Khaleej Times- UAE Joins BRICS: A Game-Changing Move For Global Economic Dynamics

THE UAE’s entry into influential BRICS group next year will further enhance its influence and provide more opportunities for trade and investment in one of the major economic blocs of the world, experts say.

Analysts, executives and economic experts said the UAE's entry could contribute to the diversification and expansion of the BRICS economies, as it is renowned for its focus on innovation, cutting-edge technologies, and sustainable development.

This strategic move would not only benefit the UAE economically but also contribute to the diversification and expansion of the BRICS economic currently represent around 40 per cent of the world's population, according to the experts.

The collaborative efforts between the UAE and BRICS countries would likely result in stronger trade and investment ties, as well as knowledge sharing and joint initiatives in various sectors such as technology, energy, and finance.

The UAE already holds a prominent position in the global economy due to its diversified economy, strategic geographical location, and advanced infrastructure. It is a major oil producer, and its entry into the BRICS club could strengthen cooperation in the energy sector among the member countries.

Additionally, the UAE's expertise in sectors like technology, finance, tourism, logistics, startups, and renewable energy would complement the existing strengths of BRICS nations and foster greater cooperation and synergy. The emirate can also negotiate Comprehensive Economic Partnership Agreement (CEPA) with BRICS nation to accelerate its economic diversification plan in years to come.

Abdulla bin Touq Al Marri, Minister of Economy, termed BRICS membership a huge step for the UAE economy and said the country has always been working on a multilateralism aspect.

“We want peace and prosperity and with that comes economy and trade. Joining BRICS will add a lot as well to the UAE's multilateralism support to the world,” Al Marri said during an interview with Bloomberg TV.

The UAE along with Iran, Saudi Arabia, Egypt, Ethiopia and Argentina will join the Brazil, Russia, India, China and South Africa (BRICS) group on January 1, 2024, after an invitation was accepted by the countries in August. Of the 20 countries that sought membership, only six with significant economic prowess and logistical relevance were granted membership.

“We were focusing on global trade as the UAE has always been a global hub. For Comprehensive Economic Partnership Agreement (CEPA) with India, Indonesia and others, we are going global south. That is another important aspect we are focusing on. Anyone connected with the UAE on bilateral trade, we look at how to grow trade by 10 folds,” Al Marri said.

NEW POWERFUL BLOC

The UAE has been actively engaging with BRICS countries on various bilateral and multilateral platforms, including the World Trade Organisation. This continuous engagement showcases the UAE's commitment to furthering economic ties and cooperation with BRICS nations.

In 2023, the collective economic contribution of current BRICS nations was a staggering 31.7 per cent of the global economy, a leap from the 18 per cent in 2011. Latest reports indicate that this contribution might reach 50 per cent of the overall by 2030, reflecting an escalating economic influence of BRICS and the consequent financial and trade advantages it offers to member countries.

Collectively, BRICS countries command a GDP surpassing $27 trillion and a population exceeding 3 billion, thereby granting the UAE access to a broader customer base for its goods and services. The new bloc will represent roughly 46 per cent of the world population, account for 29 per cent of the world’s gross domestic product (GDP) in nominal terms and 37 per cent of global GDP at purchasing power parity.

Interestingly, the new additions don’t move the needle too much in either category, as the new BRICS which will continue to be dominated by China and India, both in terms of population and economically. Combined, the six new members will account for roughly 10 per cent of the group’s aggregate GDP, as Saudi Arabia is the only trillion dollar economy among the new entrants.

Monica Malik, Chief Economist at Abu Dhabi Commercial Bank, said the inclusion of key energy exporters such as the UAE and Saudi Arabia increases the size and the economic standing of the BRICS Group as it looks to expand and grow in influence. “It is positive that the UAE will be part of an expanding group that includes the largest emerging market economies, especially given its position as a global trading and services hub. The UAE will be able to be part of the discussions and development of the group and its position as a net capital exporter will also be important,” Malik told BTR.

She further said strengthening economic ties remains a key policy objective for the UAE and reflected in the CEPA agreements, which is supported by the BRICS inclusion.

For Saudi Arabia, accessing investment and technology will also be important given the size of the investment programme and diversification plans, according to Malik.

“We do not expect to see a formation of a new BRICS currency in the foreseeable future, though greater integration could help with some reduction in the US dollar as a trading currency,” she said. “A number of Emerging Market countries are also looking to pay for commodity imports in their domestic currencies, such as India and China. Membership could facilitate the process,” she added.

