(VOVworld) –Leaders of 5 emerging market nations, BRICS, including Russia, India, China, Brazil, and South Africa, convened a summit in Brazil. They will make decisions on many important issues especially in economics to raise BRICS status in the global economic and political arena.
The Brazilian Ministry of Foreign Affairs held a press briefing on the 6th BRICS summit (photo: brics6.itamaraty.gov.br) |
BRICS makes up one third of the world’s population and one fourth of the world’s land coverage. The International Monetary Fund said that BRICS nations have an estimated gross domestic products of 16 trillion USD in 2013. BRICS is predicted to surpass G7 by 2017. China is considered the world’s top manufacturing nation, Brazil – the world’s important sources of raw industrial materials; Russia – a global petroleum station, India – a global office, and South Africa – a treasure of Africa.
In 2000, these 5 economies accounted for 8% of the global GDP. The British Economist Intelligence Unit (EIU) estimated that BRICS’ contribution to the world will be nearly 30% in 2016. Although the group’s growth has slowed down in recent years, BRICS is seen as a potential driving force for the global economy to rebound steadily.
Creating a balance on the global economic chessboard
Prior to the BRICS summit, many information sources said the 5 member economies will officially approve the establishment of a monetary reserve and development bank. In 2013, BRICS revealed a project to open a currency reserve fund and a development bank to compete with the World Bank (WB) and the International Monetary Fund (IMF) which BRICS said are under the US and EU control. Establishing two new financial institutions will help BRICS gain large influence in the global market.
Russian Financial Minister Anton Silouanov said BRISC Development Bank will have a capital of 10 billion USD in the initial phase of 7 years and it will increase gradually to 100 billion USD. Countries will make equal contributions. The Bank will begin to provide loans in 2016 and open opportunities to UN member countries.
A currency reserve fund to protect BRICS economies will also be formed with initial capital of 100 billion USD. China will contribute the most with 41 billion USD, Russia, India, and Brazil 18 billion USD each, and South Africa 5 billion USD. The BRICS fund will assist member countries in balance of payment difficulties without devaluing the domestic currencies.
Challenges
The establishment of the BRICS Development Bank and Currency Reserve Fund will need to be approved by the five national parliaments over the next year. BRICS fund’s estimated capital of 100 billion USD, which will account for only 2.2% of BRICS’ 4.3 trillion USD of foreign exchange reserve, will not be sufficient to carry out its tasks.
Analysts say the total capital of the tentative BRICS bank and fund is not big enough to stimulate growth while foreign investment has been reducing and countries are focusing on their internal affairs including Brazil’s election, Russia’s concern over the Ukrainian crisis, and economic policies of new Indian Prime Minister Narendra Modi.
Arvind Subramanian, a senior fellow at the Peterson Institute for International Economics said for India economic growth and curbing inflation are more important than BRICS cooperation. Russia expects that BRICS leaders will discuss international issues and raise their voice against sanctions from the west. Before attending the summit, Russian President Vladimir Putin said he will urge BRICS nations to agree to prevent “sanction attacks” by the US.
BRICS nations have had opportunities to enhance their influence in the global economic and political life since the financial crisis in 2008. The establishment of two financial institutions will create a breakthrough in the global financial market.