By Jubair Hasan; Journalist of The Financial Express
People having minimum knowledge on globalpolitics, economies and development activities were largely looking at China'ssoutheastern port city of Xiamen earlier last month (September 3-5) where headsof the five most emerging economic powerhouses met to discuss about futureprospects of BRICS and beyond.
BRICS stands for an association of fivemajor emerging national economies that includes Brazil, Russia, India, Chinaand South Africa. The term “BRICS” was coined in 2001 by Jim O'Neill, thethen-chairman of Goldman Sachs, who was largely responsible for organising theinitial meeting of the foreign ministers of the initial four BRIC states(Brazil, Russia, India, and China) in New York in September 2006 at the marginsof the General Debate of the UN General Assembly. This initiated the beginningof a strategic dynamics that eventually led to the group's first formal summitin Yekaterinburg on June 16, 2009. Eventually the group enlarged to five withthe inclusion of South Africa in 2010. It may also be mentioned here thatAfghanistan, Argentina, Indonesia, Mexico and Turkey have expressed stronginterest in full membership of the BRICS while Egypt, Iran, Nigeria, Sudan,Syria and, most recently, Bangladesh, Pakistan and Greece have also expressedinterest in joining BRICS.
Roughly speaking, the BRICS can be brokeninto two groups — those that took advantage of globalization’s march to integratethemselves into global supply chains (primarily China and India) and those thattook advantage of globalization to sell their abundant natural resources(primarily Brazil, Russia and South Africa).
The ninth BRICS concluded with a positivenote about building broad partnership with emerging markets and developingcountries. This is considered positive at a time when the world has beenpassing through uncertainties of diverse sorts. Threats are looming large overthe future of ruled-based global trade, pursuit of multilateralism, efforts toaddress climate change-related issues and many other matters of consequence.Indeed, profound and complicated changes are now taking place across the globe.
Some significant facts may be noted beforeassessing the performance of the latest BRICS summit meeting. As of 2016, thefive BRICS countries represented over 3.6 billion people, or about 48 per centof the world population. The five nations have a combined nominal grossdomestic product (GDP) of around US$17 trillion, equivalent to nearly 23 percent of the gross world product (GWP) and a combined GDP (PPP) of around US$37trillion with an estimated US$4 trillion in combined foreign reserves. Overall,the BRICS group expanded its economic paradigm by about 4.5 per cent in 2016,as against its estimated growth of 3.9 per cent in 2015. The World Bank hassince observed that it expects BRICS growth to pick up to 5.3 per cent in 2017.
Now let's talk about the Xiamen Summit. Itwas very important gathering on various contexts and China should be given fullcredits for successful holding of the event where five other invited guests– Egypt,Guinea, Mexico, Tajikistan, and Thailand were also taken part. In the summitChinese President Xi Jinping refuted the assertion that BRICS is losing itsluster and shared his vision for the BRICS cooperation which he believes willenter a second "golden decade" if the emerging-market countries worktogether to overcome the challenges of weak growth and threats to worldpeace.
Yes. It's true a fully-fledged BRICScooperation framework is taking shape after ups and downs over the last onedecade since the key bloc of developing countries was launched to counter thedeveloped countries. But getting entry to the golden decade largely depends onhow efficiently and quickly the BRICS countries can break down the followingfive strong walls in the coming years.
Intra-BRICS trades and e-commerce
Over the last one decade since itsfoundation, BRICS has come of age, becoming an important economic bloc. Theshare of BRICS member-states in the global economy has increased from 12percent in 2006 to 23 percent now. Their global trade has grown from 11 percentto 16 percent during this period. Most strikingly, the contribution of theireconomics to global economic growth stands now at 50 percent. This is acommendable achievement. However, intra-BRICS trades and investment stillremain at an otherwise unimpressive level – about 6 percent. Attheir summit in Xiamen, the BRICS leaders have not glossed over this issue;they have underlined the need for augmenting investment flows among theireconomies as well as to other developing and low-income countries.
Despite the achievements the bloc has made,the potential for cooperation has yet to be fully unleashed because the fivecountries’ foreign investment totaled US$197 billion in 2016, but only 5.7percent took place within themselves.
The business of e-commerce is ballooningamong the member states in recent years with the rise of middle class group andit turning into a major area of potentials in the bloc. According variousinstitutions' statistics, the number of netizens from those countries surpassed1.46 billion last year, among which about 700 million go shopping online. Thetrading volume of the internet retail business reached $877 billion, about 11percent ($90 billion) of which came from cross-border e-commerce. So, the BRICScountries could use the online-based economic blessing by creating a commonplatform to improve the scenario in terms of Intra-BRICS trades and investment.