OPENING NEW AVENUES

Atik Munshi, managing partner, FinExpertiza UAE, said BRICS membership will open new avenues of trade and investment in coming years and the UAE will reap the benefits of joining the group.

“Being invited to the elite BRICS club is a tall achievement for UAE. This clearly shows that the state has made its mark in the international arena and is considered as a force to reczon with. The UAE is sure to reap both short- and long-term benefits from this alliance,” Munshi told BTR.

He said the immediate impact will be the opening of new avenues with BRICS member countries which can provide a significant trade advantage to the country.

“Oil and petrochemicals products are expected to play a major roll, though UAE’s other sectors like trans-exports, technology and financial sectors too are expected to gain,” he said.

With a global shift in the geo-political scenarios, he said the Middle East, particularly Saudi Arabia and the UAE have attracted a lot of attention and such attention can be converted to opportunities.

“With the BRICS membership, UAE can have a further clout in the policy matters and thus could influence decision makers in corporate and political worlds. The progressive mindset of the UAE leaders as well as excellent lifestyle and safety offered by the country have already attracted global investors and now BRICS membership could further strengthen the attractiveness of UAE as a FDI magnet,” Munshi said.

“The next five years, for UAE, I believe, could witness many positive changes and BRICS inclusion will certainly assist towards the same. The UAE is expected to extend its Cepa to other BRICS members with a reciprocity,” he said.

Bal Krishen said the BRICS membership will strengthen the UAE’s trade and global value chain integration while simultaneously attracting more foreign direct investment. It will also mark a significant milestone in its economic progress, offering a host of advantages for both the nation and fellow BRICS members.

“Embracing technologies like artificial intelligence, digitalisation, and critical infrastructure investments will bolster economic diversification and reduce reliance on petroleum.

“One prominent benefit of the UAE's inclusion in BRICS is its expanded access to a substantial and growing market. Together, BRICS nations boast a combined GDP exceeding $27 trillion and a population surpassing three billion, opening up a wider customer base for UAE's goods and services,” Krishen told BTR.

Another advantage of UAE's BRICS membership lies in the reinforcement of economic bonds with these nations. The UAE is already a notable trade partner with BRICS members, and its participation is expected to amplify trade between the two blocs, according to Krishen. The UAE also aims to enhance collaboration with BRICS members in sectors encompassing investment, finance, and technology. Benefitting from strategic positioning, the UAE is well-suited to assume a leadership role in these domains, with its BRICS membership furnishing a platform for such endeavours.

“The integration of the UAE into BRICS represents a significant milestone in its economic journey, projected to amplify trade, investment, and cooperation between the UAE and its BRICS counterparts. These developments will create fresh opportunities for businesses and the workforce in both regions,” Krishen said.

In essence, he said the UAE's affiliation with BRICS signifies a transformative journey that transcends economics and politics. “It's an avenue through which the nation can leverage international partnerships, enhance its global standing, and solidify its role as a dynamic and prosperous player on the world stage.”

Joining the BRICS group stands to benefit various sectors in the UAE, including trade, investment, space, medicine, finance, energy and technology, while also having a positive impact on various aspects of the local economy.

“By aligning with the BRICS economies, the UAE can strengthen its position as a global trade and logistics hub. A prime example of this potential lies in the flourishing UAE-India bilateral trade, expected to reach $100 billion by 2030, driven by their CEPA,” Krishen said.

China has also emerged as the UAE's largest non-oil trading partner. Trade between the UAE and Brazil has surged, with a 32 per cent increase between 2021 and 2022, followed by an additional eight per cent hike in the first seven months of 2023. “This strategic alliance offers significant opportunities for technology companies to contribute to the UAE's infrastructure development, especially in the security sector. Furthermore, it holds the promise of transforming the health technology industry, advancing the education system, and more. The alliance creates ample opportunities for cross-border knowledge exchange and mutually beneficial partnerships,” Krishen said.

He said the harmonisation of property legislation among BRICS countries could facilitate cross-border transactions, giving a boost to the UAE's real estate sector and supporting overall economic growth. “This change has the potential to not only reshape industry dynamics but also transition the UAE's real estate market into a more resilient and profitable phase.”

He said the UAE's inclusion in BRICS represents more than mere economic expansion and political influence; it presents a chance to draw talent and investment via well-planned collaborations. “The BRICS consortium collectively boasts an impressive FDI portfolio that exceeds a staggering $1 trillion. With the UAE's inclusion in this group, it becomes an even more attractive destination for foreign investors seeking promising opportunities.