BRICS Plus: Opportunities for Emerging Economies
The contemporary world order is Multipolar, where geo-economics has taken precedence over geopolitics in the policy formulation of many nations. Moreover, emerging economies are cooperating for shared economic prosperity. A shift from geopolitics to geo-economics is not as sudden as it seems. Many organizations and countries have played a crucial role in making it possible. BRICS is an example of a geo-economic model that has achieved a remarkable milestone since its inception.
In 2001, Goldman Sachs chief economist Jim O’Neill formulated the idea of BRIC which became BRICS when South Africa joined the bloc in 2010. The role of BRICS countries is rapidly increasing in the World economy. According to the Research Article BRICS Countries’ Increasing Role in the World Economy, Including Institutional Innovation, published in BRICS Journal of Economics 2023, the share of BRICS in the world GDP rose from 11.9% in 2000 to 25.6% in 2021.
The group has a combined GDP of USD 27.6 trillion in 2023, representing 31% of the global economy, making G7 countries second with 30% GDP. It is important to note that intra-BRICS trade has remarkably increased in which China is playing a pivotal role. China’s foreign trade with BRICS countries increased by 17% in 2022 and 19% in 2023. Similarly, China-Russia trade has reached USD 190 billion in 2022 and the trade volume between Russia and China in the first six months of 2023 has also grown by 20%. Moreover, despite the various border clashes and disputes, the trade between China and India has increased to USD 135.98 billion in 2022. China-Brazil trade has reached USD 165.6 billion in 2022, an increase of 8.1%. South Africa is China’s largest trade partner in Africa with bilateral trade of USD 56.74 billion in 2022, which was an increase of 11% as compared to the previous year.
BRICS countries also led the formation of the New Development Bank (NDB) aimed at mobilizing resources for infrastructure and sustainable development projects in emerging markets and developing countries. According to the official website of BRICS, NDB was established as an alternative to the World Bank (WB). It has approved over 90 projects worth USD 32 billion for Infrastructure development for emerging economies. NDB has approved almost USD 33 billion in loans mainly for water, transport and other infrastructure projects since it began operation in 2015. Along with other BRICS countries, South Africa also borrowed USD 1 billion in 2020 to fight the COVID-19 pandemic.
It is important to note that, unlike the International Monetary Fund (IMF), NDB does not have conditional loans or aid for any of its BRICS countries, rather it encourages countries to trade in their local currencies. At the same time, China is stockpiling gold as part of its de-dollarization campaign. China has stockpiled 225 tons of gold worth USD 13 billion in 2023 alone. Apart from China, the other BRICS countries including Russia, India and Brazil are steadily purchasing gold. According to the World Gold Council, BRICS is officially the largest buyer of gold in 2023. These gold stockpiles by BRICS countries especially China would further strengthen the Yuan in the future. Figures also suggest that the dollar is on its way to decline. According to Oxford Business Group 2022, in 2019, 88% of global currency trade was in US dollars but by 2022, this share had been reduced to 58.8%. In 2022, Saudi Arabia and Türkiye traded Russian and Chinese goods in Yuan and Ruble. In August 2023, India and the UAE started settling bilateral trade in their local currencies. New Delhi purchased a million barrels of oil in Indian Rupees. Similarly, on 20 December 2023, Russian Deputy Prime Minister Andrei Belusov informed during his visit to China that in 2023, 95% of Russia and China’s bilateral trade was done in Rubble and Yuan.
Keeping in view the economic growth and rising intra-trade relations between the BRICS nations, China and Russia have been calling for the expansion of BRICS countries since 2017 to provide opportunities for emerging economies. Thus, on 22-24 August 2023, BRICS summit in South Africa, six new members were invited to join BRICS which included Ethiopia, Eygpy, Argentina, Iran, UAE and Saudi Arabia. Argentina withdrew the invitation owing to its own geopolitical compulsions, but remaining five members have joined BRICS from 1 January 2024. with the addition of the five new members, the GDP of BRICS countries is expected to increase by USD 30.8 trillion. According to the IMF report, the expanded bloc will have a share of 37.3% of the world’s GDP next year, 37.7% in 2025 and 38.5% in 2028.
Moreover, UAE, Saudi Arabia and Iran are oil-rich countries that would increase their share of oil production. According to the Energy Institute Statistical Review of World Energy report (2022) adding oil economies in BRICS countries would increase the share of oil production from 20.4%to43.1%. According to the Organization of the Petroleum Exporting Countries (OPEC) oil exports and production data for 2022, the BRICS Plus is going to change the power balance in the global energy market. In terms of oil reserves, the group will also control nearly half of the world’s total 719.5 billion barrels out of 1.6 trillion. Whereas, the G7 group of leading economies include the US, UK, Germany, Italy, Canada, France and Japan control only 3.9% of known crude reserves. Apart from this, BRICS countries would provide help to diversify their oil-based economy to new markets, in which other BRICS members Russia and China would help. The inclusion of Iran in BRICS may help reduce the impact of US sanctions against it. Given that the country is the world’s eighth-largest oil producer and possesses the third-largest oil reserves. It can fulfill the energy requirements of BRICS countries to a large extent.
Egypt and Ethiopia have huge reserves of petroleum, natural gas, iron ore, phosphates, manganese, gold, platinum, copper limestone, gypsum, talc, asbestos, lead, rare earth elements, and zinc. Due to their significant strategic location and long-standing political and economic ties with Beijing, BRICS countries can get the maximum benefits from those resource-rich African countries and also help them improve their economies. Apart from mineral resources, Africa holds two of the most crucial assets: arable land for food production and a young population. By 2060, Africa would account for around 30% of the global population. Meanwhile, according to the UN’s Food and Agriculture Organization (FAO), Africa possesses 45% of the world’s cultivable land for agriculture and 60% of untapped arable land, that BRICS countries could further explore for developmental purposes.
Pakistan has also applied for membership in the BRICS, the BRICS Plus membership can (i) strengthen Pakistan’s economic position and help find new markets in BRICS nations; (ii) alleviate Pakistan’s position in the region and beyond; (iii) strengthen partnership with China by joining Chinese-led forums; (iv) provide a sustainable oil supply chain and (v) expand socio-cultural and educational exchanges.
To conclude, it is pertinent to highlight that all newly added countries are already members of BRI and most of them are connected with rail and road lines constructed under BRI projects. For Pakistan, the trade route for the import and export of goods to and from Africa can be Egypt- Sudan- Ethiopia-Djibouti-Saudi-Arabia-UAE-Iran and Pakistan to China. The road and connectivity to already existing rail routes may increase Pakistan’s trade outreach to African countries.
S. Malik is MPhil International Relations, University of Karachi. She is independent researcher.