Earlier this year, the UAE, Saudi Arabia and Egypt, alongside Iran, were welcomed into the BRICS alliance, which comprises Brazil, Russia, India, China and South Africa. The inclusion of the Middle East countries, set to come into effect in January 2024, is slated to significantly boost their economies and trading opportunities. For startups, it presents an opportunity to tap into some of the world’s largest and most dynamic markets with easier trade regulations. However, it remains to be seen whether the region can benefit so substantially, given the current global economic climate.
BRICS represents a hefty chunk of the global economic landscape. The alliance boasts a collective gross domestic product (GDP) of over $27 trillion, 20 per cent of international trade transactions and embodies about 43 per cent of the world’s population. Some analysts have claimed an expanding BRICS will create a new world order, one that rebalances US power in the global South and could readdress the world’s reliance on the US dollar.
For now, the bloc is focused primarily on economic endeavours. Its aim is to increase economic interaction and cooperation among member countries including easing market access opportunities, facilitating market linkages, promoting mutual trade and investment, and creating a business-friendly environment.
For Dr Tariq Bin Hendi, senior partner at UAE-based venture capital firm Global Ventures, the regional inclusion to BRICS “could be extremely positive for Arab startups. The agreement will open new markets, simplify trade between its members and create new business opportunities”.
It is a sentiment echoed by Mohamed El-Shabrawy El-Feky, founder of Egypt-based fintech Sympl, who notes that BRICS could expand global expansion opportunities, enabling entrepreneurs to tap into diverse markets across the group, thereby diversifying their business operations and reducing reliance on a single market. “Additionally, startups could look for financing opportunities from BRICS countries, whether from investors or active investment funds in these nations,” he says.
El-Feky further adds that the BRICS agreement provides technical cooperation and expertise exchange opportunities in fields like deeptech and AI. This can open doors for Arab startups to benefit from advanced technologies, enabling entrepreneurs to collaborate on strategic projects with companies from member countries, enhancing their ability to deliver innovative products and services, and fostering international relations, acquainting them with new partners and opportunities.
India and China are two key markets that offer substantial scope for collaboration where startups and investors are concerned. Both have become technological powerhouses over the past decade, particularly in the fields of artificial intelligence and robotics. India now has more unicorns than the US and China and has proposed to inaugurate a BRICS startup forum aimed at bolstering collaboration and knowledge exchange among investors, incubators, and entrepreneurs.
This endeavour seeks to build on the success of the Startup India Programme, which facilitated the creation of about 100,000 startups in the country. The forum will serve as a platform for startups from BRICS countries to converge, exchange ideas, and expertise, with an overarching objective of expediting growth and evolution within the startup ecosystem of the member states. The forum will also enable investors to explore potential investment avenues across member countries, garner insights on local startup ecosystems, and provide incubators a platform to interact with startups, share resources, and offer guidance.
Deepening trade and economic cooperation among the group's countries opens up promising opportunities for entrepreneurs and boosts knowledge exchange and development prospects for startups, especially in the UAE and Saudi Arabia, which are already working to diversify their economies beyond oil.
"Entrepreneurship in the Arab region is already growing at remarkable rates, due to its young population, consistent and transparent regulatory frameworks, and rapidly increasing digital penetration. BRICS is an international platform via which the region can highlight and turbocharge its growth and ambition," says Bin Hendi. "Currently, BRICS economies account for 20 per cent of global exports, which will increase as new members join. Implementing the BRICS agreement will open the floodgates to a new wave of investment helping Arab businesses realise their ambitions. These startups will be able to work with BRICS-based funders to build strategic relationships, and to scale - including establishing joint ventures."
For Mohammed AlMajid, founder of Saudi Arabia-based KAFADS, which helps companies set up in the kingdom, the agreement is likely to attract BRICS startups to the region and “increase cooperation, especially in easing banking transactions among member countries. It will also enhance cooperation in issuing specialised certifications to manufacturing companies, and provide support similar to that available in Europe or America for Fourth Industrial Revolution technologies like AI, big data, semiconductors, and quantum computing.
Yet there are many challenges ahead for BRICS. A report titled "BRICS and the UAE: A New Dynamic Engagement with Emerging Economies", published by the Emirates Policy Centre in September 2023, highlights potential challenges that may curb the full realisation of these economic opportunities. The report underscores a lack of economic cohesion among all the old and new members of the BRICS group, further exacerbated by economic challenges faced by some members. This starkly contrasts with the burgeoning prosperity in countries like the UAE and Saudi Arabia and the significant economic weight China holds within the group.
Ease of market access will also work both ways, which will increase competition in the region's markets and may put Middle East startups at a disadvantage. Over the past few years, several Softbank-backed Indian startups expanded to the UAE, the initial landing point for many Indian startups given the country's large South Asian population, causing discomfort among some regional players.
“Implementation is not the same as utilisation. Startups need to think strategically about the new growth opportunities on offer, and how best to pursue them,” says Bin Hendi. “Startups must decide which markets to prioritise; should it - for example - be a very large member such as India? Or smaller, but nonetheless vibrant, markets in the group. Companies will need to consider if they have achieved ‘product-market fit’ in optimising their goods and services for wide target audiences. Alternatively, should products be ‘localised’ to achieve a positive fit? If so, what are the unique nuances of each market that would inform product localisation? Identifying key enabling stakeholders, and establishing partnerships with local businesses, is also important.”