Vice-Minister for the Ministry of CommerceWang Shouwen admitted those issues while briefing the reporters at XiamenSummit saying that the members agreed on jointly implementing E-commerceCooperation Initiative, which will help the alliance detect problems thecountries face and solve those through research and innovation.
Rating Agency
One of the key consensuses of the 9thedition of BRICS was formation of separate rating agency to get rid of threemajor western credit raters – Standard & Poor’s, Moody’s and Fitch who accounted for 90percent of the global rating market and BRICS nations often get hurt by theirratings. Credit rating is one of the fundamental tool investors consider beforemaking investment. For example, earlier on May both India and China came downheavily on Moody's credit rating downgrade. But it's not an easy task. Critics of the big three were emboldenedafter the 2008 financial crisis. The rating agencies were forced to pay over$2.2 billion in fines relating to their complicity in the credit crisis. Thisfurther damaged their credibility and heightened accusations, particularly inemerging countries. This isn’t the first time there’s been an attempt tochallenge the big three. China, Russia, India and Brazil have all established theirown credit rating agencies. But none has ever come close to establishing itselfas an alternative.
The biggest task for a new BRICS creditrating agency will be to convince investors, particularly those from the US andEurope and which rating model would-be agency is going to take and its abilityto compensate for losses in the event that it issues false ratings as the bigthree did in the past.
Rising Protectionism
Protectionism seems to be on rise becausethe USA, after Donald Trump came in power, pushed a protectionist trade agenda,pulling the US out of the Trans Pacific Partnership (TPP) and renegotiating theNorth America Free Trade Agreement (NAFTA) while Britain came out of theEuropean Union (EU) and tensions are also mounting in Scotland, Netherlands andfew other EU nations. These put globalisation process at risk. IMF is worriedover low price of oil and other commodities, tightening of monetary policy inAmerica, and the gradual slowdown of the Chinese economy. Within the BRICSgroup, two major economies, Russia and Brazil, have shrunk significantly in2016, while South Africa posted low growth. Only India and China continue withpositive growth, though much lower than before.
Though the member countries tookanti-protectionist stance in the summit, which is certainly a positive thingfor the developing and least developing nations because they needs help fromeach other to upgrade their socioeconomic status. But the problem is will the5-nation bloc translate their words into action. The less-than-expected-levelof intra-trade and investment ratio within the bloc by the BRICS members showsthe opposite picture. Hopefully, the member states will realise the blessingsof globalisation and move up by joining hands settling all the differences ofopinions in a quick and peaceful manner.
Institutional Capacity
It is one of the most key factors thatcould only ensure increased trades, investment, employment, growth andsuccessful tackling of security threats. Without it, the BRICS dream of steppinginto the golden decade will never come. It is not only accelerate trades andbusinesses, at the same time it would also help raise trust each other. TheBRICS countries should invest more on capacity building in each areas whetheris is government, private, social, cultural or religious. The Xiamen Summitalso touched the issue and decided to initiated some joint actions like commonplatform of e-port and e-commerce.
Besides institutional capacity, regularvisits and dialogues of think tanks, educational institutions, cultural bodies,business bodies are also vital to understand each other, which will be helpfulfor building a community of equally shared destiny.
Terrorism
The only paragraph that draws attention ison terrorism. All five countries for the first time named groups likeLashkar-e-Taiba and Jaish-e-Mohammed with global terror groups Islamic Stateand al-Qaeda as terrorist groups in its 71-point declaration while stronglycondemning North Korea's nuclear test. They made a commitment to enhancecommunication and cooperation in international fora on issues concerninginternational peace and security. Terrorism has become a serious problem now adays. Most countries irrespective from religion, developed, developing or leastare vulnerable to violent extremism. The BRICS need to be cooperated each otherwith sharing intelligence report and skills to tackle counter terrorism andcyber security.
Conclusion
Under the given international situation,the wording of the Xiamen Declaration matches well the hopes and aspirations ofmost countries, including the developing and low-income ones. Now the challengewill lie in translating the words into actions. If substantive actions nowfollow, that will lend credence to what the BRICS leaders have pledged. Issueslike curbing corruption, tackling illicit flow of funds, leveraging thebenefits of capital flows and managing the risks stemming from excessivecross-border flows and fluctuation, have also figured in, in the Declaration.These are undeniably matters of import. All concerned would now expect thatappropriate follow-up moves will come sooner rather than later to help achievewhat the leaders of BRICS have stated in their Declaration. Hopefully, thenations will be able to overcome these five challenges and take the allianceinto the golden decade that it is dreaming for.