Recently Chinese President Hu Jintao formally invited South African President Jacob Zuma to attend the third BRIC leaders’ summit to be held in China in the first quarter of 2011, thus taking the number of BRIC nation to five (Brazil, Russia, India, China and South Africa). South Africa had applied and lobbied to join the BRIC at the G20 meeting of the world's leading economies in Seoul in November this year. The acronym, BRIC was coined by Jim O’Neill an economist with the Goldman Sachs in a paper entitled "The World Needs Better Economic BRICs" published in 2001. The notion signals a shift in the global economic power away from the G7 economies toward the emerging economies. The BRIC thesis holds that China and India will become the hub of world’s manufactured goods and services, while Brazil and Russia will become leading suppliers of raw materials.
At present, the BRIC account for more than 25% the world’s land mass; more than 40% of world population; over 50% of world economic growth; and around 15% of the world economy. The economic indicators are bound to further shift the balance in favor of emerging economies given the astounding growth rate of over 9% in India and China. Now, with South Africa, the world’s 31st-largest economy joining the ranks, the BRIC will wield even more influence in the world economy. Even though, South Africa’s 286 billion $ economy and population of 49 million pales if compared to other BRIC members, especially China and India, however, it is the most advanced economy in Africa; the largest trade partner of China in Africa; and more importantly will provide a gateway to the BRICS into Africa.
South Africa’s entry has definitely given the BRIC a voice in African Continent, and is bound to strengthen the economic base of a multi-polar world on the one hand, and create conditions for the strengthening of global peace and security on the other. The BRIC nations call for the reforms of the world organizations, including the financial institutions and the United Nations, and demand greater role for the emerging economies in these bodies. This is obvious from the BRIC foreign ministerial meeting on May 16, 2008 in Yekaterinburg prior to the first BRIC summit at the same place in 2009. During the meeting, the BRIC nations called for the emerging economies to play more assertive role in the World Bank and the International Monetary Fund. A week prior to the Yekaterinburg summit, Brazil and Russia offered $10 billion each to the IMF and China announced plans to invest a total of $50.1 billion. India on its part has committed to contribute $ 3 billion. This was also approved by the G20 summit held in South Korea in November 2010. The reforms of the world financial institutions are considered as an important step towards a more legitimate, credible and effective bodies that will ensure greater quotas and representation reflecting the new global economic realities.
There are various agreements and frameworks concluded among the BRIC countries such as the Shanghai Cooperation Organization (SCO), where India is included in the capacity of an associate member and could become a full member in future as Russia has supported its candidature; the IBSA, which unites Brazil, India, and South Africa in annual dialogues; and more importantly, all BRIC nations including the new entrant are the members of G20. South Africa, India and Brazil will also take up a two-year seat on the United Nations’ Security Council from next year, resulting in all BRIC nations being represented on the council.
Impressive growth trajectory of the BRIC nations, and the currency appreciation especially in India and China has provided a huge opportunity for the investors in BRIC assets; meanwhile, the BRIC countries are also contemplating to buy each other’s bonds and swap currencies so as to reduce the dependence on dollar; and why not when the combined reserves of these countries are around $ 3 trillion and are the biggest holders of the US treasuries.
Regardless of the potentials and opportunities, and the reach through every continent, the BRIC countries will face enormous challenges as they do not have a common agenda. Added to this, they are not an economic block like the European Union or a political alliance like the NATO, albeit capable of converting their economic prowess into a greater geopolitical clout; all have diverging interests, and at times conflicting.
First of all, the mammoth economic growth of the BRIC counties is dependent on the manufacturing based on raw materials such as iron ore, copper, aluminum, fossil fuel and natural gas; technological breakthrough in renewable energy could shift the balance again in favor of G 7, and could result in slower economic growth than anticipated. Secondly, the so-called currency manipulation by some BRIC countries has ‘harmed’ the manufacturing in some countries, as admitted by the Brazilian finance minister Guido Mantega recently. Thirdly, there is an asymmetric relationship between the polities and economies of the BRIC nations. For example, the economy of China is bigger than the rest 4 and holds over $2.45 trillion of reserves, over 30% of the world reserves; its political clout is also bigger, as it holds the veto power in the UNSC besides being talked as G2 partner with the US. Fourthly, the political equations between India, China and Russia are impregnated with ‘mutual mistrust’ and huge ‘security deficit’, especially between India and China on the issue of border, and China’s entente with its ‘all weather friend’ Pakistan. Fourthly, some other regional flashpoints weather in the South China Sea or in the subcontinent could make the cooperation between major BRIC countries irrelevant. And, finally the domestic issues, especially the increasing social imbalance in the BRIC nations could also pose serious challenges to the internal security and economic development in these countries.
Nevertheless, the South African entry into the folds of BRIC is a welcome move, and could open this ‘alliance’ to other emerging economies. Some of the aspirants in Asia could be Vietnam, and China may be keen to put Saudi Arabia on board. We can hope that the BRIC becomes an example for all emerging economies, promote economic cooperation, ease tensions by settling bilateral disputes, and guarantee prosperity, peace and security not only in the region but also in the world at large.
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