How Will BRICS Start Another “Golden Decade”

 In your opinion, what has been the most important achievement made under the BRICS cooperation mechanism in the past ten years?

 

Ronnie Lins CEO of Center China-Brazil: Research & Business

Several great things were accomplished by BRICS. I was particularly moved by the idea of uniting so-called “emerging” countries, which could collectively wield economic and political weight that transcends much of the great world powers.

Another important point has been the unity of “countries of continental dimensions.” They can together solve their internal problems to generate better quality of life for their people – do things like eradicate poverty together. This organization also has great potential to help other countries which can benefit from similar measures. Many of them are our African brothers.

 

Boris Guseletov Senior research fellow from the Institute of Europe of the Russian Academy of Sciences

Though confronted by the global financial crisis and the ensuing economic downturn, the BRICS countries made remarkable achievement in the past ten years. One of the most significant achievements of BRICS has been the setting up of the New Development Bank, which is progressing at a steady pace and is expected to play a critical role in supporting developmental projects in the BRICS economies. The BRICS Business Council has been interacting with the NDB to build closer partnership and facilitate funding for key developmental projects.

The initiation of the BRICS Contingent Reserve Arrangement (CRA) has beefed up the global financial safety network.

In the past year, the economic cooperation mechanism of BRICS has been consolidated, and intra-BRICS cooperation on e-commerce, intellectual property rights, trade promotion, and small and micro enterprises has been strengthened.

The five nations also agreed to further boost cooperation in the fields of insurance and reinsurance, taxation reform and customs, and to explore the possibility of setting up a BRICS rating agency based on independent and market-oriented principles.

The BRICS nations have also conducted communication and consultations and made substantial progress in the fields of agriculture, information technology, disaster management, environment preservation, protection of women and children’s rights, youth, tourism, education, technology and culture.

 

Manmohan Agarwal Reserve Bank of India Chair Professor at the Centre for Development Studies, Thiruvananthapuram, Kerala

There are two sorts of activities that BRICS can undertake. One would be actions that enhance their prosperity either in the economic sphere or social sphere, or international security. The second would be actions that enhance the efficacy of the operation of the international system. One of the major problems with the system of international economic governance has been the manner of operation of the Bretton Woods institutions (the World Bank and the International Monetary Fund). Problems have been with conditionality. The concept of conditionality runs counter to their own rhetoric that a country owns the changes. If the country owns the reforms then they don’t need conditionality. Also the conditionality imposed seems to have no relation with the problem. Conditionality has rendered the IMF, in particular, dysfunctional. The BRICS nations, by setting up the New Development Bank (NDB) and the Contingent Reserve Arrangement (CRA), have the opportunity to establish new rules of operation for international organizations. The establishment of these organizations is the most important achievement of the BRICS cooperation mechanism.

 

Jia Jinjing Director of the Macro Research Department, Chongyang Institute for Financial Studies, Renmin University of China

The BRICS cooperation mechanism was born in 2006, and the BRICS countries have enjoyed a “Golden Decade” marked by notable results. The total economic output of the five BRICS members –  Brazil, Russia, India, China and later South Africa –  accounts for nearly a fourth of the world’s total, and they have contributed approximately 50 percent of world economic growth. BRICS has gradually evolved into a model for mutually-beneficial cooperation between emerging markets and developing countries from previously an investment concept into concrete results. Today, it plays an important role in promoting world economic growth and improving global governance.

 

Yazini April Research specialist at the HSRC’s Africa Institute

Financial and economic cooperation, particularly related to the BRICS Bank — the New Development Bank (NDB) — has served as a new and innovative model for further South-South cooperation.

 

Compared with other multilateral cooperation mechanisms, what’s the innovation of the BRICS mechanism?

 

Ronnie Lins

Because the group was made based on characteristics of emerging countries rather than “continental dimensions,” BRICS has placed its focus on mutual cooperation for economic development which correlates with the needs of solving social inequality. However, it should be remembered that given the enormous economic and political weight of BRICS in the world context, all the major world issues inexorably deserve the group’s participation and influence.

 

Boris Guseletov

BRICS countries are the most important engine for world economic growth and will be the backbone for materializing such perspectives. On the way of development, BRICS nations are forming a joint force and making a unified voice, while providing new solutions for fueling economic growth and optimizing global governance. Through strengthening North-South and South-South cooperation, BRICS is expected to inject new vitality, open new dimension for international development and cooperation, and drive the world development in a robust, sustainable, balanced and inclusive way.

