BRICS strive to flourish amid rivalries, suspicions | Business| Economy and finance news from a German perspective | DW | 01.09.2017
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BRICS strive to flourish amid rivalries, suspicions

When the leaders of the world's most important and influential emerging economies meet, it's certain to grab global spotlight. But divisions and distrust among them make it hard to agree on common goals and interests.

The leaders of the most populous and powerful developing countries - Brazil, Russia, India, China and South Africa (BRICS) - are meeting in the southeastern Chinese city of Xiamen from September 3-5 for their ninth annual gathering since the club's formation.   

The occasion presents an opportunity for Chinese President Xi Jinping, Indian Prime Minister Narendra Modi, Russian President Vladimir Putin, Brazilian President Michel Temer and South African President Jacob Zuma to project gravitas and statesmanship. 

Under the theme of "BRICS: Stronger Partnership for a Brighter Future," they will likely attempt to send a message of unity and hope to the rest of the world. It underscores their countries' growing significance and clout amid the widely perceived ongoing shift of power from the industrialized Western nations to the developing world.

Originally a term coined by economists working for the US investment bank Goldman Sachs in 2001, BRIC has since then evolved into much bigger today. It emerged as a formal grouping in 2006 and then became BRICS in 2011 after the inclusion of South Africa into the club.

Growing influence

With over 40 percent of the world's population spread across three continents, 25 percent of its landmass and over 20 percent of global GDP, BRICS is already an influential player in world affairs.

"Since its formation, BRICS has come a long way," Jagannath Panda, a research fellow at the New Delhi-based Institute for Defense Studies and Analyses (IDSA), told DW. "The grouping has done impressive work, particularly in terms of creating awareness at the global level on key global governance issues, be it on climate change, poverty, unemployment or infrastructure," he said.  

It has also created pressure in terms of reforming international financial institutions like the International Monetary Fund (IMF) and the World Bank. "We know for a fact that since BRICS was set up, India's and China's voting rights have improved in these global financial institutions," Panda pointed out.

For many, the bloc symbolizes the engines of economic expansion in the 21st century and represents the changing geo-political and geo-economic global order. So when the members launched a new global lending institution - called the New Development Bank - it was perceived as a rival to the Washington-based Western-dominated World Bank. 

Predictions abound that BRICS would emerge as the central players of the world economy in the coming decades, surpassing most of today's leading economies, including those in the G7 grouping.

Economic troubles

The projections might seem farfetched given the myriad of stark political and economic challenges currently confronting the five countries.

China's once rapid double-digit economic growth has now slowed down to around 6-percent expansion. The world's second-biggest economy faces a raft of problems, including excess capacities in the heavy industry, highly speculative real estate boom and widespread high corporate indebtedness. 

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The Russian economy has been hit hard by a slump in crude prices and Western sanctions imposed due to Moscow's involvement in the Ukraine conflict. Brazil and South Africa are battling political crises as well as low commodity prices, which have cast a dark spell on their economies.

Even though India's economy seems to be expanding at a faster pace, at over 7 percent, economists say the country is no way near the mark when it comes to creating jobs for the millions of Indians entering the labor market every year.

Most BRICS economies also suffer from issues such as corruption and bureaucratic red tape that act as a drag on their growth potential. They continue to rank poorly in the World Bank's "Ease of Doing Business" index.

Signaling its confidence in the group's prospects, Goldman Sachs, which coined the term in the first place, launched a BRIC Fund in 2006. But the bank decided to shut it down in November 2015 after its poor performance.

'Strategic competitors'   

Western observers frequently point out that the economies of BRICS nations have never had much in common. Their economic interests also often diverge. For instance, countries like Russia and Brazil are major energy producers that profit from high energy prices. In contrast, India is a big importer of energy and prefers low prices. Barring China, which alone accounts for two-thirds of the bloc's economic output, they have limited trade ties with each other.

Read more: 'New Silk Road' and China's hegemonic ambitions

The five members also share few political or foreign policy goals or interests. Additionally, China and Russia enjoy a much bigger and influential international role due to their permanent seats on the UN Security Council. Their governments are regarded as authoritarian, while those of India, Brazil and South Africa are seen as democratic.

"Because of the incoherencies between the five members of the BRICS group, the overall performance of BRICS is quite difficult to pin down," Paul Kohlenberg, a researcher at Berlin-based German Institute for International and Security Affairs (SWP), told DW.

"In addition to very uneven economic results, there has also been a lot of political divergence and even competition," he said, adding: "In many contexts, the five member states - particularly the triangle of Russia, India and China - view each other as strategic competitors."

Observers' skepticism about BRICS partly stems from the difficult relationship between China and India. The two have an unresolved border dispute and their ties are plagued by deep-seated mutual distrust. China and India only recently agreed to end a more than two-month-old bitter standoff on their disputed Himalayan border. It was their most serious military confrontation in decades.

'Distinction of BRICS' 

Despite the tensions, analysts in these countries say the issue about the lack of coherence among BRICS nations, particularly China and India, has been overblown. Acknowledging that they don't have much in common in terms of shared foreign policy objectives, IDSA analyst Panda said, "But that's the distinction of BRICS."

"Even though there is no commonality among BRICS nations, they have decided to sit together to talk about global governance issues and to achieve a consensus," he stressed, noting such divisions and divergent interests are common in other global forums as well. Even in the UN Security Council, the permanent members often struggle to achieve consensus on many issues, Panda said. "In that context, BRICS is no different."

Group picture of participants in China Belt and Road Forum in Beijing

The Belt and Road Initiative is an ambitious project launched by President Xi, aiming to to link China with other parts of Asia and Europe through multibillion dollar investments in infrastructure

SWP analyst Kohlenberg says China currently would like BRICS to increasingly align with its Belt and Road Initiative (BRI). "But India has refused to join the Belt and Road Initiative."

India's efforts to push terrorism emanating from Pakistan onto the agenda of the Xiamen gathering have been quashed by the Chinese, causing further friction in their partnership.

Still, from a different perspective, "one can argue that one long-implicit function of BRICS - namely offering an additional platform for conversations with regard to maintaining peaceful bilateral relations among India, China and Russia - has become more explicitly recognized," Kohlenberg underlined.

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