BRICS Insights: Homework for BRICS

The recent trends in various economies around the world show that old growth models are no longer viable nor yield the results they once did. Every country is constantly looking to update its system, each in its own way. Such developments are not only caused by the Third Industrial Revolution and rise of new technologies, but also the development and strengthening of market institutions and investments in human capital.

Meanwhile, discussion on how to define social and economic progress and how the success of nations should be measured is still far from over. Social theorist Jeremy Rifkin and those like him have predicted various hypothetical post-capitalist economic systems, such as a transition to socialism, technocracy, green economy and so on, in which the role of economists is clear and straightforward.

A transition to a sustainable development model and proactive implementation of green technologies are key imperatives for the longterm social and economic development of every country striving to advance; Russia is hardly an exception. In the near future, Russia must play a lead role in the development of a worldwide green economy. This should become a key component of the government’s long-term proactive, pre-emptive strategy. A sustainable development ideology must be embedded in the current efforts to stimulate GDP growth, which will ultimately replace GDP growth altogether.

The current situation calls for the implementation of self-regulation instruments, development of bottom-up democratic institutions, and a more proactive attitude. Overall, the strategic pivot of Russia’s economic policy must be aimed at resolving the problems that restrict long-term sustainable economic growth opportunities. These include institutional transformations, improving business climate, building a massive middle class, and striking a balance between the government’s social obligations and its ability to mobilize financial resources both at the federal and the regional level.

In terms of the BRICS group, people must bear in mind that these countries are drastically different from political and economic perspectives. However, they do share a number of problems related to the need for a better investment climate and development of human capital. The potential for cooperation in these realms and certain other economic issues between the BRICS countries has yet to be realized. Broad opportunity remains in both the private and public sectors.

BRICS cooperation currently underway in a number of realms is of systemic importance to Russia.

First, demand for Russian natural resources such as liquefied natural gas, mineral fertilizers and coal in the BRICS markets has not been fully explored yet. Power equipment and aviation solutions offer further untapped export opportunities for Russia. Conversely, the Russian market needs goods from its BRICS partners.

Second, economic integration must be accompanied not only by lifting restrictions such as import duties and non-tariff barriers, but also by quality efforts designed to generate value-added chains. For instance, BRICS governments could facilitate the development of joint manufacturing projects, foster scientific research, and enhance human resources through specialized bilateral groups composed of stakeholders.

Third, efforts to encourage better relations between private entities and to promote greater numbers of private contracts are extremely important.

From the economic perspective, governments of the BRICS member nations should pursue objectives related to creating an environment that fosters cooperation among economic agents, reduces barriers against business integration and creates a set of rules accepted by all members.

The BRICS group has yet to formulate a common economic agenda. Due to geographical, natural and economic factors, these countries now have great potential to develop trade and cooperation in mining, agriculture, energy, environmental protection and the development of human capital. Infrastructure projects are looking very promising and could expand relations between these countries as well as stimulating exports to others. The BRICS New Development Bank is a tool intended for this purpose.

The goal of building a common trade space is long-term in nature. In order to succeed, it is necessary to understand how existing integration initiatives involving the BRICS countries work. This is akin to homework for the BRICS countries, a task that needs to be completed. I hope and believe that in the near future, in only a few years, we will see significant strides in this area.

Excerpt from the BRICS magazine interview with Vladimir Mau, president and chairman of the Academic Board at the Russian Presidential Academy of National Economy and Public Administration