 

Manmohan Agarwal

If these institutions can be made to work effectively either without conditionality or a reformed conditionality, that will have tremendous impact on the current international economic organizations. The NDB has the opportunity to fill an important gap that has arisen in the international aid architecture. The lower middle-income countries have graduated from the IDA (International Development Association) but still have considerable needs for cheap credits to finance their infrastructure. Given the lags in infrastructure construction and the difficulty to make them self-financing, ordinary World Bank loans are not suitable for financing them. If the NDB can step in to fill this gap, it will be a signal achievement.

 

Jia Jinjing

Over the past 10 years, BRICS has grown from an investment concept on paper to a multi-level and multi-sector cooperation framework featuring meetings between leaders, ministers and senior private-enterprise representatives on security issues and a host of other issues. Over the last few years, BRICS cooperation has stayed with the principles of “two-wheel” drive with economics and politics, which has paved new roads for South-South cooperation. Compared to other multilateral cooperation mechanisms, BRICS has innovated its mechanisms in four ways:

First, BRICS swiftly changed member countries’ role from a participant to a leader in global governance. This is not only the result of the BRICS countries’ strong collective voice in global governance, but also the result of inevitable evolution of global patterns. History shows that BRICS does not impose its will on others – rather, it has fostered a greater output of public products while ensuring independent internal affairs, thus creating a new model worth studying and applying to global governance.

Second, BRICS countries have accumulated rich experience in economic and trade cooperation. The present world economy needs a new round of technological revolution and industrial transformation for growth. During the past 10 years of cooperation, BRICS has impressively explored areas of new economics, e-commerce, trade, investment facilitation, innovation and development, earning valuable experience in the process.

Still, there is huge space to capitalize on complementary advantages between the BRICS countries, which are able to promote construction of a big, closely interconnected market characterized by infrastructure connectivity, open trade and investment, and monetary and financial interconnection. This will open new avenues to win-win results in economic growth.

Third, BRICS has promoted people-to-people exchange. BRICS countries are located in several continents, and each has an iconic and profound cultural legacy and different channels of communication with the world’s major cultures. The intensification of comprehensive exchanges among BRICS across multiple sectors such as business, academia, media, think tanks, and literary and art circles are promoting people-to-people exchange as it helps to construct a community of a shared future.

Fourth, BRICS has founded a new type of cooperation mechanism. The five members have established a cooperation mechanism while furthering development in political, economic, and cultural realms, forming a comprehensive cooperation mode different from the Western G7, which is flat and mostly networking, hence providing a new type of cooperative platform for emerging-market countries and developing countries – which are home to 80 percent of the world population – and allowing developing countries to share the results of growth.

 

Yazini April

In general, BRICS countries have gradually become aware that they share mutual interests in international affairs and actively participate in international multilateral cooperation. Along with other more traditional multilateral economic organizations, BRICS countries consistently weigh in on international economic affairs. For instance, through APEC and the OECD forums, BRICS countries have conducted various forms of international coordination activities in response to global and regional issues of common concern. The G20 has become an important platform for them to strengthen cooperation and provides a new supporting mechanism for their participation in global economic governance.

 

In the next ten years, in which areas do you expect the most breakthroughs to be made in the BRICS cooperation?

 

Ronnie Lins

BRICS faces several challenges in the coming years, but I am looking forward to greater agility in transforming cooperation agreements into concrete action. Areas I expect to see progress made include free trade zones, infrastructure that improves the competitiveness of products and services, shared technological advances of the “Fourth Industrial Revolution” in the global productive sector, financing of development programs for companies and social action, among other activities.

 

Boris Guseletov

1) Boosting confidence. When the global economy was bogged down in the financial crisis with excess volatility in markets, frozen capital flows and plummeting international trade, it was the BRICS, with stable economic growth of its members that prevented the global economy from falling apart. In stark contrast to the developed countries floundered in financial turmoil, the BRICS kept marching ahead steadily, thus conveying a message to the market that there were still hope for the world economy.

2) Strengthening cooperation. The BRICS members are not just pursuing their own interests, they are also committed to the world’s common good. To manage the financial crisis and save the global market, the BRICS countries enhanced macroeconomic policy coordination with other economies. Despite the limited resources that were greatly needed for their own economy, BRICS contributed a total sum of US$180 billion to the International Monetary Fund (IMF) in two rounds, helping other countries in trouble to weather the storm. Now the crisis is fading away, but the BRICS members are committed to maintaining the momentum of macroeconomic policy coordination and strengthening cooperation to safeguard international financial stability.

