Key Outcomes of the 2016 BRICS Summit
By India Briefing
Posted: 3rd November 2016 08:21
The eighth annual BRICS summit was held from October 15 to 16 this year in Goa, India. BRICS, the acronym, refers to the formal grouping of five nations – Brazil, Russia, India, China, and South Africa; their annual conference is attended by the executive heads of these respective states. As a collective, BRICS brings together the five major emerging economies of the world, comprising 43 percent of the world’s population, contributing to 30 percent of the world GDP, and holding a 17 percent share in world trade.
While the BRICS have ordinarily focused on economic issues of mutual interest, their agenda has widened of late to encompass various topical global issues. This is why the 2016 summit was an unusually sensitive gathering for the international grouping, as matters related to border security and international terrorism some divided members, according to their respective national foreign policy interests. Nevertheless, the 2016 summit ended on an optimistic note with a call for stronger business, trade, and energy relationships.
Takeaways from the Eighth Summit
Agreement over the importance of the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (Bimstec): This bloc, comprising of seven countries from South Asia (India, Nepal, Bangladesh, Bhutan, and Sri Lanka) and two from Southeast Asia (Thailand and Myanmar) collectively holds great importance for the emerging powers in the BRICS collective. Currently, the rate of growth observed in the Bimstec region averages to about 6.5 percent and represents a booming consumer market, with tremendous scope for expanding trade and energy partnerships, building better business relations, and infrastructure investments and development.
Growing Trade Commitment:As stated by India’s Prime Minister Modi, intra-BRICS trade stood at US$ 250 billion in 2015. This accounts for barely 5 percent of the global trade. However, while a free trade pact among these countries is not a working consideration, a fresh boost comes from this year’s acceptance of a tax and custom cooperation framework to facilitate trade among members. Alluding to this positive development, Modi called for the BRICS nations to target the doubling of the current trade volume to US$ 500 billion in the next five years. Finally, the first BRICS Trade Fair took place this year, shortly before the summit, in New Delhi. Along with the BRICS Business Council, the BRICS Trade Fair can work to strengthen mutual trade, enhance business opportunities, establish key investment linkages, and promote ease of commerce in the intra-BRICS region.
Nevertheless, the success of such trade aspirations will not be achieved without sufficient trade liberalization – a commitment that is losing appeal worldwide as populism and protectionism underline state policies.
General Cooperation with the New Development Bank (NDB):The BRICS nations established the New Development Bank (NDB) in July 2014 with an initial authorized capital of US$ 100 billion and the bank was officially launched a year later. At this year’s BRICS summit, India signed an MoU on General Cooperation with New Development Bank (NDB) through the BRICS Interbank Cooperation Mechanism. (Five banks from the BRIC nations had established the BRICS Interbank Co-operation Mechanism to enhance trade and economic relations amongst the BRICS nations and enterprises.)
Moreover, the president of the development bank, KV Kamath, stated that the NDB would lend up to US$ 2.5 billion next year, including loans backing ‘green’ projects. The NDB has thus far approved US$ 900 million in loans to green projects in each of the BRICS states. A renminbi-dominated borrowing program has also begun.
India – Brazil Ties: A key development on the sidelines of this year’s BRICS summit has been greater business and economic engagement between India and Brazil, even as relationships with China and Russia entered more testy waters due to contradicting political interests. India and Brazil exchanged four memoranda of understanding (MoUs) last week, which included an Investment Cooperation and Facilitation Treaty; an MoU on Genetic Resources, Agriculture, Animal Husbandry, Natural Resources and Fisheries; an MoU on Pharmaceutical Products Regulation; and an MoU on Cattle Genomics and Assisted Reproductive Technologies.
At present, Brazil accounts for only 1.21 percent of India’s total trade at US$ 6.69 billion in 2015-2016. Hoping to accelerate this relationship, the Brazilian Ambassador to India, Tovara Da Silva Nunes, highlighted the important sectors that show scope for growth in their bilateral trade – medical equipment and medicines, aerospace, aeronautics, oil and natural gas, chemicals, fertilizers, and processed food. Additionally, market opportunities exist in the areas of food and drinks (coffee, tea, fruits, cocoa, and confectionary products), home and building (woods), machinery and equipment (vehicles and auto parts), and mineral products.
Many challenges lie ahead for the BRICS. Each of these emerging economies are presently on divergent growth paths, which in turn translate into differing priorities and the lack of a unified agenda. Nevertheless, since these five countries cumulatively hold considerable weight in global economics and politics, their continuing engagement serves well for stable growth prospects in the regions they encompass. This is why overcoming individual ambitions is a prerequisite if the trends toward deepening through institutionalization (via the year-old New Development Bank and the proposed ratings agency) are to actually materialize. In that sense, it makes more sense for the BRICS quintet to subscribe to a well-defined economic scope to avoid getting caught in the quagmire of geopolitical rhetoric. Though such a mandate would be necessarily limited, seeking exclusively to promote investments and commercial collaboration, they would also invariably reflect the dynamism of these five powerful economies.
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