, the first meeting of the RIC group (Russia, India and China) was held in 2005 in St. Petersburg.){kind=link}
After the creation of the BRIC term in the early 2000s (the economies of Brazil, Russia, India and China), the first meeting of the RIC group (Russia, India and China) was held in 2005 in St. Petersburg.
Brazil and later South Africa joined this group in February 2011, completing the initial BRICS group. Although BRICS is not an official alliance and there are wide differences between the members, by having held dozens of successful meetings and summits, there are still attractiveness and common interests in strengthening the BRICS’ broad economic mechanisms. Intra-BRICS trade reached US$162 billion in 2022, attracting the attention of multiple other countries expressing interest in joining and overtaking the collective GDP of the G7 group of nations.
BRICS Motivations and Opportunities for Egypt
BRICS countries possess about 26% of the global land area, and about 42% of the world’s population, meaning they have an increasing role in influencing the world economy. Due to the restructuring occurring within this, coupled with the strengthening of economic and financial cooperation within BRICS, the alliance has been welcomed by Egypt’s political and economic leaders.
At the 14th BRICS summit (in June 2022), new possibilities for economic cooperation were discussed. BRICS efforts in forming alternative payment systems and reserve currency for global trade, partnership for win-win cooperation, a gradual development of a non-dollar financial system, moving away from reliance on the US dollar, development of a common BRICS payment system (BRICS Pay), and an increase in trade with domestic currencies and the creation of a common digital currency have attracted more attention from Egypt.
The formation of reserves to solve liquidity problems and better cope with global crises through the economy of the member countries, forming a new multipolar economic strategy is a help to the Egyptian economy. BRICS attention to the development of alternative commercial and financial routes, promoting economic recovery, diversifying the economy, minimizing costs, developing e-commerce, market integration and cooperation with other countries has made BRICS more attractive to the Egyptian elite.
Since 2015, the New Development Bank has approved more than 90 projects worth US32 billion to support mainly infrastructure, with the bank’s focus on implementing projects related to the national development priorities of member countries.
Strengthening the role of the BRICS New Development Bank (NDB) is a move away from the hegemony of the United States, the International Monetary Fund, and the World Bank. Cairo became a member of the NDB after going through the necessary procedures and recently became a shareholder of the New Development Bank (NDB).
In this regard, Egypt’s participation in the NDB with the maximum limit and obtaining appropriate voting power in the board of directors (about 2.1% of the bank’s voting power) allows the country to support its sustainable development, address the liquidity issues, and facilitate the strengthening of cooperation and regional integration by investing in its infrastructure.
The presence of Egypt within the NDB is strengthening trade exchange agreements with the BRICS countries, while Egypt’s joining the NDB will help to reduce an overly high demand of US dollars to supply the country’s imports.
From Egypt’s point of view, the BRICS, as a union of strong emerging powers with a total of US$4 trillion in its collective foreign exchange reserves, can be an important economic option in front of institutions led by the West (such as the World Bank and the International Monetary Fund) and to overcome difficult conditions for the BRICS member states and provide mutual assistance.
Additionally, offering a series of technological projects to the BRICS countries through the NDB is expected to stimulate Egypt’s exports. Russia, for example, already has a manufacturing Free Trade Zone in Port Said, near the Suez Canal, as does China.
In another dimension, the expansion of Egypt’s strategic relations with Russia, China, Brazil, South Africa and India and the increase of joint projects and investments between the two sides are motivations for official participation in BRICS. BRICS members’ closer economic ties with the Gulf Cooperation Council (GCC), and fluctuations in economic relations between the United States and Egypt have increased Cairo’s desire to join BRICS. Also, benefiting from the experiences and assistance of the BRICS countries is another important part of incentives and opportunities for Egypt.
In the past decade, India has roughly doubled its GDP per capita, and China is rapidly strengthening its global economic role. Egypt can receive positive effects from India’s accelerated experience in the form of BRICS or facilitate the process of attracting foreign investment to Egypt and further enhance its national economic development.
