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Delicate balancing act for Malaysia if it joins BRICS

By June 19, 2024No Comments

Malaysia will need to tread carefully to avoid antagonising the US and its Western allies.

Prime Minister Anwar Ibrahim has backed comments by Brazilian president Luiz Inacio Lula da Silva criticising the dominance of the US dollar in international trade. (Bernama pic)

PETALING JAYA: Malaysia’s unexpected decision to join BRICS, a bloc of rising economies spearheaded by Russia and China to challenge the world order dominated by the US and its Western allies, means it will need to tread carefully to avoid antagonising the latter.

Malaysian Institute of Economic Research head of research Shankaran Nambiar welcomed Prime Minister Anwar Ibrahim’s confirmation of Malaysia’s wish to join the grouping comprising founding members Brazil, Russia, India, China and South Africa.

BRICS, which was founded in 2009, expanded in January 2024, when Iran, Saudi Arabia, the UAE, Egypt, and Ethiopia joined as new members. A host of countries are lining up to join the grouping including Thailand, which made its intent clear end last month. Indonesia is also mulling joining the bloc.

“Malaysia has decided that it wants to be on the side of other fast developing economies. It wants to be a part of the group that will set the narrative for the next 50 years,” Nambiar told FMT Business.

BRICS accounts for more than 40% of the world population and a quarter of the global economy, surpassing the G7 group of leading industrialised economies led by the US.

“The global economy has for long been a part of the dominant narrative, and Anwar clearly thinks it is time to review alternative models.

“Managing the balancing act is the tricky part (if Malaysia joins BRICS). But I think it can be negotiated. Malaysia has always had extremely good relations with the US, and this can be expected to continue in various areas including defence,” Nambiar said.

In an interview with Chinese media outlet Guancha, Anwar said his government would soon begin the process of joining the bloc.

“We have made our policy clear, and will start the formal process soon,” the Shanghai-based outlet quoted Anwar as saying.

Move to de-dollarise

Nambiar agreed that Malaysia’s decision to join BRICS suggests that Asean nations are hedging their bets to “de-dollarise” given that Washington has weaponised the US dollar through the increasing use of unilateral sanctions.

In the interview with Guancha, Anwar backed comments by Brazilian president Luiz Inacio Lula da Silva criticising the dominance of the US dollar in international trade.

“Last year Malaysia had the highest investment ever, but the currency was still attacked. Well, it has eased in the past few weeks. But it doesn’t make sense, it goes against basic economic principles,” he said.

Nambiar said Anwar has clearly stated that Malaysia should explore de-dollarisation and even supported the idea of an Asian Monetary Fund.

“It is time that these ideas are pursued more fully. Both China and India, too, have expressed a willingness to take up local currency settlement when it comes to trade,” he added.

Southeast Asian countries are increasingly wary of the role the greenback plays in sanctions brought on by the US. The US along with the European Union froze some US$300 billion (RM1.4 trillion) of Russia’s foreign reserves following the Ukraine conflict.

At the 42nd Asean Summit in May last year, the 10 Asean members agreed to push for the use of local currency transactions. This is seen as the bloc’s strategy to transition away from established currencies used for trade such as the US dollar and euro.

Asean countries are in effect mitigating their risks as they are wary the US could use the power of its currency to target them in the future.

However, Pacific Research Centre of Malaysia principal adviser Oh Ei Sun is not in favour of the de-dollarisation initiatives by Asean.

“I tend to hope that most major Asean economies are smarter than to jump on the de-dollarisation bandwagon,” he told FMT Business.

He was also dismissive of Malaysia’s plan to join BRICS, calling it a “somewhat desperate decision”.

“Malaysia sorely needs investments. So, if joining BRICS is one way to please those bigger BRICS economies so that they could be even more willing to invest here, then so be it.

He added that only time can tell what tangible benefits could be derived from joining BRICS.

However, Nambiar does not think that countries want to join BRICS just because they want to get more investments.

“I don’t agree with that argument. I think China would be willing to invest whether or not Malaysia joined BRICS. Same with India. Same with Turkey, because Anwar has good relations with them,” he said.