BRICS - Objectives, Summits, Need and Disparities
BRICS - Objectives, Summits, Need and Disparities
– BRICS is a acronym for an association of five major emerging national economies: Brazil, Russia, India, China and South Africa
– Originally called as BRIC as South Africa was not included till 2010.
– The term "BRICS" was coined in 2001 by then-chairman of Goldman Sachs Asset Management, Jim O'Neill
– Common characteristics are large, fast-growing economies all developing or newly industrialized countries.
Importance of BRICS
– As of 2014, the five BRICS countries represent almost 3 billion people, or approximately 40% of the world population.
– The five nations have a combined nominal GDP of US$16.039 trillion, equivalent to approximately 20% of the gross world product,
– They have an estimated US$4 trillion in combined foreign reserves.
1. Yekaterinburg Summit (2009)
Consensus on improving the global economic situation and reforming financial institutions. BRIC nations announced the need for a new global reserve currency, which would have to be "diversified, stable and predictable"
2. Brasilia Summit (2010)
South Africa officially became a member nation. Iran and nuclear weapons, development, the furtherance of the BRIC as an international body, the global economic situation at the time, reform of financial institutions, the financial G20, and cooperation and issues related to global governance.
3. Sanya Summit (2011)
Economics, anti-terror law under UN auspices,United Nations Security Council reform,decision to cease mutual trade payments in U.S. dollars and instead henceforth give credits to one another in their national currencies alone.
4. New Delhi summit (2012)
A proposal to create a joint BRICS development bank that would finance investments in developing nations
5. Durban Summit (2013)
Negotiations for setting up the bank.
6. Fortaleza Summit (2014)
Creation of two financial institutions: the New Development Bank (NDB) to finance infrastructure and “sustainable development” projects, with $50 billion in capital to start with, and the $100 billion Contingent Reserve Arrangement (CRA), to tide over members in financial difficulties.
7. Ufa Summit (2015)
Similar objectives shared by BRICS
1. The BRICS countries act as one to promote a more legitimate international system, including advocating reform of the UN Security Council.
2. The BRICS group is a South-South framework for cooperation.
3. The BRICS group also acts as a bridge between developed and developing countries. For example, in the WTO, the BRICS countries are trying to promote a fair order regarding agricultural policies. They are attempting to promote the liberalization of the international economic order to diminish agricultural subsidies in the United States and the European Union, which would make developing countries’ agricultural products more competitive.
4. The BRICS group will also play an increasingly important role in assisting developing countries in gaining an advantage in trade and climate change negotiations, as well as on issues related to the export of manufacturing products.
5. Developing countries on the periphery of the group will be able to leverage the NDB and the CRA to increase their bargaining power.
6. The group established the BRICS Business Council, made up of 25 prominent entrepreneurs from the five countries and representing many industries and economic sectors.
7. The BRICS also formed an information-sharing and exchange platform that expands beyond economic cooperation to also involve educational, cultural, and environmental engagement.
8. They have a shared interest in challenging the current governance of Western financial institutions like the International Monetary Fund and the World Bank for that they have announced the establishment of the bank
9. They will advocate for the interests of middle powers on global forum.
Disparities with BRICS
1. The dominance of China in BRICS is problem for others. The Chinese economy is now not only the second largest in the world but also larger than the economies of all the BRICS together.
2. China's political aspiration creates a challenges that has made it difficult for it to make consensus.
3. China’s manipulation of its currency has resulted in significant problems for the manufacturing sectors of other emerging powers. Central banks of other countries have registered protest against undervalued yuan
4. There is doubt if BRICS can emerge as a unified political force.
5. BRICS is a loose grouping of countries that share interests in particular areas but that play by different rules. It is not a formal international alliance.
6. It maintains a low profile on security issues. BRICS will never attempt to make the group into a traditional security framework.
7. With the exception of the NDB and the CRA, the BRICS framework has not proven very efficient or substantive.
8. The BRICS have little in common. The Chinese economy is 28 times the size of South Africa’s. Income per person in India is one-tenth that in Russia.
9. Brazil, India, South Africa are democratic countries while Russia, China are authoritarian regimes
10. Russia, Brazil and South Africa export different commodities, while China exports manufactured goods and India exports services.
- New Development Bank will have an initial subscribed capital of $50 billion which will be raised to $100 billion.
- The five members will have an equal share for each in the bank, so no one member dominates the institution.
- Headquarters – Shanghai
- Bank will have African Regional Center in South Africa
- India will assume the first presidency of the bank.
- Chairman of Board of governance will be Russian
- The emergency reserve fund - which was announced as a "Contingency Reserve Arrangement" will also have $100bn and will help developing nations avoid short-term liquidity pressures.
- It will have $41 billion from China, $5 billion from South Africa and $ 18 billion from remaining nations.
Need of a BRICS bank
1. Global financial institutions like IMF and world bank are dominated by U.S and western countries
2. IMF and world bank follows different voting power based on quota system. Though China is second largest economy after U.S it has fewer voting rights.
3. The financial institution created by BRICS will reduce the importance of US dollar as a global currency and eventually it will increase importance of Yuan
4. IMF cash assistance program is conditional. If a country's foreign policy clashes with US then it will be difficult to obtain a loan.
5. It will provide resources for infrastructure development of developing countries.