Efforts to create a stronger BRICS

Creating geo-economic groupings with a political slant has been on for some time. There are the South Asian Association for Regional Cooperation (SAARC) and the Association of South East Asian Nations (ASEAN) in Asia. In Latin America, there is the MERCOSUR or the Southern Common Market, composed of five countries looking for common tariff structures. There is also the Asia-Pacific Cooperation (APEC). These groups have been trying to determine least common denominators and also discover common approaches within the matrix of economic development. Their efforts have focused on dialogue but, in most cases, they have had difficulty in establishing an institutional approach forward.
The latest to join this cavalcade has been BRICS, composed of Brazil, Russia, India, China and South Africa. This middle-income group has a total population count of over three billion (about 42 per cent of the world's population), per capita GDP (gross domestic product) varying between USD 1500 (India) and USD 14,600 (Russia) and about a fifth of the global economy.
Leaders of the BRICS group of emerging countries recently gathered in Fortaleza, Brazil (July 15-17) soon after the World Cup Soccer competition had concluded in Brazil. The latest summit meeting was held amidst tension in the Western bloc over the continuing Ukraine crisis and the suspension of Russia from the G-8. The Indian Prime Minister Narendra Modi aptly observed that the BRICS leaders were meeting "at a time of political turmoil, conflict and humanitarian crisis in several parts of the world, and persisting weakness and risks in the global economy".
In addition to discussions in Fortaleza, the BRICS leaders also held bilateral discussions amongst themselves and also with some Latin American leaders who are not part of BRICS. The entire dynamics was particularly important for the newly-elected Indian Prime Minister. It enabled him to not only establish contact with the leaders of Russia and China but also afforded him the opportunity to share his views about steps that need to be taken to strengthen efforts towards economic independence.
It may be recalled that these five emerging nations unveiled in 2013 their plan to create a bank that would rival the Washington-based World Bank. This objective was framed, according to analysts, because of critical feelings within this group about the slow pace of reform pertaining to giving developing nations bigger voting rights at the International Monetary Fund. There was also common agreement that the creation of such a bank would provide a 'backbone' to BRICS, ensure the creation of a platform for building consensus on international agenda items such as rules for international trade, and facilitate joint action at the United Nations or the WTO.
The world has been following the joint efforts of this group with some interest since 2009, but has generally noted their inability, in recent times, to cast any influence on the evolving situations in the international political sphere. As noted by Alan Beattie in the 'Financial Times', 'the BRICS have failed collectively to have any coherent influence on the situation in Ukraine, though Russia is heavily involved.' It has been noted that other BRICS states have allowed Beijing to 'stir up trouble in the South China sea'. It has also been observed that 'the BRICS grouping wants to be seen as a hub of global governance. However, in reality each country's relationship with the US remains generally more important than their relationships with each other'. Consequently, the group has remained far from the kind of economic and political power it aspires to be.
It would, however, be pertinent at this point to quote Fan Yongming, the Director of the BRICS Research Center at Fudan University in Shanghai. He has optimistically observed that 'the BRICS countries have tided over the most difficult waters and are now turning for the better'.  It has been suggested that BRICS has undertaken serious and active structural adjustment in order to achieve sustainable growth. This, claims Mu Xuequan, is 'fundamentally different from problems in developed economies such as liquidity crisis, debt crisis and weak demand'. It has been pointed out that BRICS accounts for 21 per cent of global output and have contributed more than 50 per cent of world economic growth in the past six years.
Narendra Modi during his first appearance in the BRICS gathering has brought in another important point. He noted that this meeting afforded the BRICS leadership the opportunity to discuss how 'we can contribute to international efforts to address regional crises, address security threats and restore a climate of peace and stability in the world'. He added that he looked forward to the discussions further advancing intra-BRICS economic cooperation and collective efforts to advance 'global economic stability and prosperity'.
The BRICS leadership has agreed that their economic agenda will now be carried forward by their initiative to establish the New Development Bank and the Contingent Reserve Arrangement that had been identified as crucial in New Delhi in 2012.
Initially, there appears to have been a dispute between China, India and South Africa over the question as to which country would host the new Bank. It was eventually decided that the development bank would be hosted by China in Shanghai and that for the first five years its Chief Executive would be from India. It is believed that this understanding emerged after a bilateral meeting between the Chinese President and the Indian prime Minister. It is understood that the bank's Africa regional centre will be established in South Africa.
The Bank will have an initial capital of USD 50 billion with each BRICS member contributing an equal share, while the reserve will have USD 100 billion at its disposal. China will contribute USD 41 billion towards this, followed by USD 18 billion each from Brazil, India and Russia USD 5.0 billion will come from South Africa. The bank and fund, however, have to be ratified by each country's legislature before coming into force. China has stressed that this process as well as the modalities for its operationalisation needs to be completed at the soonest. The finance ministers of the member states have been charged with this responsibility in their respective country. The BRICS Bank could end up being a big player but that will be determined to a great extent by the seriousness in its governance.
Despite this important step forward, some analysts have expressed their doubts about BRICS being able to move forward together in the economic front, given China's overwhelming dominance of intra-South trade. They have articulated fears about the possible emergence of 'economic nationalism'. They have also pointed out that Beijing's refusal to let the Yuan appreciate has created significant problems for the manufacturing industries of India, Brazil and South Africa. It may be recalled in this regard that central bankers from Brazil and India spoke against the undervalued Yuan in 2009 and 2010, but to little effect.
Nevertheless, as suggested by Harsh V Pant, the fascination with the emergence of BRICS needs to be seen as partly "an offshoot of the discussion on the emerging so-called 'post-American' world where multi-polarity is likely to be the norm". This is also being seen against the perspective of their being able to translate their power at the global level.
Anticipating this difficulty, Chinese President XI Jinping has urged BRICS members to "unswervingly push forward sustainable economic growth, adhere to inclusive growth, turn quantitative growth into qualitative one and coordinate economic development, social development and environmental protection". He has also correctly called for "building an integrated market in trade and investment areas, promoting people-to-people exchanges among different countries".
This positive attitude on the part of China has resulted in the BRICS states also signing a Memorandum of Understanding on Cooperation among BRICS Export Credit and Guarantees Agencies that will improve the support environment for increasing trade opportunities, for strengthening financial ties and adopting innovation initiatives among themselves.
BRICS countries have expressed concern over the harmful impact of tax evasion, and transnational fraud and affirmed their commitment to continue a cooperative approach on issues related to tax administration, to targeting tax base erosion and information exchange for tax purposes.
The emergence of the BRICS bank will, one hopes, have a positive impact on the world economy and persuade the International Monetary Fund to seriously consider implementation of the 2010 reforms.
The writer is a former Ambassador and specialsed in foreign affairs,
right to information and
good governance.
mzamir@dhaka.net