BRICS Leaders Search For Meaning Amid Shadow Of A Worldwide Slowdown

Industry news

BRICS Leaders Search For Meaning Amid Shadow Of A Worldwide Slowdown

Leaders of BRICS, a grouping of five emerging countries that once held out great hopes for the global economy, met in Goa in western India on Oct. 15-16 amid lingering questions over the group's continuing relevance. Five economies - Brazil, Russia, India, China and South Africa - make up the acronym. When it came into being, BRICS was expected to bring about a new world order balancing the developing world's economic interests with advanced countries of the West, and help negotiate fair deals at multilateral forums. Ten years on, the BRICS members have been hit by slowing global demand, falling commodity prices and corruption scandals. China is going through a slowdown while Russia and Brazil have slipped into recession. The South African economy too is facing a major crisis.

At this eighth annual summit since 2009, the leaders, including Indian Prime Minister Narendra Modi, Chinese President Xi Jinping and Russian President Vladimir Putin, reached several agreements. One was to expand the amount of loans from their jointly established New Development Bank to US$ 2.5 billion next year for green projects. They also agreed to set up a BRICS rating agency, and to create an agricultural research platform. BRICS's New Development Bank, which became operational last year, aims to serve as a source of financing for infrastructure projects in developing countries. The bank has so far extended US$ 900 million for green projects.

"Going forward, we are targeting US$ 2.5 billion for next year, which will be mainly in the areas of sustainable infrastructure and green infrastructure. We plan to raise another US$ 1.5 billion in bonds," NDB President K.V. Kamath said at the BRICS meeting. "In order to further bridge the gap in the global financial architecture, we agreed to fast-track the setting up of a BRICS rating agency," Modi said.

BRICS maintains it is another "pole" in global politics, reiterating the importance of a "multi-polar international order" in the Goa Declaration, but the outcome of the summit was less aggressive toward the existing Western-led order. It emphasised "institution building" as Modi mentioned in his speech.

Though India remains the bright spot with over 7% annual growth, the weighted average growth rate of 4.9% the BRICS recorded in 2015 was the slowest since 2001.

In 2015, total trade value of the BRICS contracted 14% over the previous year, a greater decline than the world's minus 12%. It is the first time for BRICS to do worse than the global average. In imports alone, it shrank 20%. The league of emerging economies is losing its capacity to generate demand for the global economy. In his remarks, Modi said confidently, "We should set ourselves a target to double intra-BRICS trade to US$ 500 billion by 2020." Trade among the BRICS nations is not terribly impressive - the total is around 10% of their entire global trade, according to IMF data. Unlike usual regional blocs such as European Union, the BRICS does not have an interdependent trade relationship, so far. China is keen for a free trade agreement within the five-nation bloc, but the other members are not as enthusiastic, fearing that it could lead to a massive increase in imports of cheap Chinese products, which in turn would harm local manufacturing. Xi expressed his confidence by saying the bloc still had the strength and potential to grow. But the phrase "sustainable economic development," echoed by Putin and Brazilian President Michel Temer, seems to represent the real challenge of the "other pole."