BRICS is one of the most important economic blocs in the world, which includes Brazil, Russia, India, China and South Africa.
BRICS is an abbreviation of the first letters in the English language of the countries that make up the organization, which are: Brazil, Russia, India, China and South Africa. The group represents about 30% of the size of the global economy, 26% of the world’s area and 43% of the world’s population, and produces more than a third of grain production In the world. Member states have established the New Development Bank (NDB) with a capital of $100 billion to finance infrastructure and sustainable development projects in member states, as well as emerging market economies and other developing countries.
Interest in the BRICS bloc increased following the Russian-Ukrainian war and the accompanying restructuring of a new world order heading towards multipolarity, as several countries seek to join this bloc out of a desire to benefit from the economic and political advantages it offers, and to achieve a state of balance in the global economy.
After the “BRICS” group announced its invitation to Egypt to join its membership starting in January 2024, several questions emerged regarding the expected gains and the nature of the opportunities and challenges that the Egyptian state may face after joining, which is what this research paper answers in an analytical manner through several axes that come as follows: :
First: The economic importance of the BRICS bloc
Second: Egypt’s economic relations with the BRICS bloc countries
Third: The impact of Egypt’s accession to the BRICS bloc (opportunities and challenges)
Fourth: Estimating the gains of the new bloc
The most important findings of the paper are as follows:
-The total GDP of the BRICS member states will be about USD 25.9 trillion in 2022
-The BRICS group controls 17% of World Trade, and its current countries control 27% of the world’s land area, equivalent to about 42% of the total population of the Earth.
-Egypt’s exports to the BRICS countries increased by 5.3% to reach 4.9 billion dollars in 2022.
-The investments of the BRICS countries in Egypt amounted to 891.2 million dollars during the fiscal year 2021/2022.
-The size of the economy of the “BRICS ” group will become about 29 trillion dollars after the accession of the six new countries, representing about 29% of the size of the world economy
First: The economic importance of the BRICS bloc
The BRICS has become one of the most important economic blocs in the world today, due to the economic weight of its countries in light of its human, industrial and agricultural potential, which makes its decisions the focus of global attention and influence, as follows:
1-share of global gross product: the total GDP of the BRICS member countries is about 25.9 trillion dollars during 2022, which is 25.6% of the global GDP of about 101 trillion dollars in 2022, and it is also one of the countries that witnessed rapid economic growth rates, making it one of the largest global economies, such as China, the second largest economy in the world after the United States of America.
2- Contribution to global trade: The BRICS countries control 17% of the volume of global trade, according to World Trade Organization data. Looking at the global trade weight of the BRICS bloc in 2022, it was found that China leads the world with an export share of about 15% of total global exports, and comes in second place in terms of imports with a global share of more than 11%. Russia – second in the world in fuel exports – is ranked 15th globally in terms of exports, while India ranks 21st globally in terms of exports and 17th globally in terms of imports.
3- Human capital: The BRICS countries own about 40.9% of the world’s total population, with a total of 3.25 billion people out of a global total of about 7.95 billion people in 2022, making it a huge global market in terms of labor force, production, as well as distribution and consumption.
4- Diversity of the production structure: The commodity structure of BRICS exports in 2022 is characterized by diversity. Which gives these countries great opportunities for intra-trade and the integration of supply and production chains between them. For example: Russia has a huge production power of oil, natural gas, grains, fertilizers, nickel and its products, while China is distinguished by the diversity of its non-oil industrial production structure and leads the world in exporting many heavy industrial products. . South Africa is also distinguished by the manufacture and extraction of minerals and precious stones, especially pearls.
Second: Egypt’s economic relations with the BRICS countries
The BRICS countries have great economic relations with Egypt, where the volume of trade exchange between Egypt and the group in 2022 is as follows
– Egypt’s exports to the countries of the “BRICS ” group increased by 5.3% to reach 4.9 billion dollars compared to 4.6 billion dollars.
