BRICS has indeed become a hinge for cooperation among emerging markets economies and developing countries and an important force for promoting global growth, improving global governance structures and advancing democracy in international relations, writes PHELELANI MPANZA
Just over a decade since its establishment in 2006, Brazil, Russia, India, China, and South Africa (BRICS) cooperation has developed to become a powerful global force. Having found its genesis in a series of reports written by the then Chairman of Goldman Sachs Jim O’Neill in 2001, the BRICS alliance has since gone on to seek cooperation and grown into a big tree laden with fruits.
By expanding from the initial grouping Brazil, Russia, India, and China to include South Africa in 2010 and forging the BRICS partnership, the grouping has an increasingly solid foundation for cooperation. BRICS is the ‘third global giant alliance’ after the European Union and the United States, representing about 2.5 billion people and a combined Gross Domestic Product of approximately 16 trillion dollars.
The scope of cooperation among these countries has expanded from a focus on the economy, trade, and finance to wide-ranging political security. A multi-layered cooperation structure has taken shape, spearheaded by an Annual BRICS Summits attended by the Presidents of all member states, buttressed by meetings of senior security representatives, meetings of Finance Ministers, Foreign Ministers and other ministerial-level meetings. The Summit has come up with practical cooperation in dozens of areas and institutions such as the New Development Bank (popular known as the BRICS Bank) and the Contingent Reserve Arrangement.
In 2012, at the BRICS Summit in Delhi – India, all the finance ministers of the countries were directed to examine the feasibility and viability of creating a New Development Bank (NDB) to meet the development finance requirements of the five founding countries and other emerging economies and developing countries as well. Developing countries face challenges of infrastructure development due to insufficient long-term financing and foreign direct investment, especially investment in capital stock.
This constrains global aggregate demand with significant impact on the emerging economies in particular. Therefore, BRICS leaders considered the possibility of setting up a new development bank for mobilizing resources for infrastructure and sustainable development projects in BRICS and other developing countries, to supplement the existing efforts of International Finance Institutions for global growth and development.
To further advance the broad agenda of BRICS nations, the BRICS Chamber of Commerce and Industry (CCI) was founded in the year 2012 by eminent professionals and entrepreneurs. It is a non-profit and non-governmental organization and has been actively promoting commerce and industry within BRICS nations. The chamber’s vision is to build an enabling ecosystem, especially for entrepreneurs and the Small, Medium and Micro Enterprise as the catalyst to achieving economic growth and development.
In 2015, the NDB began operations, with its headquarters in Shanghai and initial authorized capital of US$ 100 billion of which subscribed capital of US$ 50 billion was equally shared among founding members states. In 2016, the NDB held its first Annual General Meeting, in the first year of operation the Bank provided $811 million in the first round of loans for clean energy projects in four nations.
In the financial year 2016/17 round of financing, Brazil’s Banco Nacional de Desenvolvimento Economico e Social received $300 million to build 600 megawatts of renewable energy capacity. India’s Canara Bank received $250 million of renewable-energy projects. South Africa’s Eskom SOC Ltd received $180 million for renewable energy generation and China’s Shanghai Lingang Hongbo New Energy Development Co. received $81 million loans, to finance projects focused on rooftop solar power.
BRICS has indeed become a hinge for cooperation among emerging markets economies and developing countries and an important force for promoting global growth, improving global governance structures and advancing democracy in international relations. For instance, BRICS countries are striving to achieve an ambitious conclusion to the on-going and long-overdue reforms of the Bretton Woods institutions (the International Monetary Fund and the World Bank).
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BRICS called for a greater attribution of shares in the Fifteen General Review of Quotas, and for developing countries to yield a further two chairs on the Executive Board of IMF and the World Bank (WB) to ensure broader inclusions. The shares of quotas allocated to different IMF members countries determines, among other things, the country voting powers and the amount of financing they can borrow from the institutions’ funds.
In essence, the BRICS alliance shares a perspective that these institutions should shift from mediating north-south cooperation to institutions that promote equal partnership with all countries as a way to deal with development issues and to overcome an outdated donor-recipient dichotomy. However, the countries note that reforming IMF and WB’s governance structures require a substantial shift in voting power to developing countries.
The BRICS vision 2025 is to become an institution of a new global financial system with a significant presence in the five nations and steps to initiate a formal dialogue with non-BRICS countries (BRICS Plus) have been started at the 2018 BRICS Summit held in Johannesburg South Africa, allowing additional emerging economies to support each other.
BRICS is also envisioning increasing humanitarian and cultural exchanges with improved infrastructure and better standards of living in the nations. The long-term BRICS vision is committed to exploring and shaping new models of global governance that shall strive to achieve more equitable development and inclusive growth.
Mpanza is a Director of Rethink Business Group and Ph.D. candidate at the University of the Witwatersrand, School of Economics and Business Sciences. He completed a BRICS exchange programme at Fudan University (China) and also served as the Finance Minister in the Model BRICS Summit 2016