BRICS and the GCC Deciphering Avenues for Engagements

Economic Diplomacy

The GCC countries deserve a larger role in the global governance architecture and in the multilateral trading system. BRICS, with a GDP of $15.81 trillion, has a trans-continental outreach and has emerged as the developing world’s most significant voice. Thus, a confluence is evident between the GCC and BRICS. The BRICS mandate and the emerging policy and institutional frameworks therein can be a source of mutual benefit and cooperation among the emerging economies, including the GCC countries.

New Delhi assumed the Brazil-Russia-India-China-South Africa (BRICS) presidency in February 2016, and shall again host the Leader’s summit after 2012. This article addresses an interesting question that while all emerging countries are keeping a track of BRICS activities, what benefits can the Gulf Cooperation Council (GCC) derive through supporting the cause of BRICS as being a voice of the global South.

The 2012 Delhi Summit had plethora of issues including those related to the BRICS Bank or the New Development Bank (NDB), global governance and developing common stand of BRICS on unilateral and other measures on climate change. Much has happened since then. In 2015, the Leader’s summit was held in Ufa, Russia and it formalised the two much sought after institutional mechanisms - NDB and the Contingency Reserve Arrangement, both with a capital of $100 billion each.

The GCC is a regional trade bloc comprising 6 countries of the Persian Gulf, namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE). It was formed in 1981 and aims to enhance cooperation in trade and strategic areas among the members. The level of economic integration in the GCC is exemplary. It became a Customs Union in 2003 and a Common Market in 2008. The GCC now has a combined Gross Domestic Product (GDP) of $1.6 trillion (2013, World Development Indicators database, The World Bank), and hosts more than 35 percent of the proven crude oil reserves in the world. The presence of hydrocarbon resources has played a significant role in the economic development and in enhancing the international trading position of the GCC countries.

With such economic conditions coupled with a liberal investment regime, the GCC countries deserve a larger role in the global governance architecture and in the multilateral trading system. BRICS, with a GDP of $15.81 trillion (2013, World Development Indicators database, The World Bank), has a trans-continental outreach and has emerged as the developing world’s most significant voice. Thus, a confluence is evident between the GCC and BRICS. The BRICS mandate and the emerging policy and institutional frameworks therein can be a source of mutual benefit and cooperation among the emerging economies, including the GCC countries.

An important challenge is how to strengthen the Southern voice by building common positions on issues of global concern. The policy platforms can be many including the G20, but BRICS definitely has its own gravity. This is an era of multilateralism and there is a need for emerging economies to play a lead role in rule-making in the World Trade Organisation (WTO). Unilateral measures adopted by some developed countries deter the enabling environment for cooperation. The Ufa Declaration during the 7th BRICS Summit also resolved against the unilateral interventions and economic sanctions that violate international law.

Moreover, an evident proliferation of funding channels reduces aid effectiveness in the global South, and hampers the growth of south-south cooperation as well. Many Arab states are recipients of development aid, and some of them, especially the GCC countries are donors as well. BRICS can play a pivotal role in strengthening and deepening the implementation of the Paris Declaration on Aid Effectiveness, 2005 and the Accra Agenda for Action, 2008. Their timely and complete implementation is necessary to support the WTO’s Aid-for-Trade initiative as provided by the Hong Kong Ministerial of 2005. An alignment of all such development initiatives with the nuances of South-South Cooperation agenda shall be highly feasible and conducive for development in the countries of the global South, especially in Africa and the Arab region. The GCC and African countries can build common positions with the BRICS for promoting south-south cooperation and trade as well.

Besides, the emerging economies including the GCC can build possible common position on new issues in the multilateral trading system viz. trade and climate change including Unilateral Trade Measures (UTMs), technology transfer, etc; trade and food security including agricultural subsidies, food export restrictions, etc; and, trade and finance including protectionism and financial stability. The UTMs, which are generally trade measures adopted by developed country against developing countries’ exports on grounds of protectionism, is a threat to the emerging economies and is a cause of common concern for the global South. Such UTMs also violate the provisions of the Article 3 of the United Nations Framework Convention on Climate Change, which calls for the ‘principle of common but differentiated responsibilities’, on which the BRICS countries tend to have some common position. Besides, implementation of quota and governance reforms 2010 in the International Monetary Fund (IMF) already solicits common position of the two entities for acquiring a larger say in global governance. These are the areas where GCC and BRICS can cooperate and mutually strengthen their voice and participation in world affairs.

Another issue before the GCC countries is the need for diversification in trade portfolio. In recent years, these countries have been extensively focusing on diversifying their trade basket from oil to non-oil sectors. Some key sectors that have garnered policy attention in recent years in the Gulf include manufacturing, mining, small and medium enterprises, transportation, tourism, higher education, and other services. For instance, the Sultanate of Oman’s 2016-20 Plan aims to reduce the oil industry’s contribution from 44 percent to 22 percent of its GDP and focus on manufacturing, mining, transport and tourism sectors. The plan also envisages that the country expects a $106 billion worth of investment inflows.

The effort for diversification is in terms of services sector (financial, healthcare, education, tourism, etc), and also in terms of investment in infrastructure and project exports. This is opening up scope for more engagement of GCC countries with other emerging economies including the BRICS. Capacities can be built in areas of services sector through training and research, and mechanism and frameworks of south-south cooperation can be utilised for sharing best practices and initiating capacity building programs in the region. Also, technology sharing at the intra-firm level in case of multinational companies, in strategic alliances, and in joint ventures; technical assistance; market access; and, trade facilitation remain some of the most sought after areas in the Gulf and the Arab region, which can be focused upon through cooperation with the BRICS and other emerging economies.

Interestingly, with the development of NDB, BRICS is well positioned to finance such infrastructural investments. The GCC countries can utilise the financing mechanisms of the NDB as well as of the China-led Asian Infrastructure Development Bank (AIDB), for deciphering the benefits of investment inflows and outflows with the BRICS countries. This will also help increase the participation of the GCC countries in the global value chains.

Moreover, BRICS countries possess comparative and competitive advantages in agriculture, industrial growth, technological knowhow, renewable energy, information and communication technology, growth of small and medium enterprises, tourism, transport, telecommunications and other services, which are of utmost significance for the GCC countries. These advantages of the BRICS countries could be used by the GCC to help build production capacities, and encourage investment flows.

Go to Content Page

Back to Top

Diplomatist Magazine was launched in October of 1996 as the signature magazine of L.B. Associates (Pvt) Ltd, a contract publishing house based in Noida, a satellite town of New Delhi, India, the National Capital.

Search