12th BRICS Summit
12th BRICS summit is scheduled to be held from July 21-23 in St. Petersburg, Russia. There are speculations as to the feasibility of conducting such a summit amidst covid-19 crisis.
Russian think-tank Valdai Club released a report named “BRICS and the Rivalry Pandemic” wherein the question of considering BRICS as a global governance institution has come to the fore.
What is BRICS?
BRICS is the acronym coined for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa. South Africa is the latest entrant in the group.
Originally, the first four were grouped as “BRIC” (or “the BRICs“), before the induction of South Africa in 2010.
The genesis of the idea of BRICS did not come from any of the members but rather from a prominent economist Banker, Jim O’Neill.
In November 2001, Jim O’Neill, a British economist, then chairman of Goldman Sachs Asset Management, coined the term ‘BRIC’ to describe the four emerging economies of Brazil, Russia, India, and China.
He published a paper ‘The World Needs Better Economic BRICs’ for the Goldman Sachs ‘Global Economic Paper’ series.
In this paper, he made a case for BRIC on the basis of econometric analysis projecting that the four economies would individually and collectively occupy far greater economic space and become among the world’s largest economies in the next 50 years or so.
So, these four nations paid heed to his article and met on the side-lines of G-8 summit.
The grouping was formalized with the first meeting of BRIC Foreign Ministers in 2006.
The first BRIC Summit was held in Yekaterinburg, Russia, on June 16, 2009.
A decision to expand BRIC into BRICS with the inclusion of South Africa was taken at BRIC Foreign Ministers’ meeting in 2010.
In the 3rd BRICS Summit at Sanya, South Africa in 2011 became member of expanded BRICS.
The last summit to be held in India was the 8th BRICS Summit in 2016 which culminated in the ‘Goa Declaration’. India also invited the member countries of BIMSTEC, as part of BRICS outreach program.
2018 marks a decade of BRICS with the 10th BRICS Summit in South Africa.
The 11th BRICS Summit was held in 2019 in Brazil.
Significance of BRICS Grouping
The dominance of any group across the world is judged on the basis of following parameters: Territory under control, Population, GDP and Trade.
BRICS grouping has:
- 42% of the global population,
- 23% of the global GDP,
- 30% of the global territory
- 18% of the global trade.
The BRICS members are also known for their significant influence on regional affairs; all are members of G20.
New Development Bank (HQ: Shanghai)
It is a multilateral development bank operated by the BRICS states. The bank’s primary focus of lending is infrastructure projects with authorized lending of up to $34 billion
The bank has the starting capital of $50 billion contributed equally by all the members.
BRICS Contingent Reserve Arrangement (CRA)
It is found that emerging economies that experienced rapid economic liberalization went through increased
economic volatility, bringing uncertain macroeconomic environment.
Hence, CRA is a framework for providing protection against global liquidity pressures.
This includes currency issues where members’ national currencies are being adversely affected by global financial pressures.
Thus, BRICS CRA is a mechanism that intends to forestall short-term balance of payment pressures in member countries.
There was a successful test run conducted in 2018, with expected operationalization in future with the functioning of the CRA System of Exchange in Macroeconomic Information (SEMI).
Individual contribution of members:
BRICS ensure continued efforts to establish the BRICS Local Currency Bond Fund with expected support from IMF.
Note: CRA is generally seen as a competitor to the International Monetary Fund (IMF) and New Development Bank (NDB) as that of World Bank (WB).
Challenges Faced by BRICS
Geographical separation: Members are fragmented along 4 different continents.
Political heterogeneity: For a long-lasting strong group,
there should be political homogeneity. (ex: EU). But China and Russia have authoritative government and rest have democracy.
Dominance of China: Chinese role in trade relations makes the BRICS much more a China-with-partners group than a union of equal members.China is floating its own organizations like,One Belt One Road (OBOR), Shanghai Cooperation Organization (SCO), Asian Infrastructure Investment Bank (AIIB).
Lack of Mutual trust and Interests: China- India rivalry (Territorial); Manufacturing (China, India); Russia and Brazil rivalry (Mining)
So, although BRICS has all necessary conditions (political, military and economic influence) to act like a global institution, but these conditions are not sufficient.