– The value of trade exchange between the two parties reached 31.2 billion dollars in 2022, an annual increase of 10.5% from 28.30 billion dollars, according to data from the central agency for public mobilization and statistics.
– Egyptian imports from Brazil, Russia, India, China and South Africa amounted to 26.4 billion dollars last year, an increase of 11.5% from 23.6 billion dollars in 2021.
– The Indian market was the first destination for Egyptian goods within the group in 2022 with a value of 1.9 billion dollars, followed by China with a value of 1.8 billion dollars, and Russia with a value of 595.1 million dollars
The BRICS countries began investing in Egypt over the past years, reaching $891.2 million during the fiscal year 2021/2022, an increase from the previous year, which amounted to $610.9 million, thus increasing by about 45.90%, and China came in first place with $369.4 million. Followed by India with $266.1 million, and South Africa with $220.3 million.
The number of companies established by the group’s countries in Egypt has reached 2,318, with a capital value of approximately two billion dollars, operating in several vital economic sectors, including the industry, services, construction, communications, and technology sectors.
China is at the forefront of the BRICS countries in terms of the volume of investments, as the number of companies established with the General Authority for Investment and Free Zones of the State of China is 1,345, and the contribution of these companies to the issued capital reaches 792.53 million dollars. China’s ranking on the list of foreign countries investing in Egypt is ranked 21st.
The Russian Federation ranks second among the BRICS countries investing in Egypt, as the number of companies founded by investors from Russia reaches 423, and the contribution of these companies to the issued capital reaches $124.97 million. The Russian Federation is ranked 47th among countries investing in Egypt.
There are strong partnership relations with Russia that have extended for more than 79 years of political, economic, military and diplomatic cooperation.the volume of trade exchange during 2021 amounted to about 4.7 billion dollars compared to 4.5 billion dollars in 2020, and Egyptian exports to Russia increased during 2021 to about 591.7 million dollars compared to about 515.6 million dollars in 2020.
Egypt is Russia’s first trading partner in Africa, with a ratio equivalent to 83% of the volume of trade between Russia and Africa, and Egypt obtains 33% of the volume of trade exchange between Russia and the Arab countries.
India: The number of companies established is 462, and the contribution of these companies to the issued capital is 751.64 million dollars. India’s ranking comes in 32nd place among countries investing in Egypt.
Brazil: The number of companies established at the Investment Authority is 28, and the contribution of these companies to the issued capital is $36.47 million, and Brazil is ranked 61st among the countries investing in Egypt.
South Africa: The number of companies establishing the State of South Africa in Egypt is 60, and the contribution of these companies to the issued capital is $292.16 million, and South Africa is ranked 64th among the countries investing in Egypt.
Third: the impact of Egypt’s accession to the BRICS bloc
The member states of the group play an increasing role in influencing the global economy, and thus the formation of a new multipolar economic strategy represents an opportunity to help the Egyptian economy. This is why Egypt’s joining the group represents a diversification of options for Cairo and a reduction in its exposure to any form of economic pressure. We review the opportunities and challenges related to Egypt’s joining the bloc as follows:
1-the decision of Egypt to join the BRICS group directly contributes to benefiting from the experiences of participating countries in increasing manufacturing and production rates, as the agreement establishing the BRICS Development Bank allows Egypt to strengthen the trade exchange agreement with 68 BRICS countries, thus providing a common market for the promotion of Egyptian goods and products, next to the Comesa grouping, which supports the continuation of the strategic vision on a new diversification of international trade relations.
2-this bloc gives the member states a kind of balance and rapid trade exchange to revive their economies, as well as the formation of reserves to address the liquidity problem, and how to face global crises through the economies of the member states, which are considered the most and fastest growing in the world.
