ISSUE BRIEF
INSTITUTED OF STRATEGIC
STUDIES ISLAMABAD
web: www.issi.org.pk
Phone: +92-51-9204423,24
Fax: +92-51-9204658
BRICS AND PAKISTAN - ASSESSING
OPPORTUNTIES&CHALLENGES
By
Muhammad Taimur Fahad Khan
Research Associate
&
Mian Ahemd Naeem Salik
Research Fellow
Center for Strategic Perpective (CP),(ISSI
Edited by
Dr. Neelum Nigar
October 12,2023
(View expressed in the brief are those of the author, and do not represent those of ISSI)
In the age of intensifying bloc politics and increasing fluidity in contemporary international affairs, the XV BRICS Summit in Johannesburg, held on August 22-24, 2023,was a surprisingly successful event, despite all the negative assessments and critical analyses coming out from various media, policy and academic circlesacademic circles predicting a confused, divided, and unfavourable outcome of the event.
The XV BRICS Summit was able to achieve an across-the-board consensus on two major agenda points (among others) of the Summit: a) positive movement of member states towards the use of national currencies in trade and financial transactions among group members and with other nations of the 'Global South'; and b) agreement on the expansion of the group into a broader platform by inviting new member states into BRICS.
Evolution of BRICS:
BRICS is an informal grouping of emerging economies. It is a denotative acronym of its founding/ core member states namely, Brazil, Russia, India, China and South Africa. The acronym was first introduced by Jim O'Neill a British economist, in 2001.1
ISSI 2023 .All Right Reserved
BRIC leaders released a joint statement2 outlining the group's objectives as well as strategies for addressing the world's financial and economic problems arising in the aftermath of the global financial crisis of 2008.
Bangladesh, Egypt, United Arab Emirates (UAE) and Uruguay were admitted as members of the NDB.
NDB initially authorised capital of US$ 100 billion. NDB's founding members in the beginning subscribed US$ 50 billion which consisted of US$ 10 billion of paid-in funds while US$ 40 billion as callable capital. (See Figure 1)4
According to the 2022 International Monetary Fund (IMF)
statistics, BRICS members held a share of 31.58% of the total Global Gross
Domestic Product (GDP), based on Purchasing Power Parity (PPP). (See Figure 2)5
2
"Joint
Statement of the BRIC Countries' Leaders", BRICS
Information Centre, University of Toronto, published on June 16, 2009.
http://www.brics.utoronto.ca/docs/090616leaders.html#:~:text=We%20call%20upon%20all%20parties,the%20WTO's%20Doha%20Development%20
Agenda.
3
"History", New
Development Bank, accessed on September 12, 2023. https://www.ndb.int/about-ndb/history/
4
"Shareholding", New
Development Bank, accessed on September 12, 2023.
https://www.ndb.int/about-ndb/shareholding/
[1] BRICS member states collective
GDP based on PPP, share of the world, International Monetary Fund, created on
September 20, 2023.
https://www.imf.org/external/datamapper/PPPSH@WEO/IND/RUS/CHN/BRA/ZAF?year=2022 6 Bryce
Baschuk, "How Global Trade Changes
With BRICS on the Rise", Bloomberg, published on August 23, 2023.
https://www.bloomberg.com/news/newsletters/2023-08-23/supply-chain-latest-how-global-tradechanges-with-saudi-indonesia-in-brics#xj4y7vzkg
(Figure 2)
The BRICS member states (before expansion)
represented 41.25% of the world's total population. Its global GDP share till
2022 was 32% and which is expected to grow to 40% by the year 2040.6 Who have joined BRICS so far?
On August 24, 2023, it was announced during the press
conference by BRICS members during the XV BRICS Summit, to invite six (6)
countries to join BRICS, taking the total number of its members from five to
eleven, namely: Argentina, Egypt, Ethiopia, Iran (IRI), Saudi Arabia (KSA) and
the UAE. Membership of these six countries will take effect on January 01,
2024.[1]
South African President Cyril Ramaphosa stated that BRICS
countries have reached agreement on the guiding principles of the BRICS
expansion process and noted that interests of other countries in building
partnership with BRICS is valued by its members.[2] According to him, more than
40 countries and regions showed interest in joining BRICS and 22 of them
formally applied to join this year (2023).[3]
[1] "BRICS welcomes new members: What does it mean to the world?",
CGTN, updated on August 24, 2023. https://news.cgtn.com/news/2023-08-24/BRICS-announces-new-members-1mwR9byHOp2/index.html
[2] "Media briefing remarks by BRICS Chair, President Cyril Ramaphosa,
announcing the outcomes of the XV BRICS Summit", The Presidency
Republic of South Africa, published on August 24, 2023.
