BRICS Has Enormous Potential

25.07.2014

One of the main achievements of the 6th BRICS Summit was the signing of an official document on establishing a New Development Bank with a declared capital of $100 billion. The creation of the bank is an important step towards institutionalizing BRICS and strengthening its positions in the world in the long run.

One of the main achievements of the 6th BRICS Summit was the signing of an official document on establishing a New Development Bank with a declared capital of $100 billion. The creation of the bank is an important step towards institutionalizing BRICS and strengthening its positions in the world in the long run. In particular, creating a development bank where decisions are made by a consensus of five member states (the total share of the founding countries cannot be lower than 55%) will boost their influence in emerging economies and worldwide.

A new decision-making mechanism and loans issued by the New Development Bank will help to mobilize funding and human resources, as well as tools and technologies, particularly from these five countries, rather than from developed Western economies. Combined with joint research on the transition to a qualitatively new level of living standards, economic growth, security, social justice, economic policy and innovations, which is conducted by expert centers of the five member states, this can significantly speed up the growth of the BRICS member countries.

The participants in the 6th BRICS Summit also signed an agreement to create a pool of foreign exchange reserves to support the BRICS countries in case of liquidity shortages. In the future, this can be used as a direct tool to support countries facing economic and financial difficulties. Also, the new pool can redirect financial and trade flows from developed to emerging markets. Of course, refocusing these flows completely to the BRICS markets is a utopian idea, especially in the short-term perspective, but the five member countries have a significant potential for trade and investment cooperation, both bilateral and multilateral, in the long term.

Notably, the potential of the BRICS countries is truly enormous: their aggregate GDP in terms of purchasing power parity (PPP) accounts for 30 percent of the total global GDP. According to a forecast prepared jointly by the Institute for Energy Research of the Russian Academy of Sciences and the Analytical Center at the Russian Government, it will make up 43 percent of the global GDP in terms of PPP by 2040.

Furthermore, the leaders of the BRICS countries share common views on a number of principles underlying the current world order, including their opposition to hegemony, respect of the interests of all its members and support of a multi-polar world. Even early on, the group showed that it has its own joint position regarding a number of international political issues, such as Syria, Iran and Libya, to name a few, that does not necessarily conform with that of Western countries.

Admitting new members was one of the issues that caused particular interest in the run-up to the 6th Summit. BRICS had just started the transition from extensive development that included expanding the agenda and identifying common issues for the five countries, to intensive development, that is, focusing on systematic current work on individual issues. The admission of new members was supposed to begin after the group had acquired a certain amount of experience of joint work over a period of approximately seven to 10 years. The most likely candidates would include countries with average incomes that are prepared to join BRICS and boast significant levels of influence in their respective regions. Indonesia and Argentina are already on the agenda. However, admitting new members at this stage would be impractical, as BRICS is only just beginning to find its place in the world.

Leonid GRIGORYEV is Professor, Head of Chair of World Economy, Department of World Economy and International Affairs, National Research University Higher School of Economics; Chairman of the Board, World Wildlife Fund Russia (since 2006); Member, Council on Foreign and Defense Policy (CFDP); Member, Valdai Discussion Club.

Alexandra MOROZKINA is an expert in Economic Expert Group.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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