3- -reducing the demand for the dollar: the “BRICS” countries are working on the formation of alternative payment systems and the creation of a common digital currency and a reserve currency for World Trade, which is likely to be backed by gold; as they are working on the gradual development of a financial system away from the US dollar, and expanding the use of local currencies in trade exchange, in a way that achieves win-win cooperation.
4-Egypt’s accession will strengthen its important and influential role in Africa, through trade agreements between them, and it will be able to benefit from trade agreements such as the common market of the South (Mercosur), to become a center connecting Africa, Asia and South America.
5-expectations indicate more intra-regional investments and the placement of countries such as India, for example, on the Egyptian investment map. The Egyptian economy is looking forward to attracting investments in the fields of digitization, renewable energy, agricultural development, green environmental investments and infrastructure.
6- securing strategic goods: the BRICS countries produce a third of the world’s grain production, and Egypt, Russia and India have previously held discussions regarding the trading of wheat and rice, along with other strategic goods in the Egyptian pound, ruble and rupee.
7-settlement of payments resulting from intra-trade between Egypt and the countries of the group using their currencies without the need for dollars, euros or yen.
8-stressing that Egypt has become an independent political decision seeking to establish balanced relations with all parties.
There are a number of challenges facing the bloc, both internal related to the extent of compatibility between the member states and the nature of their handling of key files and issues, and even bilateral relations between different countries within them, as well as external challenges related to the developments witnessed in the world and the range of current or upcoming wide variables.
There are also challenges associated with agreeing on future collective economic formulas
It is too early to agree on a single currency, but the ambition is currently related to exchanges in local currencies, reducing dependence on the dollar and transaction costs, and there is a state of freedom in trade exchanges without relying on the US currency .
Fourth: Estimating the gains of the new bloc
Three countries (Russia, China, and India) with international economic, political, and military weight are all seeking to play a greater role in the international arena and it seems obvious that they know-and even benefit-from American mistakes by making partnerships different from what the United States is doing. In light of these data and the political-military attraction sometimes between these giant economic powers and between America and Western countries, the dominance of the dollar will decline, but this will take some time.
Another important issue is the ability of the BRICS group to move forward towards more orderly, fairer and more established economic relations between the countries of the group. The following gains can be tentatively estimated:
1-after the size of the economy of the “BRICS” group was about 26 trillion dollars, representing about 6 percent of the global economy in 2022, after the accession of the six new countries will become about 29 trillion dollars, representing about 29% of the global economy.
2-with the increase of the number of BRICS countries to 11, the population of the BRICS countries will become more than three billion and 670 million people, which is almost half of the world’s population, while this percentage was at about 40% before the accession of these countries.
3-with the accession of both Saudi Arabia and the UAE to the “BRICS” bloc, there are oil forces with high production capacity, given the daily production volume of 10 million barrels of oil for both Russia and Saudi Arabia, and about three million barrels for the UAE, and in the presence of China within the bloc and as the largest importer in the world.
In conclusion, it can be said that there is a state of optimism in the language of numbers, the percentage of the contribution of the “BRICS” group reached 31.5% in the world economy, compared to 30.7% for the Seven industrial powers. The group seeks to reflect this superiority in practice by expanding its economic activities aimed at countering the dominance of the US dollar. The BRICS group controls 17% of World Trade, and its current countries control 27% of the world’s land area, equivalent to about 42% of the total population of the Earth, while the population of the group of seven countries is about 800 million people, but the bloc’s policy so far does not take the paths of conflict, all BRICS members are talking only about increasing the use of local currencies in intra-trade and the establishment of a common payment system, taking the Russian-Ukrainian crisis as an opportunity to achieve this goal.
Despite the optimism related to the success of the BRICS bloc in shaking the throne of the dollar, the de facto policy reduces this optimism, because reality strongly confirms that breaking the dominance of the US dollar in the global financial system is extremely difficult, as the dollar represents the most widespread reserve currency in the world at 61%, it is the main currency in World Trade and in the global stock markets, in the commodity markets, bank deposits, development finance and borrowing.