https://www.thepresidency.gov.za/speeches/media-briefing-remarks-brics-chair%2C-president-cyrilramaphosa%2C-announcing-outcomes-xv-brics-summit
[3] Hassan Isilow, “More than 20 countries have applied to join
BRICS: South African president”, AnadoluAjansi (AA), updated on August 21,
2023.
https://www.aa.com.tr/en/africa/more-than-20-countries-have-applied-to-join-brics-south-africanpresident/2972344
[1] "BRICS welcomes new members: What does it mean to the world?",
CGTN, updated on August 24, 2023. https://news.cgtn.com/news/2023-08-24/BRICS-announces-new-members-1mwR9byHOp2/index.html
[1] "Media briefing remarks by BRICS Chair, President Cyril Ramaphosa,
announcing the outcomes of the XV BRICS Summit", The Presidency
Republic of South Africa, published on August 24, 2023.
https://www.thepresidency.gov.za/speeches/media-briefing-remarks-brics-chair%2C-president-cyrilramaphosa%2C-announcing-outcomes-xv-brics-summit
[1] Hassan Isilow, “More than 20 countries have applied to join BRICS: South African president”, AnadoluAjansi (AA), updated on August 21, 2023.
Is use of national currencies by BRICS
possible?
China, which has a mixed-economy (where large state-owned
enterprises operate alongside private enterprises), the unprecedentedly
Western-sanctioned economy of Russia, combined with India’s increasing bonhomie
with the West and the United States in particular, as well as New Delhi’s
enhanced desire to continue trading in the US dollar are some of the reasons
why the idea of a common BRICS currency is unable to gain any meaningful
traction so far.
Moreover, it is also important to understand here that
after the inclusion of 6 new members into the group, it no longer remains BRICS
but have adopted the new form of BRICS Plus (+). This new form brings its own
opportunities and challenges for the group. On the one hand, while the addition
of new members into BRICS will add to its geo-political, geo-strategic,
geo-economic clout and material strength, on the other hand, with expansion of
voices, more challenges will surface in the group, especially for the
consensus-based decision-making within BRICS due to diverging interests of
different members.
State of play within BRICS:
The current state of play in BRICS is highly dynamic and interesting and the internal dynamics of the group can be understood through several key aspects:
https://www.aa.com.tr/en/africa/more-than-20-countries-have-applied-to-join-brics-south-africanpresident/2972344
•
One of the main driving forces and uniting
elements behind the BRICS is economic
cooperation. These nations trade widely among themselves and have diverse
economies. They collaborate to encourage investment and trade among member
states, and they frequently talk about how to lower trade barriers and improve
economic integration.
•
In the domain of political cooperation, BRICS members continue to hold annual
summits and discuss a wide range of political issues which include regional
disputes, international security, and global governance.
•
In the sphere of economic development, each member has its own unique economic
development challenges to overcome. While China and India have experienced
rapid economic growth, members like Brazil and South Africa have experienced
economic slowdowns combined with domestic political instability. Moreover,
Russia has also experienced massive economic slump after getting hit by Western
economic sanctions imposed after the commencement of the Russia-Ukraine
conflict.
•
Furthermore, South-South cooperation, among developing nations, is a BRICS
priority, among others. The member countries collaborate to exchange best
practices and support global development projects, notably in Africa.
• Apart from formal meetings and summits, BRICS leaders participate in informal dialogue, allowing for more open discussions on numerous problems. These unofficial exchanges promote collaboration and help member states develop confidence and trust with each other.
•
Most important of all, the dynamic of geopolitical interests is probably one
of the most influential of all among BRICS’ state of play factors. While the
BRICS countries share many interests, they also have different geopolitical and
geo-strategic interests which are at times divergent.
Should Pakistan join BRICS?
As things stand today and are expected to pan out in the
future, Pakistan should seriously consider applying and go for BRICS
membership. But it is essential to understand the reasons behind this
affirmative in order to logically and pragmatically justify the assessment.
