Emerging powers' group likely to also take steps to align bourses
By Nirmala Ganapathy, The Straits Times, 29 Mar 2012
NEW DELHI: A development bank along the lines of the World Bank that could fund projects and encourage trade in developing nations will top the agenda when leaders of emerging powers Brazil, Russia, India, China and South Africa (Brics) meet here today for their annual summit.
The Brics countries, which account for about 40 per cent of the world's population, are also expected to look at setting up a common secretariat, take steps to align their stock exchanges and discuss regional and international developments in Syria and Iran.
Although their economies are among the fastest-growing in the world, the five countries have serious political and foreign policy differences. For a start, India and China have a border dispute. China and Russia have also opposed expansion of the United Nations Security Council to accommodate countries like India and Brazil.
But they have similar economic and financial goals. The idea of a multilateral bank to provide a common investment fund for infrastructure and development projects is seen as an attempt to increase Brics' influence in international economic affairs dominated by Western nations. 'It would be a very powerful tool to improve trade opportunities and maybe a major step to support the EU (European Union) to overcome its financial crisis,' said Brazilian Trade Minister Fernando Pimentel.
Experts said it would take time for the bank to be set up. 'I think the development bank is a good idea but I think it will take a long time to sort out the mechanics and establish it,' said former Indian foreign secretary Lalit Mansingh. 'It will help in investment in Brics countries and strengthen the currencies.'
The theme of the summit, Brics' fourth, is Partnership for Global Stability, Security and Prosperity. It brings together President Dilma Rousseff of Brazil, President Dmitry Medvedev of Russia, President Hu Jintao of China, President Jacob Zuma of South Africa and Prime Minister Manmohan Singh of India.
Mr Hu arrived in Delhi yesterday to Tibetan protests amid news that Tibetan demonstrator Janphel Yeshi, 27, who set himself on fire on Monday in protest against Beijing, had died of his injuries.
With China's economy expected to overtake the United States by 2027, the country is expected to be the dominant force. 'This is a group that is dominated by China even on the economic side, so much will depend on what the Chinese want in agenda,' said Mr Mansingh.
But, writing in The Indian Express newspaper yesterday, China's Ambassador to India Zhang Yan noted: 'A more fair and democratic international economic and financial order cannot be achieved without the participation and cooperation of Brics countries.'
One immediate challenge within the group is to agree on a candidate for the top job in the World Bank which will be vacant soon. Last year, the grouping failed to agree on an International Monetary Fund (IMF) candidate even though its aim is to counter US and European influence in economic institutions.
The leaders are expected to sign two agreements today aimed at decreasing the dominance of the US dollar as the main currency for trade. One will allow each member's development bank to extend credit to other members in local currencies. The other creates a credit facility in local currencies for businesses.
A benchmark equity index derivative to be shared by the countries' stock exchanges is also expected to be launched this week. They would be cross-listed, so investors can trade in local currencies and invest in one another's progress.
Though there are differences, the Brics countries, with their high rates of growth, are expected to increase their clout in international affairs. Mr Arup Mitra, a professor of economics at the Delhi-based Institute of Economic Growth, said: 'It is more of a paper tiger. But the potential exists for them to come up in a big way to challenge large institutions.'
Brics to boost mutual trade
5 nations sign pact to push for trade in their own currencies
By Nirmala Ganapathy, The Straits Times, 30 Mar 2012
NEW DELHI: Leaders of the world's biggest emerging markets - Brazil, Russia, India, China and South Africa, collectively known as Brics - agreed yesterday to increase lending in local currencies to one another to boost trade, while calling on the West to give them more clout in global finance.
They signed an accord to boost credit for trade transactions, according to a joint declaration issued after their summit here yesterday. They also agreed to study the feasibility of setting up a joint bank similar to the Asian Development Bank to help fund projects in the developing world.
The move to push trade in their own currencies was widely perceived as a step towards reducing dependence on the United States dollar.
'Institutions of global political and economic governance created more than six decades ago have not kept pace with the changing world,' India's Prime Minister Manmohan Singh told the gathering at the Fourth Brics Summit here. 'The agreement signed today by development banks of Brics countries will boost trade among us by offering credit in our local currencies.'
President Dilma Rousseff of Brazil, President Dmitry Medvedev of Russia, President Hu Jintao of China and President Jacob Zuma of South Africa were all on hand for his remarks.
'A suggestion has been made to set up a Brics development bank,' said Dr Singh. 'We have directed our finance ministers to examine the proposal and report back at the next summit.'
Brics represents over 40 per cent of the world's population, a quarter of its land mass and a quarter of its economy, at US$13.5 trillion (S$17 trillion). Trade among the five nations is about US$230 billion, and could touch US$500 billion by 2015.
World Bank president Robert Zoellick, underscoring the importance of the emerging world's biggest economies, welcomed the idea of a new development bank. 'We will be looking forward to working with it to see how we can leverage one another's strength,' he said while travelling in the eastern state of Orissa, according to the Press Trust of India. 'It will complement the type of work we do.'
Financial analysts also see a dominant role for China, the economic powerhouse in the group.
Mr Rishi Sahai of Cogence Advisors said: 'China in all probability will supply the maximum amount of facilities to all the countries, saying, 'Buy from me and I will give all the credit you want.' The yuan will be established as a stronger currency, and it could allow the independence of Brics countries to come out of the dollar-dominated trade.
'It will lead to an increase in goods and services trade among countries. It will also allow projects and local companies to get credit in local currency and allow nations to offer better trading facilities.'
On other issues, the grouping stood together, noting that dialogue was the only way forward, warning of 'disastrous consequences' in allowing the Iran stand-off to escalate, and emphasising that the bloodshed in Syria could be resolved only by 'peaceful means'. 'We must avoid political disruptions that create volatilities in global energy markets and affect trade flows,' said Dr Singh.
Experts said that the common link between the countries was a desire for greater influence in the design of the world's financial architecture.
Said Dr Nagesh Kumar, chief economist at the United Nations Economic and Social Commission for Asia and the Pacific: 'These emerging economies are contributing to the sustainability of growth and are growth engines, but they exercise no power in terms of global economic governance, which is dominated by the advanced economies. So if they speak with one voice, it becomes a strong voice.'
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