It may have started as a witty acronym at the beginning of the new millennium by a Goldman Sachs investment banker, seeking to analyse the prospects of the major “emerging economies” in the architecture of the new global order, but BRIC (Brazil, Russia, India and China) which became “BRICS” with South Africa becoming a member in 2011, has become quite institutionalised, having just completed its ninth leadership summit last week in China.
In 2009, after the first summit, there were several excitable projections that the bloc of nations – encompassing 41 per cent of the world’s population and 21 per cent of the world’s gross product – was launching a “new world order” that would create mass chaos in the present web of global relationships. The fears have proven groundless and the leaders of BRICS have shown themselves quite mature in realising that the world is much too interwoven to have such seismic changes. What the BRICS have done is to create a set of parallel institutions that serve to complement the present ones that were formed after the ascendance of the West following WWII, and which offer the members of BRICS greater clout as they jostle for space at the power table.
For instance, the 10th paragraph of the closing declaration stated: “We agree to promote the development of BRICS Local Currency Bond Markets and jointly establish a BRICS Local Currency Bond Fund, as a means of contribution to the capital sustainability of financing in BRICS countries, boosting the development of BRICS domestic and regional bond markets, including by increasing foreign Private Sector participation, and enhancing financial resilience of BRICS countries.” While these developments may not sound as sexy as sending troops to Afghanistan as President Donald Trump has decided, they offer a possible alternative for non-Western investors whether or not Trump continues with his isolationist path for the US.
The forum also allows the members to deal directly with issues they may have with each other. For instance, in the months before the summit, Indian and Chinese troops tensely faced off in their Himalayan border region that many feared might escalate into a full-scale war, as occurred in 1962. Today, however, both nations are nuclear powers and such, an escalation would have catastrophic consequences for the world. The two countries decided to pull back their troops just before the summit and their leaders, Narendra Modi and Xi Jinping, held extensive talks on the sidelines of the summit.
Many countries, especially in the underdeveloped regions, were optimistic about the New Development Bank (NDB) that was launched by BRICS with an initial subscribed base of US billion. In the five-year plan announced in July, the NDB will concentrate on sustainable infrastructure development such as clean energy, transport infrastructure, irrigation, water resource management and sanitation. Another innovation would be to finance projects in local currency and the Bank will, therefore, soon be issuing bonds in the currencies of the member nations.
But the relatively low-key approach of the NDB, as compared to the Asian Infrastructure Investment Bank (AIIB), which China launched in 2015 with an authorised capital base of US0 billion, membership of 56 countries and a Moody rating of Aaa, signals China’s quest to become the leading global nation concomitant with its expected eclipsing of the US as the largest economy in the world in the next few decades. As part of this strategy, China has also launched the two “silk roads” – one by land and one by sea – to link its underdeveloped regions with Africa, Europe and most importantly, Eurasia.
The OBOR initiative (“One belt; one road” as it is referred to in China), while seeking to develop its outlying provinces and quell economic inequality is also seen as a “pivot” to Eurasia, where there appears to be a power vacuum with the retreat of Russia. But overall, the BRICS summit demonstrates that it is a welcome institution for the strategic role it can play in addressing tensions both within and without BRICS.
