Against the backdrop of a sizeable expansion in BRICS membership, debates have intensified over the expediency of the bloc’s institutionalization to cope with the rising complexity in its operations. In particular, calls have been voiced on the desirability of a permanent secretariat and headquarters to be established so that BRICS becomes a full-fledged international organization that operates in continuous mode rather than a network platform that focusses on the BRICS annual summits. And just like the expansion of the bloc, BRICS institutionalization harbors opportunities as well as notable risks. Arguably, the most important near-term goal for the BRICS needs to target the full use of the networking and aggregating potential of the current agile platform. This, however, calls for innovative approaches to building economic linkages within the BRICS+ circle – mere imitation of rigid and outdated institutional frameworks is fraught with lower development momentum and inefficient use of resources.
In some respects, there may be a case for greater institutionalization of BRICS via creating a permanent secretariat and administrative bodies that ensure a continuous coordination of economic and financial policies of member countries. Thus far, BRICS key meetings center on the annual summits of the member countries’ leaders with one of the very few tangible institutional platforms to support continuous economic/financial cooperation being the New development Bank (NDB). Furthermore, the recent case of Saudi Arabia signaling ambivalence concerning its entry into BRICS highlights the risks of a framework that is at times too flexible and not quite as rigorous in outlining and enforcing the rules of the grouping. On the other hand, the downside of a concerted move towards institutionalization is the pile-up of the “bureaucratic overhang”, lower agility and flexibility in decision-making, greater scope and costs of tensions amid expanding membership.
But before member countries grapple with the risks and opportunities offered by the bloc’s institutionalization, it may make more sense to focus on deriving maximum benefits from the flexible network that is in operation currently. To be sure, thus far there has been limited headway in exploiting the opportunities for creating new economic platforms and generating network effects across the BRICS+ space. This is particularly the case with respect to regional platforms that across the developing world have already amassed sizeable resources and capabilities exceeding those of the global multilateral institutions – within the BRICS+ context such regional platforms may include:
- Platform for regional development banks (RDBs)
- Platform for regional financing arrangements (RFAs)
- Platform for regional integration/trading arrangements (RTAs)
There is also scope for other types of platforms with powerful network effects in finance:
- Platform for sovereign wealth funds (SWFs)
- Platforms bringing together the exchanges and regulators of the BRICS+ circle
- Energy sustainability platform to coordinate policies on sustainable development and energy production/use
Pooling existing BRICS+ resources is superior to creating new institutions, funds and organizations. Firstly, pooling lowers the risks of duplication and the inefficient use of resources – rather than struggling to dole out additional funds from their (at times ailing) budgets, the BRICS+ economies may simply resort to directing their existing regional and national development institutions and reserves towards priority economic objectives. The recent proposal to create a new BRICS Investment Fund is a case in point – while there may be merits in having a stronger institutional framework for BRICS+ investment cooperation, such an initiative risks duplicating some of the functions of the New Development Bank (NDB), while also requiring additional budgetary allocations from members. A platform that brings together the SWFs of the Global South would generate far more resources with lower if any costs.
The pooling of regional resources and reserves across the Global South may be instrumental not only in forming platforms of financing priority development tracks – such a strategy may also enable BRICS economies to address some of the key gaps in the economic development of the Global South. These “anomalies/disconnects/paradoxes” include the notable degree of under-trading (below potential as indicated by gravity model estimates) among the leading BRICS economies and their respective regional partners, the sizeable under-trading (again in line with gravity model indications) in South-South trade; the Lucas paradox (capital flows largely flowing from the Global South to the developed world rather than vice versa). Bringing together existing regional undertakings of BRICS economies may also deliver an important impulse to further developing these regional platforms and rendering South-South economic cooperation in trade and investment more structured and balanced.
In the end, imitation always produces a sub-par version of the original. Rather than merely following the route charted by international organizations and traditional alliances led by developed economies, the BRICS need to innovate in making use of the opportunities offered by platforms that pool existing resources with strong network effects. After all, the current trends in the global economy are characterized by the rise of platforms that prove to be more agile and competitive than traditional corporate structures. While greater institutionalization may be something to explore in the longer term, the near-term exigencies have to do with bringing together the main economic building blocs from the Global South (most notably the regional integration arrangements and their regional development institutions) into closer cooperation with each other. Otherwise, excessive and premature zeal in forging ahead with institutionalization harbors the risks of BRICS and BRICS+ veering off-track into self-aggrandizement and inefficiency.
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