Now that the integration processes in the West have stalled (Brexit, the US withdrawal from the Trans-Pacific Partnership), BRICS can come to the forefront in defining the global economic agenda and coordinating the international efforts to that end.
The process of global economic integration is clearly facing multiple challenges, including those related to non-economic factors. The world powers are struggling to give the global economy a new start, while regional players are looking for ways to effectively become part of these processes.
- International tensions, the drop and subsequent volatility in energy prices, and structural economic imbalances in the developing countries have all led to an obvious slowdown in the intensity of economic interactions. Over the past 20 years, international trade has been growing at an average rate of over 7% per year. Yet, last year, the growth rate stood at a measly 1.3%, according to the WTO.
Against that backdrop, BRICS has the potential to relaunch the global economy by intensifying cooperation within the bloc.
- Currently, the key to further development of BRICS lies in the building and fine-tuning of shared institutions, including a rating agency, an energy agency, and the New Development Bank (NDB). After a long period of approvals and alignments, the NDB started working last year and has since become an important alternative to the Western development institutions, such as the IMF. In 2016, the NDB approved financing for seven projects for a total of USD 1.5 billion, while for this year it has planned investments at USD 2.5 billion, with the NDB projects being implemented across all BRICS countries. The NDB's current investment focus is renewable energy. For example, in Russia the bank has provided USD 100 million worth of financing for construction of small 50 MW hydropower plants in Karelia, whereas in China it has released USD 81 million to finance a solar power project in Shanghai.
- At the 2016 BRICS summit in Goa the member-states reaffirmed their commitment to expedite customs procedures within the bloc, while continuing collaboration at the level of dedicated ministries and agencies. Overall, there are over 30 formats of cooperation on economic and other matters.
- Russia also seeks to increase the volume of mutual investments within the BRICS group. The oil and gas industry is one of the most obvious choices here, which is of particular significance to Russia given the Western sanctions directed against it. Last year, the Chinese and Indian companies joined several Russian oil and gas development projects. Rosneft and its partners, in their turn, purchased India's refiner Essar Oil. A resolution adopted by the Russian Government last year to issue federal loan bonds (OFZ) in the currencies of BRICS comes as a sign of particular importance Russia attaches to the BRICS association. This decision gives Russia an opportunity to tap into an alternative source of funding to circumvent the financial limitations imposed by the Western sanctions.
Russia and China are now playing the key role in further strengthening and development of the BRICS club.
- Early in 2017, China suggested bringing other countries into the discussion of relevant matters within BRICS. Beijing proposes to set up new groupings (BRICS+ and BRICS++) inviting the countries from the economic integration associations that the BRICS member states are part of (e.g. the EAEU or Mercosur).
- Russia stays the course on bolstering up BRICS, which became especially evident during its presidency of the club in 2015–2016. In 2015, Russia was the driving force behind the development and approval of the Strategy for BRICS Economic Partnership. On top of that, Russia drafted the BRICS Roadmap for Trade, Economic and Investment Cooperation until 2020. These two documents were used as a platform to launch five new workstreams, including e-commerce, development of a one-stop shop framework, intellectual property cooperation, promotion of trade, and SME.