Sixth BRICS summit.
    • The BRICS CRA aims to provide short-term liquidity support to the members through currency swaps to help mitigating BOP crisis situation and further strengthen financial stability.
    • The initial total committed resources of the CRA shall be US one hundred billion dollars (USD 100 billion).
    • It would also contribute to strengthening the global financial safety net and complement existing international arrangements (IMF).

    Challenges

    • Potential divisions and weaknesses in the grouping, including significant economic instabilities, disagreements between the members over UN Security Councilreform, and India and China's disputes over territorial issues.
    • Dominance of RCI: The marked dominance of big three Russia-China-India is a challenge for the BRICS as it moves ahead. To become a true representative of large emerging markets across the world, BRICS must become pan-continental. Its membership must include more countries from other regions and continents.
    • Narrow Scope: The BRICS will need to expand its agenda for increasing its relevance in the global order. As of now, climate change and development finance, aimed at building infrastructure dominate agenda.
    • Narrow Base: It is restricted to five nations. It is not flexible for the entry of new nations into the group.
    • The extremist view is that they have established neither new counter-balancing institutions nor come up with an alternative ideology. It has no ability to challenge the primacy of the United States and NATO.
    • Lack of Consensus:
      • They uphold drastically different political systems, from active democracy in Brazil to entrenched oligarchyin Russia, and communism in China, and their economies are little integrated and are different in size by orders of magnitude.
      • As BRICS moves forward foundational principles of BRICS i.e. respect for sovereign equality and pluralism in global governance are liable to be tested as the five member countries pursue their own national agendas.
      • China’s efforts to co-opt nation states, which are integral to its Belt and Road Initiative, into a broader political arrangement has potential to cause conflict among BRICS members especially China and India.

    Weaknesses

    • Failed in reforming Multilateral Financial Institutions: Little progress has been achieved in reforming the multilateral systems like IMF, WTO, UN and other international organisations.
    • Failure of BRICS to sign any agreement with US: None of the BRICS countries has signed trade or investment agreements with the United States and some of the negotiations have been failed due to opposition to US approach. This has hindered economic expansion of BRICS countries.

    Since the Federal Reserve signaled the recovery of American economy from the financial crisis and recession and raised its interest rates, the BRICS have been on a steady decline. Investors pulled out from BRICS countries as US securities are more lucrative to them, which threatened the BRICS' economic growth. 

    • Slowing down of Chinese economy: it has caused turmoil in not just in BRICS bloc but across the world.
    • Recession in Russia and Brazil: The political and economic isolation of Russia, orchestrated by the US after the Ukraine crisis, has had a tremendous negative impact on the once surging economy. Even Brazilian economy is slipping into recession.
    • Failure to sustain economic growth: the emerging member countries have failed to gain any momentum for sustained growth.

               11th BRICS Summit

    The 11th BRICS Summit took place from 13th-14th November 2019 in Brasilia, Brazil. The theme of the 2019 BRICS summit is "Economic Growth for an Innovative Future.”

    BRICS countries adopted the Brasilia Declaration.

    Brasilia Declaration

    • It advocates and supports multilateralism, the central role of the U.N. in international affairs and respect for international law.
    • Reforming Multilateral Systems: There is an urgent need to strengthen and reform the United Nations and other multilateral organisations, including the World Trade Organisation (WTO) and the International Monetary Fund (IMF), to address the significant challenges being faced by the developing countries.
    • Support to Multilateralism: The trade war between China and the U.S. and rising protectionism is hurting the global economy. Multilateralism is crucial for emerging countries to protect their own interests.
    • Russia proposed BRICS Energy Research Platform
    • The creation of New Crypto currency for Unified Payment System was discussed

    India’s Stand at the Summit

    • Intra-BRICS trade accounts for just 15% of world trade, it needs to be increased. India invited business leaders of the member nations for investment, particularly in infrastructure development.
    • India proposed to hold the first meeting of BRICS Water Ministers in India.
    • ·India highlighted the menace of terrorism which has resulted in the loss of $1 trillion to the world economy.
    • Structural disparity between China and other BRICS members: Chinese economy has the largest share among the member countries and it accounts for 38 percent share in the total export of BRICS. This has resulted in dominance of China in the BRICS bloc and in turn has stoked the economic nationalism in other member countries.
    • Tension within the BRICS bloc: There is lack of policy coordination within the member countries owing to troubled political relations between some members. For example, India- China ties have witnessed a steady deterioration over the last few years.

