PETALING JAYA: Joining BRICS could offer Malaysia market growth, economic diversification, and less reliance on the dollar.
But experts warn it also brings risks of trade tensions with Western nations and uncertainty over whether the bloc can deliver cohesive benefits.
BRICS, which initially included Brazil, Russia, India, and China, was established in 2009, with South Africa joining in 2010. The bloc now includes Egypt, Ethiopia, Iran, and the United Arab Emirates.
For Malaysia, joining BRICS offers expanded access to large and diverse markets like India and Brazil, which are underdeveloped trade partners at present.
OCBC Senior Asean Economist Lavanya Venkateswaran stated that while Malaysia already has strong ties with China, there is “room to deepen trade ties” with other countries to lower concentration risk, highlighting that India and Brazil accounted for only 3.2% and 0.4% of Malaysia’s exports in 2023, respectively.
“Joining BRICS opens doors to conversation on deeper trade, investment and financial ties.
“The scope to explore countries within the alliance as potential markets for products, investments can yield longer term economic benefits of market and even product diversification,” she said in a reply to StarBiz.
China has remained Malaysia’s top trading partner for 15 consecutive years since 2009. Although bilateral trade with China fell by 7.3% to RM450.84bil in 2023 from the preceding year, it still accounted for 17.1% of Malaysia’s total trade.
While Malaysia’s trade relations with China are strong and substantial, Lavanya noted there is room to further deepen these ties.
Similarly, SPI Asset Management managing director Stephen Innes said the BRICS membership could further strengthen Malaysia’s trade ties with China and India, improve market access, and bring BRICS funding opportunities for infrastructure.
He highlighted that Malaysia’s BRICS membership could boost export markets for electronics and palm oil, enhance access to technology transfers for digital and green sectors, and position Malaysia as a supply chain hub within BRICS, thereby reducing its reliance on Western markets.
“BRICS membership could diversify Malaysia’s trade and attract investment, but balancing relations with Western allies, especially the United States and European Union (EU), may prove challenging.
“Navigating potential conflicts between Western and BRICS policies will require skillful diplomacy,” he said.
Innes warned the BRICS membership could strain Malaysia’s balanced foreign policy and risking trade and investments with the United States and EU.
“With BRICS’ policy focus often on larger economies, Malaysia might not see major economic gains, instead facing increased geopolitical risks without guaranteed benefits,” he added.
Taylor’s University lecturers Paul Anthony Mariadas and Uma Murthy said the BRICS membership could provide Malaysia access to initiatives like the contingent reserve arrangement (CRA), which aims to provide liquidity support during financial crises.
“This could serve as an additional financial safety net, enhancing Malaysia’s economic resilience,” they opined.
Additionally, by joining the BRICS’ bloc, they said Malaysia could benefit from technology transfers, research collaborations and shared expertise in sectors such as artificial intelligence and renewable energy, potentially fostering a knowledge-based economy.Meanwhile, Malaysian Economic Association (MEA) president Yeah Kim Leng pointed out that BRICS’ market is far larger than the combined Group of Seven economies and the Regional Comprehensive Economic Partnership (RCEP).
“By participating in both economic blocs (RCEP and BRICS), Malaysia stands to benefit from being a member in both groupings in terms of trade and investment flows,” Yeah said.
He added other potential spillovers include technology transfers, enhanced food and raw material security, and improved supply chain stability, with members often prioritised over non-members.Yeah also highlighted that BRICS membership could help Malaysia diversify its geopolitical risks as “being a member confers first-mover or first-right advantages to new financial, trade and investment arrangements” introduced for the bloc.
He noted that Malaysia’s role within BRICS could further enhance its trade through preferential tariffs and trade facilitation agreements, while also positioning it as a moderating voice in global power dynamics.
“Malaysia stands to benefit in the event of any disruption to the global payment system should de-dollarisation or a currency crisis were to hit the United States due to unsustainable policies or economic imbalances,” he added.
AmBank Group chief economist Firdaos Rosli viewed BRICS as one of many multilateral initiatives that could align with Malaysia’s national interests.
“Whether it will benefit us economically or otherwise depends on how the bloc intends to pursue its economic agenda, which is still a work-in-progress,” he said.
OCBC’s Lavanya noted the effectiveness of the alliance is hindered by “varied domestic policy priorities and stages of development.”
Yeah warned “the US and its allies could impose sanctions or disrupt bilateral trade and investment flows to force Malaysia to choose sides should geopolitical tensions come to a boil.”
He said Malaysia could leverage this situation to “build bridges or de-escalate tensions between the two alliances.”
However, Taylor’s Mariadas and Murthy highlighted the difficulties in balancing Malaysia’s established ties with Western nations, particularly the United States and the EU, alongside BRICS interests.
They said “close association with BRICS could inadvertently subject Malaysia to criticism or complicate its international relations.”
They emphasised the need for Malaysia to safeguard its “sovereignty and economic independence” from excessive dependence on Chinese trade and investments.
Furthermore, competition with larger economies like China and India could pressure smaller Malaysian companies, leading to potential job losses and reduced market share.
“Malaysia’s membership in BRICS could potentially create tensions within Asean as some members might view Malaysia’s closer alignment with BRICS as a departure from the region’s non-aligned stance and collective economic interests,” they noted.
BRICS united the world’s most significant developing nations to challenge the political and economic power of wealthier nations in North America and Western Europe.
BRICS has since expanded to include Iran, Egypt, Ethiopia, and the United Arab Emirates. Malaysia was among 13 nations accepted recently as BRICS partner countries, including Indonesia, Thailand, Vietnam, Algeria, Belarus, Bolivia, Cuba, Kazakhstan, Nigeria, Turkiye, Uganda, and Uzbekistan.
The increasing interest in BRICS membership reflects a desire for economic independence from Western-dominated systems said Innes.
“Long-term, this trend could support multipolar trade networks and regional growth but may cause coordination issues within BRICS and geopolitical tension with the West,” he said.
Yeah noted the rising membership trend is likely to continue as the global south consists of numerous small and mid-sized economies seeking to expand trade and attract global capital.
“More developing countries are looking to expand trade and attract global capital. Hence, joining BRICs especially if more development programmes aimed at promoting shared prosperity are rolled out, will become increasingly alluring.” he noted.
Over the long term, he said the shift toward a bipolar or multipolar world will become more entrenched.
“The transition however could be choppy as the United States’s influence on the global economy and political order and dependency on the US dollar diminishes gradually,” he added.
In the context of dedollarisation, Firdaos pointed out that as long as BRICS members continue trading in their national currencies, the associated risks will be tied to each country’s fiscal and monetary policies, rather than stemming solely from reliance on the greenback.
“Unless they can agree on a single currency, I think there is no real challenger to the greenback,” he added.
Innes said de-dollarisation could heighten tariffs and trade friction with dollar-reliant economies, impacting Malaysia’s dollar trade.
“However, it may also open up new trade channels with BRICS, reduce dollar volatility exposure, and prompt Malaysia to diversify currency strategies.” he noted.
Yeah, meanwhile, pointed out that unless the United States imposes tariffs to deter de-dollarisation, the trend towards more stable global payment systems among BRICS members is likely to continue.
“Given its sizeable albeit declining trade with the United States, any tariffs imposed will result in a further slowdown in bilateral trade. Malaysia will have to expand trade with BRICs and other countries to offset any potential adverse tariff impact,” he added.