3) Proceeding with reforms. The BRICS members are firmly committed to global economic governance reforms so as to reflect changes of world economic configuration featured in the growing weight of emerging and developing countries. Motivated by the BRICS, the IMF and World Bank have both decided to reform their governance. The Financial Stability Forum, once dominated by the G7 industrialized countries, has been reconfigured to the Financial Stability Board with broad and equal participation of emerging economies, and has evolved into a more representative institution of international financial standard setting.

 

Manmohan Agarwal

Two areas are going to be of critical importance: financial services and development of new technologies. Financial services are important to create a smooth conduit between savers and investors. Except in China, where the state plays a very important role in making this process smoother, other countries lack an adequate mechanism. As a result, investment levels in Brazil, Russia and South Africa are much lower today than they have been in the past. Low levels of investment are responsible for low levels of growth. Even in India in recent years, levels of investment have fallen as the commercial system is clogged by non-performing assets. Though generating new technologies is very important, governments may find it difficult to successfully intervene in this process and so may find it easier to deal with the financial system.

 

Jia Jinjing

In the coming decade, BRICS will become a heavyweight in global governance and international affairs. To fix the imbalance of the global economy, it is necessary to increase developing countries’ participation in global governance, enhance the right to discourse and ensure more say in decision-making to build an equal world order together. BRICS cooperation in global governance continues to intensify.

During the BRICS leaders informal meeting in 2016 on the sidelines of the G20 summit in Hangzhou, Chinese President Xi Jinping proposed that BRICS countries work together to improve global governance by increasing representation and the right to speak of emerging markets and developing countries.

At BRICS Goa 2016, the group reiterated the G20 Action Plan on the 2030 Agenda for Sustainable Development to promote economic global governance while stressing an anti-terrorism theme and actively designing an international order that is peaceful and stable.

 

Yazini April

Industrialization will probably be widely celebrated. BRICS must promote development programs and recognize that development programs for infrastructure connectivity must be scaled across regions to meet the UN 2030 Agenda.

 

Which challenges your country faces can be solved by the BRICS cooperation mechanism?

 

Ronnie Lins

Brazil is currently experiencing political problems, but the government is trying to make necessary reforms that have never been achieved by any other government. It is time that Brazil put priority on programs that will change social inequality instead of focusing on internal political disputes.

Brazil is a country of continental dimensions. It has tremendous resources, but requires support to even begin exploiting some of them, a predicament that BRICS can aid immensely. I would point to technological development and infrastructure, which could lead to reduced production costs, increased productivity and development of products and services with greater value added.

Brazil has great potential for new investment and will certainly become one of the great world powers in the future.

 

Boris Guseletov

1) The slowdown of the economy as a result of sanctions of the Western countries, which have a particularly painful effect on the financial sector and the attraction of high-tech equipment and modern technologies.

2) Strengthening the common security forces of the BRICS countries in the context of an aggressive US policy.

Putting pressure on Russia, the West intends to impose political and economic isolation. To overcome this isolation of Russia, it is very important to have support from other countries, and especially the members of BRICS in all areas.

Russia also aspires now to promote its integration project of the Eurasian Economic Union (EEU). However, due to the difficult economic situation within the country, the implementation of this project is also fraught with a number of difficulties. To overcome them, it is very important to try to ensure the interfacing of the projects of the EEU and China’s Belt and Road Initiative.

 

Manmohan Agarwal

India would benefit if the BRICS countries could jointly set up regulatory and supervisory systems for financial institutions. India has not been able to benefit from its high rates of savings, unlike China in the past. India has also not been able to establish institutions that would generate new technologies. Each of the BRICS countries has been successful in particular sectors. Cooperation and learning from each other may generate more technological change over a broad front. As in many areas they are at similar technological levels, such cooperation is possible and can be successful.

 

Jia Jinjing

At present, the world’s “long-period economic downturn” hasn’t yet bottomed out, as deep-rooted contradictions are continuously exposed. International cooperation mechanisms such as regional economic and trade arrangements, regional groups, the Bretton Woods system and the G20 have navigated the course of the global economy. Today, however, the world is experiencing many new changes economically: Emerging markets and developing countries account for a bigger part of the global economy, and Eurasia has become a major power for global production and consumption. Establishing new concepts of and blazing new paths to international cooperation have become urgently needed for global development.

China’s voice in global discourse has become increasingly louder in recent years in respond to these urgent needs. While facing challenges, the BRICS countries have also ignited opportunity in new directions for globalization. Internally speaking, BRICS countries are complementary in economy, and as emerging economies, they are all in the stage of economic growth.

The BRICS countries have been reformers of international financial order since the day BRICS was formed. Over the next 10 years, they will lead another round of world economic development and fuel another round of globalization with mechanisms including the BRICS Development Bank and its “Contingent Reserve Arrangement.”