Foreign direct investment and the value of bilateral trade between the BRIC countries and African countries are growing, and Egypt wants to take full advantage of this opportunity. Moreover, from the beginning of 2023, South Africa, in the leadership position of the group of BRICS countries, plans to advance the interests of Africa and partnership with key players. Both are members of the African Continental Free Trade Agreement (AfCFTA) which includes all African nations bar Eritrea, and reduces intra-African tariffs on 96% on all products to zero.
During South Africa’s BRICS Presidency, Cairo is placing its new membership in the BRICS under more consideration by using the “BRICS and Africa” program, together with the presence of BRICS in AfCFTA and especially in the development of infrastructure, and sustainable development.
Egypt’s Membership Process
“BRICS Plus” was created in 2017; and invited non-BRICS government officials to hold discussions. Russia and China have supported the process of expanding the membership and cooperation of “BRICS Plus” including the expansion of BRICS members.
Egypt participated in the BRICS Summits in 2017 and 2022. Egyptian President Abdel Fattah al-Sisi participated in the last BRICS summit at the invitation of Chinese President Xi Jinping. Emphasizing on increasing the position of the BRICS economy and the position of Egypt and its leading economic and commercial capabilities in the region, Cairo showed its interest in joining the BRICS group. Good relations with the BRICS members have caused actors like Russia to support Egypt’s efforts to join the alliance, while the Egyptian economy and manufacturing sectors have aligned with the needs of the BRICS grouping. Egypt is, along with South Africa, very much seen as a Gateway to the African Continent.
Challenges and Prospects
Egypt’s economic challenges include a weak sovereign currency, including a 50% devaluation of the Egyptian Pound last year, high rates of inflation (reaching as much as 40% in 2022), a 13% increase of Egypt’s foreign debt to US$163 billion dollars, a withdrawal of about US$20 billion of foreign investment, overly hasty implementation of prestigious projects, and excessive borrowings all brought about a deterioration of the Egyptian economy in 2022. The country was significantly damaged by EU polices formed as a result of the Ukraine conflict, which saw energy prices skyrocket and Ukraine’s grain harvest (usually sold to Egypt and Asia) be absorbed instead by the EU. With bread an Egyptian dietary stable, this created serious food shortages across the country for several months. That in turn lead to an overly pessimistic perspective of the future commitment of the EU as a trade partner to share products in times of global stresses.
Internally, critics have pointed to unnecessary and huge costs for projects such as the new Government administrative capital, the need for real structural reforms, the lack of comprehensive and sustainable development plans, and a reluctance to accept direct foreign investment.
However, the positive view of international institutions to Egypt’s economic indicators, a clear outlook, increasing of exports and foreign investments, increasing of the growth rate to 5.3% in 2023/2024, and plans to reduce foreign debt remain optimistic goals.
Challenges such as managing the volume of foreign debt, and a structural imbalance in the Egyptian economy, can reduce the incentives of BRICS members to fully integrate with Egypt. Some critics suggest that BRICS have not effectively achieved any specific goals, that there is little economic logic in expanding BRICS, and adding new members to it. But it must be said that the opportunities of joining BRICS for Egypt are rather more than the challenges. Egypt’s interaction with BRICS can be expected to grow.
Egypt’s membership in BRICS to some extent can reduce problems such as increasing poverty rates, (more than 30 million Egyptians live below the poverty line), an almost complete lack of comprehensive development, a negative balance of foreign exchange and debt risks with more than US$120 billion in foreign loans acquired since July 2013.
Now, 12 countries have applied to join the BRICS group. By following up the determination of the principles, standards, criteria and procedures, of the bloc, Egypt’s acceptance process may not be immediate. The country is likely to need more and longer economic reforms and negotiations for membership. However, South Africa’s gradual plan for Egypt to fully join BRICS (in August 2023) is likely to become more scientific, as the region’s most populous country, with 105 million people, is poised to play an increasing role in the economy of North Africa and the Middle East.
Source : Silkroadbriefing