Institutionalising BRICS

Cover Story

By Dr Ravni Thakur

The establishment of the BRICS New Development Bank, first mooted by India, and formalised during the Fortaleza Summit on July 14, marks the culmination of several agendas that BRICS set for itself at its inception. Chief amongst these was economic cooperation, as each country felt disadvantaged by the existing structures of international trade and finance. This is indeed a laudable agenda, and a look at recent figures shows that effective trade and common positions within the G20 have indeed been good for these countries.

BRICS as a combined economic unit makes up 20 percent of the global output and its share, according to Forbes, has increased four-fold in the recent decade. Though, like the world economy, BRICS economies have slowed down from an average of seven percent to 4.8 percent, they still represent strong fundamentals. The BRICS development Bank makes its intentions clear as far as the global economic architecture is concerned. BRICS countries are willing to come together to provide collective humanitarian assistance, and fund infrastructural development in member countries. They have also offered to help other countries from the developing world. This is an important step forward for BRICS countries to really rise as leaders amongst emerging economies. Apart from the Bank, BRICS has institutionalised multilateral, high-level exchanges at sectoral levels.

China is certainly the largest economy in this grouping, making up 75 percent of the GDP. It will also host the Bank’s headquarters in Shanghai, raising the importance of Chinese staff and infrastructure for the Bank. While all countries have agreed to share equal voting rights and initial capital of $50 billion, China will be the largest funder of the CRA or Contingency Reserve Arrangement that is being set up to help countries overcome any short-term liquidity crisis. China will contribute $41 billion to this fund, while Brazil and India will contribute $18 billion each and South Africa will invest $5 billion, testifying to the relative strength of these economies.

The setting up of the BRICS funded New Development Bank this year has proved that a process that began tentatively, has garnered synergy and moved forward enough to concretise the idea of a BRICS Bank. The demands for a more equitable economic architecture and institutions have led to growing institutionalisation. This will be followed by gains in trade and common bargaining on trade issues. To what extent this group succeeds in evolving a common international agenda is something that remains to be seen. In the final analysis, BRICS is a grouping of emerging economies that seeks to provide an alternative agenda for handling a complex, interdependent world. Their coming together also ensures that no one country can emerge as a unilateral power in the 21st century.

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