Monday,23 July, 2018
Current issue | Issue 1359, (7 - 13 September 2017)
Monday,23 July, 2018
Issue 1359, (7 - 13 September 2017)

Ahram Weekly

‘Brighter future’ woes

Political and economic challenges cast shadows over this week’s ninth BRICS Summit meeting in China, reports Sherine Abdel-Razek  

source: Russian Global Council

Since its first ever meeting in 2006, the BRICS group of the fast-growing nations of Brazil, Russia, India, China and South Africa has aimed to challenge the Western dominance of the world order and to overcome the developed nations’ tight grip on global power by seeking the better representation of the developing countries.

“We need to make the international order more just and equitable,” Chinese President Xi Jinping told attendants at this week’s BRICS Summit meeting in China, entitled “A Stronger Partnership for a Brighter Future”.

“Our ever closer ties with the rest of the world require that our five countries play a more active role in world governance. Without us, many challenges cannot be effectively resolved,” he said.

However, challenges within and outside the group put question marks over its ability to achieve these targets.  

‘Brighter future’ woes

There are clear political and economic differences among the BRICS countries. Their regimes range from the democratic to the autocratic, with China and Russia heavily controlling their economies and clamping down on civil society. The different sizes and nature of the economies of the five nations makes it hard to balance their collective actions. 

This was clear in the group’s reaction to North Korea’s sixth nuclear test which took place on the eve of the meetings. Coming a few days after the test, Pyongyang’s largest so far, a group communiqué deplored the act but fell short of hard criticisms of China’s ally. 

“We express our deep concern over the ongoing tension and prolonged nuclear issues on the Korean Peninsula,” the communiqué said.

The test angered the US, which vowed a “massive military response” if it or its allies were threatened. US President Donald Trump wrote on Twitter that his country would halt all trade with any country doing business with North Korea. 

Observers believe that China, leader of the BRICS with regard to economic influence, was the target of this tweet as it is North Korea’s biggest trade partner. However, others believe this is a far-fetched scenario as China is also the largest trade partner of the United States.

The recent border dispute between India and China has also raised questions about the claimed unity between members of the group. Last week, China and India agreed to withdraw troops from the disputed Himalayan region after two months of stand-off between hundreds of troops from the two neighbours in what was feared could trigger armed confrontations between the nuclear-armed countries.  

However, on the positive side, the leaders of the five emerging BRICS powers said they considered militant groups based in Pakistan to be a “regional security concern”. This was read by many as China, known as an ally of Pakistan, trying to make amends to India.   

While India has long asked Islamabad to move against such groups, the latter has always denied any involvement in attacks in India, including in the disputed region of Jammu and Kashmir.

While members of the BRICS group want to have a more effective role on the international scene, there are also concerns that the group’s economic power may be waning. 

The global economy has seen better days, and the effect of the slowdown has been reflected on the economies of the group, underscoring the different economic stages to which they belong. 

China is the second-largest economy in the world by GDP and is expected to overtake the US within a few years. Its contribution to world industrial output is roughly 25 per cent. India, on the other hand, focusing on the services sector, especially IT, has seen services account for roughly 61 per cent of its GDP. With IT exports of $108 billion, India is one of the largest IT exporters worldwide. 

The three other BRICS countries, which mainly depend on natural resources, have been hard hit by declines in oil prices. 

But the growth rate of the bloc as a whole during 2016 came in at five per cent, which is 0.9 per cent higher than the group of developing countries and a whole 3.3 per cent larger than that of the developed economies, according to figures released by the IMF.  

The World Bank’s Russia Economic Report has noted that Russia should gradually get out of the recession that began in 2014. Russia’s economic growth in 2017 is expected to be about 1.3 per cent. 

The large role that China plays in the group is a shortcoming in the view of many, with China’s GDP alone being equivalent to the sum of that of the other four countries. 

Trade within the BRICS is also in favour of China. According to Bloomberg, South African President Jacob Zuma has said that despite a doubling of his nation’s trade with BRICS countries from $15 billion in 2010 to $31.2 billion in 2016, the growth had been “inequitable”.

According to observers, BRICS is not a bloc governed by economic size, as is the case of the G7 where the US dominates. The bloc prioritises democracy and equality of voting rights among its members.

Being led by China, according to most analysts, gives the group the chance to challenge US protectionist and “America first “ policies. The BRICS countries will continue to firmly oppose protectionism as they are committed to an “open and inclusive” multilateral trading system, a communiqué released during the meeting noted. 

While US President Donald Trump has threatened to end the 23-year-old North American Free Trade Agreement (NAFTA), Mexico’s President Enrique Pena Nieto, who attended the BRICS meeting, discussed establishing a free-trade agreement with China.

The Chinese president ended his opening speech at the gathering by encouraging Chinese companies to continue going abroad and welcoming foreign firms to invest in China. However, this did not put aside criticisms that China has done little to remove its discriminatory policies and market barriers that favour Chinese companies.

Ten years after its inception, cooperation between the bloc’s members in investment is still weak. Of the $197 billion in outbound investment made by the BRICS in 2016, only 5.7 per cent was within the five countries.  

During the summit meeting, China offered 500 million yuan ($76.4 million) for a BRICS economic and technology cooperation plan and another $4 million for projects financed by the group’s New Development Bank (NDB). 

The meagre new Chinese contribution to the BRICS in comparison to the $124 billion it pledged in May for the “Belt and Road” initiative aiming at boosting links between Asia, Africa and Europe has also drawn criticism. 

China has invited the leaders of Egypt, Guinea, Mexico, Tajikistan and Thailand to attend a dialogue with the BRICS group presidents and prime ministers under the BRICS+ initiative that aims at adding new rapidly developing countries, as well as other emerging ones, to the group. 

But no formal progress has been announced on this level.

The bloc in brief

THE ACRONYM BRICS was first suggested by a US Goldman Sachs financial company analyst in 2001, when he said that the bloc of Brazil, Russia, India, and China could end the Western dominance of the world economic and political scene that had been in place since the end of World War II. 

The first meeting of the foreign ministers of Brazil, Russia, India and China took place in 2006. In 2010, China invited South Africa to join the bloc, which changed its name to BRICS.

BRICS accounts for almost half the world’s population and about a fifth of global economic output. It has succeeded in reaching an agreement to increase the share of voting rights for emerging markets in world financial bodies the International Monetary Fund and World Bank. 

One of its main achievements is agreeing on setting up a BRICS National Development Bank (NDP). The $50 billion bank, whose capital includes equal contributions from the five economies, was launched in Shanghai in 2015 to provide an alternative funding source to the World Bank. To date, it has invested in 11 projects, lending $1.5 billion in 2016 and $2.5 billion set for this year.

China was the largest trading partner for the other four nations in the BRICS last year. By contrast, India, Russia and Brazil ranked 13th, 14th and 15th on China’s tally, with South Africa further down the list, according to Bloomberg.

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