 

Yazini April

South Africa as well as the African continent has benefited from economic cooperation with BRICS partners. South Africa’s trade with BRICS countries has increased by 70 percent. In 2014, its total trade with BRICS was US$29 billion (R382 billion), up from US$20 billion (R268 billion) in 2011. Africa has doubled its total trade with BRICS since 2007 to US$340 billion (R4.2 trillion) in 2012.

Despite the economic statistics, challenges remain for South Africa to more deeply cooperate with BRICS, most of which relate to poverty alleviation. Poverty alleviation is not just a South African challenge — countries in BRICS face the same situation along with many of the G20 members. The creation of sustainable development, reduced inequality of living standards and improved economic growth are ideal items for this year’s BRICS agenda and should be examined further.

 

How will the BRICS cooperation mechanism influence and promote the reform of global governance?

 

Ronnie Lins

I think President Xi’s governance model is a source of inspiration. First, it has well-defined and clear steps on achieving the “Chinese Dream.” Then, by analyzing other components of the model, we can determine how it could be appropriately customized for any developing country, regardless of its particular policy and ethical or religious nature.

The ultimate aim of the model is to promote improved quality of life for Chinese people, especially by eradicating poverty.

I have no doubt that BRICS, which has already focused on social inequality, will certainly gain even greater weight in the global context in the years to come.

 

Boris Guseletov

BRICS proposed a new paradigm of inter-governmental cooperation featuring openness, inclusiveness and common development. A good example was a dialogue between BRICS and African leaders, when some African leaders hailed the event as the first of its kind allowing them to conduct dialogues with big countries out of their region, on the basis of equality and genuine partnership. That’s totally different from the dialogues they used to have with former colonial powers. BRICS is an ongoing process compatible with the historical trend of peace, development and cooperation, and represents a progressive force in international relations. BRICS countries account for 29.6 percent of the world’s territory and 42.3 percent of the world’s population. Their GDP amount to 21.3 percent of the world’s total last year. Economic vitality and social stability of these countries constitute a solid foundation and driving force for international peace and stability. Pragmatic and efficient cooperation among BRICS leads to more balanced global economy, more democratic international relations and more effective global governance.

 

Manmohan Agarwal

Despite the rhetoric, South-South cooperation has not made much progress over the years. Often too many countries with diverse interests are involved. Successful cooperation among the BRICS countries can encourage others to also engage with them. BRICS can become a nucleus around which broader South-South cooperation can develop. South-South cooperation would enable developing countries even as the developed countries to avoid stagnating.

 

Jia Jinjing

Within the G20, the somewhat more inclusive platform for global economic governance, BRICS and the G7 are two of the most important transnational mechanisms. After 10 years of development, the BRICS mechanism has gradually started working alongside the G7 in global governance.

First, BRICS shoulders a heavy task in global governance. The BRICS countries account for nearly 40 percent of the world’s population, and they have seen a rapid economic development in recent years. In a decade, their total share of economy has risen from 12 to 23 percent, contributing more than 50 percent of world economic growth. Because BRICS is the largest driver of the global economy, it needs the greatest “enhancement” of its right to speak and vote in global governance.

Second, BRICS and G7 share the global governance “stock” responsibility. About 30 years ago, the total economy of the seven Western countries accounted for about 85 percent of the world’s total, and the G7 became a premier platform for global economic governance.

After the international financial crisis in 2008, those countries have not been able to shake off the shadow of low growth, and their proportion of global economic output has dropped to below 50 percent. Nevertheless, the G7 has always been the pace car for the G20 and BRICS to follow. Therefore, the G7, as a more mature mechanism, shares the same responsibility in global governance as BRICS.

Finally, both BRICS and the G20 share the responsibility of leading global governance. The 2016 G20 summit in Hangzhou, China, was a critical turning point in the history of global governance. All kinds of reports on cooperation in 2017, such as the recent Media Note of the Meeting of the BRICS Ministers of Foreign Affairs/International Relations, evidence the clear-cut mission of BRICS to share responsibility in G20 policies – a marked difference between the development of BRICS and the G7. The BRICS mechanism is becoming the standard-bearer of the G20’s fundamental policies.

 

Yazini April

While BRICS countries and other emerging economies have been pushing for deep reform in global governance, their national interests and world views differ, which makes complete alignment in global governance reform, such as the UN Security Council reform, unlikely. BRICS was created to address financial governance for developing countries and should probably focus on that objective first. Broadening the scope on the reform of global governance is a bit complex for current member states. I think it’s too soon for that.