As of 2023 data, China (#2), India (#5) and Russia (#8) are
among the world's top ten economies.[1] (See Figure 3)
https://www.worlddata.info/largest-economies.php
All BRICS countries, due to their increasing economic
influence are becoming drivers of the global economic growth. While quoting IMF
data, Bloomberg reported that by 2028, BRICS countries will contribute close to
40% of global economic growth.[1]As of
April 2023, compared to the G7’s(Group of Seven) share of global GDP at PPP
which stood at 29.9%, BRICS members’ share in global GDP collectively accounted
for 32.1%. (See Figure 4)12
[1] “BRICS cooperation shines with strong appeal”, Bloomberg, published
on August 19, 2023. https://www.bloomberg.com/press-releases/2023-08-19/brics-cooperation-shines-with-strong-appeal 12 Felix Richter, “BRICS VS. G7 - The Rise of BRICS”, Statistica, published on August
22, 2023.
https://www.statista.com/chart/30638/brics-and-g7-share-of-global-gdp/
[1] “BRICS cooperation shines with strong appeal”, Bloomberg, published
on August 19, 2023. https://www.bloomberg.com/press-releases/2023-08-19/brics-cooperation-shines-with-strong-appeal 12 Felix Richter, “BRICS VS. G7 - The Rise of BRICS”, Statistica, published on August
22, 2023.
https://www.statista.com/chart/30638/brics-and-g7-share-of-global-gdp/
.png)
(Figure 4)
In 2000s, G7 made approximately 50% of global GDP at PPP,
while BRICS was contributing just below 10%. And now, with 6 additional
members, BRICS represents almost half of world’s population (55.75%) (See
Figure 5)[1] and
its share in the global GDP at PPP is approximately 37% (36.9%). (See Figure 6)[2]
[1] “BRICS Plus Population”, International Monetary Fund (IMF), map
extracted on September 22, 2023. https://www.imf.org/external/datamapper/LP@WEO/ARG/BRA/CHN/ETH/IND/IRN/RUS/ZAF/ARE/SAU/E
GY?year=2023
[1] “BRICS Plus members’ share in Global GDP at Purchasing Power Parity”,
International Monetary Fund (IMF), chart extracted on September 22, 2023.
.png)
(Figure 5)
https://www.imf.org/en/Publications/WEO/weo-database/2023/April/weoreport?c=213,223,924,469,644,534,429,922,456,199,466,&s=PPPSH,&sy=2009&ey=2028&ssm=0&scsm=1
&scc=0&ssd=1&ssc=0&sic=0&sort=country&ds=.&br=1
.png)
(Data generated from IMF)
In addition, BRICS members are active members of leading international organisations and agencies where they carry substantial clout such as the UN, G20, WB, and IMF. They had 14% of the total votes at the World Bank as of July 31, 2023, and 15% of the quota share at the IMF as of August 8, 2023.[1] In light of the latest data cited above, from geopolitical, geostrategic,[1] “Chart of the Day: The significance of BRICS”, CGTN, published on
August 19, 2023.
https://news.cgtn.com/news/2023-08-19/Chart-of-the-Day-The-significance-of-BRICS1mojXxSPO9y/index.html
economic, and diplomatic perspectives, BRICS seems to be an
appropriate forum for Pakistan to be a part of.
For Pakistan, which is a member of the
SCO, it is a suitable option to join a dynamic organisation like
BRICS due to its growing political, economic, and
diplomatic potential which will be beneficial for Pakistan’s short and
long-term interests and help in realizing its much-desired pivot to
geoeconomics, keeping in mind its geo-strategic interests.
Moreover,
by becoming a part of BRICS, Pakistan would be able to expand its diplomatic
influence, open up lucrative trade and investment opportunities, and get access
to vast natural resources like oil and gas. Especially after addition of new
members, BRICS members will cover half of the world’s oil and gas resources.[1]
With regards to food production, BRICS countries contribute
almost half to the global food production, with 4 of its members being the top
food producers in the world which include: China, India, Brazil, and Russia.[2]
Hence, Pakistan being a country facing acute food and energy shortages will
greatly benefit by having access to massive energy and food markets by being a
part of the BRICS organisation.
[1] “A-Z Index”, U.S. Energy Information Administration, data extracted
from the source on September 22, 2023. https://www.eia.gov/tools/a-z/
[2] Sean Ross, “4 Countries That Produce the Most Food”,
Investopedia, published on April 30, 2023.
https://www.investopedia.com/articles/investing/100615/4-countries-produce-mostfood.asp#:~:text=The%20world's%20top%20four%20food,production%20plays%20in%20their%20econom
ies.
economic, and diplomatic perspectives, BRICS seems to be an
appropriate forum for Pakistan to be a part of.
For Pakistan, which is a member of the
SCO, it is a suitable option to join a dynamic organisation like
BRICS due to its growing political, economic, and
diplomatic potential which will be beneficial for Pakistan’s short and
long-term interests and help in realizing its much-desired pivot to
geoeconomics, keeping in mind its geo-strategic interests.