    Importance for India

    • Multi-lateralism and multi-culturism: India can benefit from collective strength of BRICS by way of consultation and cooperation on economic issues of mutual interests, as well as topical global issues, such as, international terrorism, climate change, food and energy security, reforms of global governance institutions, etc.
    • Support for Collective Fight against Terrorism: India has succeeded in convincing BRICS to strengthen its commitment to counter-terrorism. Its working group on countering terrorism has expanded its activities through five thematic subgroups that deal with terrorist financing, use of Internet for terrorist purposes, countering radicalisation, issue of foreign terrorist fighters, and capacity building.
    • Support for NSG Membership: India remains engaged with the other BRICS countries on its NSG membership.
    • Support for achieving SDG and national goals: The NDB will help India to raise and avail resources for their infrastructure and sustainable development projects. The NDB has approved its first set of loans, which included a loan of US$ 250 million in respect of India for Multitranche Financing Facility for Renewable Energy Financing Scheme’.
    • Platform for furthering relations with other nations: India sees BRICS as a platform to build multilateral relations with Latin American, African and Asian countries.
    • India has also tried to use BRIC as a forum to resolve the age-old mistrust and complicated relationship with China.

    Way Forward

    • BRICS did well in its first decade to identify issues of common interests and to create platforms to address these issues.
    • For BRICS to remain relevant over the next decade, each of its members must make a realistic assessment of the initiative's opportunities and inherent limitations.
    • BRICS nations need to recalibrate their approach and to recommit to their founding ethos. BRICS must reaffirm their commitment to a multi-polar world that allows for sovereign equality and democratic decision making by doing so can they address the asymmetry of power within the group and in global governance generally.
    • They must build on the success of the NDB and invest in additional BRICS institutions. It will be useful for BRICS to develop an institutional research wing, along the lines of the OECD, offering solutions which are better suited to the developing world.
    • BRICS should consider a BRICS-led effort to meet their commitments under the Paris Agreement on climate change and the UN's sustainable development goals. This could include e.g. setting up a BRICS energy alliance and an energy policy institution.
    • NDB in partnership with other development finance institutions could be a potent vehicle to finance progress towards the sustainable development goals amongst the BRICS members.
    • Idea of setting up a BRICS Credit Rating Agency (BCRA) as proposed by India, opposed to Western agencies like Standard & Poor’s, Moody’s etc. can be on BRICS future agenda.
    • Operationalisation of the Partnership on New Industrial Revolution (PNIR) is underway. It is focused on cooperation in digitalisation, industrialisation, innovation, inclusiveness and investment. This partnership will be concretised by establishing industrial and science parks, innovation centres and business incubators.
    • The business promotion among member-states has been accorded a new salience. The BRICS Business Council held a substantive dialogue to foster cooperation in areas ranging from infrastructure and energy to financial services, regional aviation and digital economy. Its cooperation with the NDB is being encouraged. The national trade promotion agencies signed an MoU on cooperation among themselves. A BRICS Women Business Alliance was created, both as a women empowerment measure and as a tool to bring “a distinctive perspective on issues of interest for the business community.”

    Learning Aid

    Practice Question

    BRICS was started with the basic objective of bringing reforms in the multilateral institutions. In the light of the statement assess the achievements of BRICS and also bring out the challenges and weaknesses of the informal group.

    X

    © 2020 Basix Education Pvt. Ltd. All Rights Reserved

    Enquire Now

    Join Us on
    WhatsApp