Policy Alert #50 | April 28, 2013

The leaders of Brazil, Russia, India, China and South Africa met in Durban last week for the 5^th BRICS Summit, where the group appeared to make some progress on the idea of a BRICS development bank. In today’s Policy Alert, we examine and contrast Russian and Chinese optimism in BRICS, with the much more cautious and cynical views from India and South Korea.

RUSSIA

Commentary in Russia uniformly praised the BRICS countries for establishing a “polycentric system of international relations,” and noted the importance of Russia-China relations within the BRICS framework.

• “BRICS has transformed itself from a political idea into a tangible symbol of a multipolar world,” said Vadim Lukov, the Russian foreign ministry’s special envoy to BRICS. Lukov also highlighted the importance of Russia-China relations within the BRICS. “China’s approach to BRICS is characterized by a deep understanding of the significance of creating a new multi-polar international system. Russia-China cooperation within BRICS is one of the important engines of its development.”
• The absence of consensus on a BRICS development bank, initiated during the previous summit in India, elicited mixed views from Russian experts:
  • Leonid Gusev, expert at Moscow State Institute of International Relations (MGIMO), predicted that making progress on the bank is unlikely, noting that the BRICS economies, particularly China and India, are too closely integrated with the American market for significant changes to take place.
  • Sergei Katyrin, chairman of Russia’s Chamber of Commerce and Industry, was more optimistic, stating that “while no ultimate decisions have been made on the bank’s quantitative parameters, its authorized capital, its contributors and the volume of contributions…I think this project will eventually take shape.”

INDIA

Most Indian views on the BRICS were either skeptical that the bloc can have any real impact, or were wary of China dominating a BRICS bank in the future.

• The Hindustan Times pointed out that the foreign policy relations amongst BRICS nations “remain shaky and at times seriously lacking in trust.”
• An op-ed in the Times of India also argued that the BRICS have conflicting interests and slowing economies, and that in any case “India’s economic interests are more closely aligned with the US than with the other BRICS,” since both countries are importers of oil and commodities.

The proposal to create a $100 billion BRICS bank drew sharp criticism by many newspaper editorials.

• “The BRICS bank is already crippled by concerns it will become the multilateral bank of Beijing because of China’s deeper pockets,” warned the Hindustan Times. “New Delhi, having proposed the idea, now drags its heels for fear it will be subsidizing Chinese soft power with Indian taxpayers’ money.”
• The Business Standard expressed the same admonition, recalling “India’s troubles with financing from the Asian Development Bank, thanks to China’s interference in some sensitive projects.”
• The Indian Express was wary of not only China’s role in a BRICS bank, but also Russia’s. The editorial questioned whether transparent and democratic financial governance was possible with China and Russia involved in the bank, and asked whether the bank “could become a means for China and Russia to support governments of their choice?”
•  Similarly, a Times of India editorial emphasized caution more broadly. “Closer economic cooperation in BRICS mustn’t end up being conflated with automatic like-mindedness on all geopolitical issues.”

The exception in criticism was an editorial by The Hindu, in which the paper’s leftist and nationalist stance lent support to this possible alternative to the current Bretton Woods financial system. Calling the bank “a great idea,” the paper acknowledged China’s likely dominance but argued that it “should not detract from the merits of the BRICS bank, especially its development orientation and stress on infrastructure financing.”

CHINA

Chinese commentary on the BRICS expressed confidence in the bloc’s political and economic potential, with mixed messages about the extent to which China will play a dominant role.

• The BRICS could create “a new model for multilateral cooperation” that could “gradually weaken Western dominance over global affairs,” said the Global Times. However, the same editorial also emphasized that “China has no ambition to dominate BRICS, and will not purposely seek to raise its role in this mechanism.”
•  Regarding a BRICS bank, another GT editorial also argued that such an institution would help reform the global financial system, but not challenge the IMF or World Bank. “China will have the most say in the development bank” and will face growing demands that it take on more global responsibilities, noted the paper.

Scholars also expressed high hopes for the BRICS on a range of issues.

• Liu Zongyi of the Shanghai Institute for International Studies pointed out the need to coordinate the grouping’s economic interests in Africa, and welcomed the possibility of cooperation on defense.
• Experts at a Ministry of Commerce think tank and the China Association of International Trade advocated the establishment of a BRICS free trade agreement to counter the US-led Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership.
• Fan Yongming of Fudan University expressed confidence that “the BRICS would maintain their momentum despite [Western] pessimism,” while Su Hao of China Foreign Affairs University expected much slower and incremental change.

SOUTH KOREA

In South Korea, a number of reports have suggested that the BRICS influence is fading, accounting for skepticism and lack of coverage regarding the BRICS summit.

Earlier this year, a report by the Korea Trade-Investment Promotion Agency suggested that “BRICS are giving way to VIPs,” referring to Vietnam, Indonesia, and the Philippines as “major markets for Korean exporters.” The report noted that while the VIP countries are just starting to grow, the BRICS countries are already seeing their growth levels fall, making the former a better bet for local exporters.