Moreover,
by becoming a part of BRICS, Pakistan would be able to expand its diplomatic
influence, open up lucrative trade and investment opportunities, and get access
to vast natural resources like oil and gas. Especially after addition of new
members, BRICS members will cover half of the world’s oil and gas resources.[1]
With regards to food production, BRICS countries contribute
almost half to the global food production, with 4 of its members being the top
food producers in the world which include: China, India, Brazil, and Russia.[2]
Hence, Pakistan being a country facing acute food and energy shortages will
greatly benefit by having access to massive energy and food markets by being a
part of the BRICS organisation.
[1] “A-Z Index”, U.S. Energy Information Administration, data extracted
from the source on September 22, 2023. https://www.eia.gov/tools/a-z/
[2] Sean Ross, “4 Countries That Produce the Most Food”,
Investopedia, published on April 30, 2023.
https://www.investopedia.com/articles/investing/100615/4-countries-produce-mostfood.asp#:~:text=The%20world's%20top%20four%20food,production%20plays%20in%20their%20econom
ies.
By joining BRICS, Pakistan will have access to mobilized
funds and resources allocated by the NDB for different sustainable development
projects that Pakistan critically needs. Also, by becoming a member of the NDB,
Pakistan will have alternatives to the Western-created and dominated creditors
like the IMF and WB. This will definitely lift off substantial pressure from
Pakistan’s policy and decision-making which it had been facing since long as
well.
Challenges for Pakistan in joining BRICS:
Acquiring BRICS full membership will greatly benefit Pakistan
and present great opportunities; however, Pakistan’s BRICS membership also
faces its unique set of challenges. They include:
•
The first and foremost challenge to Pakistan’s
BRICS membership is India’s opposition to Pakistan’s inclusion in the organisation.
•
Another challenge for Pakistan in joining BRICS
is to efficiently handle political and economic pressure that Pakistan might
face from its Western partners, who perceive BRICS as an organisation that was
created as a counterweight to Western-created global financial institutions and
challenge the global influence of the US dollar.
•
Pakistan is currently facing a plethora of
issues that range from political instability, economic stagnation, terrorist
attacks, climate change to food and energy insecurity. Countries like India
within BRICS will try to use these issues against Pakistan to weaken its case.
• Political stability in Pakistan and consensus among all relevant stakeholders is extremely necessary before approaching BRICS for full membership.
Recommendations:
The case for Pakistan to opt for BRICS membership is
strong. However, there is still a lot that needs to be done in order to make
Pakistan’s bid formidable and undeniable. Following are the recommendations for
Pakistan when making its case for BRICS membership:
•
Despite India’s expected opposition to
Pakistan’s BRICS membership, Pakistan should continue to make its case as an
eligible candidate. For the constant and repeated opposition to Pakistan’s case
for BRICS membership, India will have to spend its political capital within the
group which will ultimately run out and fatigue rest of the members of BRICS.
•
To counter India’s efforts to weaken Pakistan’s
case in front of other BRICS members, Pakistan will have to conduct an
aggressive diplomatic campaign to lobby all members of BRICS to vote in favour
of Pakistan and convince India to let Pakistan in for the larger benefit of the
organisation.
• Pragmatic assessments of Pakistan’s national capacity and capabilities must be made before joining BRICS. This will help Pakistan avoid making commitments which the country would find hard to fulfil later, restrict its policy manoeuvrability or infringe upon its interests.
•
It is equally pivotal to work on strengthening
the national currency – PKR, as it will aid in smoothly dealing in national
currencies with other members for commercial purposes.
•
Besides working on the existing strength areas
of Pakistani exports, the overall export portfolio also needs to be expanded
extensively and move towards product specialization will also have to be made
in order to compete with bigger economies within the group and avoid becoming
commercially redundant.
•
Policy consistency will have to be ensured at
every level. This will boost confidence of other BRICS members on Pakistan as a
potential candidate for BRICS and will generate economic and political
dividends even after becoming a member of the organisation.
•
Pakistan should immediately apply for NDB
membership even before it formally applies for BRICS full membership. Being
NDB’s member will complement and strengthen Pakistan's full membership case
into BRICS as well.
Conclusion:
Despite concerns of a few members, several geopolitical
factors have driven BRICS to expand. This trend which officially began during
the XV BRICS Summit in 2023 will most probably continue for the foreseeable
future. However, it is imperative for Pakistan to capitalize on this opportunity
before this window is no longer available.
BRICS is going to shape geopolitics and it would be remiss
if Pakistan misses the window of opportunity to join the organisation,
especially when majority of its members have openly stated that they are ready to
welcome all promising members who fit the bill to join BRICS.
The addition of six new members into BRICS is a window into
its future orientation. In comparison to the new inductees, Pakistan’s chances
of being accepted into the group are extremely bright, provided it effectively
fulfils all the criteria and advocate its case consistently, with good merit
and strong credibility in a timely manner.
Post a Comment