Why should a small economy like Nepal care much about developments in BRICS (Brazil, Russia, India, China and South Africa) whose 15th summit concluded in Johannesburg last week? There are three obvious reasons. First, Nepal is sandwiched between the two most influential BRICS members, India and China. This has ramifications in the extent and nature of economic and other engagements today and in the future. Second, Nepal has no alternative but to calibrate its policies along the geopolitical currents BRICS has been making globally. Third, and this may come as a surprise, the 2011 bestselling book by Jim O'Neil, The Growth Map: Economic Opportunity in the BRICs and Beyond, is set in Everest Base Camp, which he visited immediately after the collapse of Lehman Brothers that triggered the 2008 global financial crisis. At that time, the world was desperate to find a new hypothesis for growth optimism. O'Neil coined the acronym BRIC in 2001 from the initials of four populous and economically ambitious countries (excluding South Africa).

The setting

O'Neil in his book looks back on how his decade-old prediction not only got vindicated but exceeded many of his extrapolations and expectations in terms of the size of the economy and their growth rates over the review period. As the chief economist at the Goldman Sachs London office in 2001, he published a research paper in the company's Global Economics series, which made what at that time seemed a risky prediction: The global economy in the coming decades would be propelled by the growth of the BRICs.

The author says, "That (2001) paper started to command the attention of many, even though most thought it fanciful at the time. But our updated research (by 2011) suggests that it was anything but: China’s economic output—its gross domestic product—could match that of the United States as early as 2027, and perhaps even sooner. Since 2001, China’s GDP has risen fourfold, from $1.5 trillion to $6 trillion… And it’s likely that the combined GDP of the four BRIC nations will exceed that of the US sometime before 2020."

However, for BRIC leaders, it took almost a decade to translate the concept of a mere acronym to actual grouping until they met in Russia for the first summit in June 2009. South Africa joined in December 2010, and the group became BRICS. The 15th BRICS summit in as many years in South Africa last week has decided to add six more countries: Argentina, Egypt, Ethiopia, Iran, Saudi Arabia and the United Arab Emirates from January 2024. It would not be impertinent to ask whether Nepal also considers joining it as some three dozen countries are, reportedly, aspiring to be part of the group.

Although BRICS is still an informal arrangement, without a charter and a secretariat and referred to loosely as a forum, platform, mechanism, partnership or strategic partnership, it is evolving as a formidable force in economic terms.

The growth story of the BRICS countries, especially China and India, has been more than impressive. China's GDP has grown from $1.34 trillion in 2001 to $17.96 trillion in 2022. Likewise, the Indian economy has grown from a mere $0.5 trillion in 2001 to $3.4 trillion in 2022. Two other major economies, Russia and Brazil, have also registered significant growth, albeit with some serious punctuations. The group now constitutes over a quarter of the global GDP.

According to a recent UNCTAD report, foreign direct investment (FDI) annual inflows to the bloc more than quadrupled between 2001 and 2021, and contributed significantly to gross fixed capital formation. The creation of institutions such as the New Development Bank, with a $100 billion capital base, and the Contingent Reserve Arrangement manifest the group's economic ambitions. Between January and July this year, China’s intra-BRICS trade expanded by 19 percent year-on-year to $331 billion, or 10 percent of its total foreign trade. India's trade with the BRICS nations was valued at more than $100 billon last year.

Geopolitics overtakes

Explicitly or implicitly, BRICS has created several interesting global narratives such as giving a collective voice to the global South, providing development financial alternative to West-dominated Breton Woods institutions, and striving for de-dollarisation in the global economy, among others.

Even as O'Neil conceptualised BRIC under pure economic and demographic terms, he seemed to have missed taking geopolitical variables into account vis-à-vis the institutional fate of the alliance. He seemed unconvinced about the "political decision" to include South Africa back in 2010, and is still questioning the rationale behind inviting Ethiopia and not Nigeria, and including Argentina while excluding Indonesia and Mexico.

Whether one likes it or not, BRIC's expansion from the original four to 11 countries and its opening up for membership takes the focus away from "emerging large economies" with the potential of synergistically contributing to global growth. It was overriding economic interests that bound the disparate four—the fairly functional democracies India and Brazil, the essentially dictatorial regime Russia and the state capitalist China. Apart from strategic contestation between China and India, the inclusion of adversaries such as Iran and Saudi Arabia, countries with questionable democratic credentials, comes with challenges. One great challenge is in its institutionalisation and global recognition as a viable global institution capable of providing an alternative to West-dominated, mainly development finance organisations.

In economic terms too, countries with little global standing, such as Ethiopia, with a contribution of less than 0.1 percent to global GDP as against China and India with nearly 19 and 7 percent, respectively, are bound to play mere cheerleaders to an influential country. The speculation that BRICS+six, with a majority of undemocratic countries in it, would effectively become an instrument to augment China's strategic interests than serve the global economy could be self-fulfilling in light of its apparent aberrations and blurred vision. Ambitious agendas like dedollarisation and institutionalisation of South-South cooperation in the larger interest of small and developing economies certainly need more rule-based operation and bull's eye focus on the objectives, if at all they are identified, defined and articulated. The gap here looks glaring.