BRICS expansion could add RM19 bln to Malaysia’s economy: Juwai IQI
29 Aug 2023
Malaysia would profit economically from the expansion of the BRICS coalition of states to form “BRICS Plus” by leveraging its international relationships, according to Juwai IQI co-founder and group chief executive officer Kashif Ansari.
The attempt to make BRICS Plus a counterbalance to the G7 deepens the global rivalry between China and the United States, opening up new opportunities for Malaysia to collaborate with both sides to achieve its own economic and policy goals, he said.
Today, China accounts for 70 per cent of economic output among the BRICS nations and 69 per cent of all imports and exports.
Kashif said Malaysia has an opportunity to strengthen ties on both sides and make itself a non-aligned island of prosperity favoured by all.
“Let’s assume for the sake of illustration that Malaysia can use the competition between these national groupings to increase its trade and foreign direct investment (FDI) by one per cent, that would be an additional one per cent, above and beyond the contribution any other factors might make.
“If Malaysia can leverage the great power competition into benefits that boost GDP by one per cent, that would add some RM19 billion to the economy,” Kashif said, according to a new analysis released by Juwai IQI.
Kashif said a one per cent increase in GDP is a reasonable assumption.
The World Bank put 2022 GDP at RM1.9 trillion (US$406.31 billion).
“Remember that China’s interest in good relations with Malaysia helped lead to Chinese commitments to invest RM170 billion when the Prime Minister travelled to China in March. That was before China committed its diplomatic prestige to turning BRICS Plus into an important grouping.
“We can also look at bilateral trade agreements to provide context on the potential economic benefits Malaysia could obtain through negotiations with members of BRICS Plus and the G20,” he said.
Kashif pointed out that Malaysia’s agreement with Australia (MAFTA) has increased GDP by 0.2 per cent per year above the baseline level.
“Our team at Juwai IQI ran these back-of-the-envelope numbers to highlight the scale of Malaysia’s opportunity. One might conservatively expect Malaysia to be able to leverage the BRICS Plus-G7 competition to increase trade and foreign direct investment significantly. The result would be improvements in employment and the standard of living.
“A more robust economy and higher household income and employment will, over time, lead to a more stable housing market and higher homeownership rates,” he said.
Brazil, Russia, India, and China held their first BRIC summit in 2019 and were joined by South Africa the following year.
Since then, BRICS has been a forum for these countries to use their economic and demographic weight to argue for policies that benefit them.
Kashif said that with the creation of BRICS Plus, the grouping is taking on even more importance.
Last week, the five original nations invited Argentina, Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE to join in 2024.
In total, some 40 countries have expressed interest in joining the bloc.
Kashif said Malaysia can benefit even while maintaining its traditional non-aligned status.
These power blocs will want good relations with such a large and fast-growing nation. The push to turn BRICS Plus into a counterweight to the G7 means the two groupings of nations have incentives to maintain good relations with non-aligned countries, he said.
Kashi said savvy diplomacy and negotiations by the government may lead to new trade agreements, concessions, technology transfers, and investments by members of both BRICS Plus and the G7.
“At the same time, Malaysia’s friendliness to both BRICS Plus and the G7 will make it a safe place for corporations to invest in manufacturing and logistics,” he said.
According to Kashif, Juwai IQI’s network of Juwai Centres in China has received a surge in interest this month from companies that want to establish production centres outside of China to tap global markets and production capacity.
“It is in Malaysia’s interest to be friendly to both sides without fully committing to either. That fits Malaysia’s long-term foreign policy goals of maintaining peaceful relations with all countries and facilitating trade and inbound investment,” he said.