JUST a couple of years ago, BRICS (Brazil, Russia, India, China and South Africa) were the poster boys of the emerging economies. They were the bright spots while Western economies were struggling.
But over the past year, the BRICS have been eclipsed, as they all experienced an economic slowdown to varying degrees. Except China and India, the other members of the grouping have slid markedly in growth rates.
However, India’s growth has also skidded somewhat and China’s growth, while still robust, is slowing because of reduced demand for exports and structrual reform.
This has engendered skepticism regarding the BRICS’ clout as a growth engine of world economy. Some naysayers even doubt the future for cooperation among BRICS members as they gradually lose their luster.
Experts dismissed the pessimistic view at a seminar at Fudan University, at the release of the Chinese edition of the BRICS Information Sharing & Exchanging Platform (www.brics-info.org) on February 26.
Even for South Africa, the smallest economy among the BRICS, skepticism about the BRICS is short-sighted and misinformed, said Liu Guijin, deputy foreign minister of China.
Sound fundamentals
Although South Africa’s economy has lost some momentum, its fundamentals are sound. The country has a large reserve of natural resources. Its financial and banking system remains stable and generally healthy. And the nation has a solid base of infrastructure and manufacturing. Moreover, its tertiary industry accounted for more than 60 percent of the economy. All these factors and indicators do not paint a bleak picture, said Liu.
The South African government is speeding up development of infrastructure such as railways, roads, hydropower and logistics as well as restructuring its economy to wean it from dependence on commodities, the former Chinese ambassador to South Africa said.
He added that South Africa had tried to deepen South-South cooperation within the BRICS framework when it brought African heads of state together at the fifth BRICS summit in Durban, South Africa, last March.
The rise of emerging economies, led by BRICS, has been a splendid chapter in the annals of human development. As such, it is inappropriate to focus on their current problems and negate their achievements, said the diplomat.
There is reason to believe the BRICS will ride out the slowdown, because of the potential for business cooperation among BRICS members, said Xu Chao, Chinese secretary general of the BRICS Business Council.
We should not be blinded by statistics when it comes to BRICS’ growth, since the figures will change.
A potential area for cooperation is the setting up of export credit agencies in each other’s countries. Such agencies will provide the much-needed funding to BRICS businesses, since traditional financial institutions are reluctant to lend for fear of the risks in cross-border transactions, said Xu.
He said China should take the initiative to broach proposals for business cooperation within BRICS, and if necessary, be willing to make compromises to win others’ trust and reciprocal provision of broader market access.
Self-interested policies
The current slowed growth of the world economy has mainly stemmed from self-interested policies of developed economies to shift their own trouble to others, such as the Fed’s QE (quantitative easing) measure.
Now that the Fed has started to wind down QE, the capital flight has caused hot money to flee the property and stock markets of BRICS, resulting in a plunge in prices, said Fan Yongming, director of the BRICS research center at Fudan.
Fan argued that compared with developed economies, BRICS still have the labor, resources and market strengths for growth.
Developed economies’ share of contribution to global GDP is 54 percent, which returned to the pre-financial crisis levels, but in purchasing power parity terms, the proportion falls to 35 percent, with the remaining 65 percent coming from BRICS. Therefore, despite its problems, it’s not yet the time to write off BRICS as a major growth engine, Fan told the audience.
With the recovery of their economies, Western nations are backpedaling on their earlier pledges to give BRICS and emerging economies a bigger role in global institutions such as the World Bank and IMF, which they dominate and seek to dominate indefinitely, Fan said.
But if we think more in terms of fundamentals, rather than statistics, the picture is still promising for BRICS nations, said Fan.
Whether the vested Western interests welcome their ascent or not, they are certain to play an increasingly important role in managing the world economy and building a new and just world order, he observed.