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.

A HUGE STEP

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 reckon 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.

“This heightened appeal as an FDI destination has the potential to stimulate significant economic advancement within the UAE and create numerous job opportunities across a spectrum of sectors, from technology and finance to healthcare and education,” he said.