Younes Bhat
The sixth BRICS (Grouping of Brazil, Russia, India, China and South Africa) summit at Fortaleza, Brazil unveiled its New Development Bank, which sue generis is an important landmark in the evolution of ‘New World Order’ as this new development may lead towards the culmination of current world order based on ‘Washington Consensus’ which per se is based on US hegemony and dominance in the political and economic landscape of the world.
The sixth BRICS summit from 14th to 16th July 2014 produced ‘Fortaleza Declaration’ that announced the agreement to establish the New Development Bank for infrastructure and sustainable development in BRICS and other developing economies in the world. The initial capital of the bank shall be of US$100 billion with initial subscribed capital of US$50 billion to be equally shared by its founding members. The declaration also announced to put in place BRICS Contingent Reserve Arrangement (CRA) with initial size of US$ 100 billion to forestall liquidity pressures in the near future. It was also announced that headquarter of the bank shall be at Shanghai, China and it first president shall be from India. The noteworthy point about the new bank is that voting share shall be equal irrespective of contribution to the bank which will differentiate it from the Britton Woods Institutes. It is also declared that the business shall be in domestic currencies rather in US dollar.
The BRICS which was earlier BRIC as South Africa joined lately in 2011 to this grouping is an acronym invented by Jim O’Neill, chief global economist at Goldman Sachs in 2001 to describe the most emerging economies in the world. The first official summit of this grouping was held at Yekaterinburg, Russia in 2009. The main raison d’être of its formation was to promote a fairer world order and to influence international economic and financial policies.
The world in post Second World War era is predominantly dominated by the western countries headed by the United States of America not only in the political sphere but in economic sphere as well. The modern International Political Economy established by the Britton Woods Conferences in 1944 has been structured and evolved in the interest of western countries as it were these countries who laid its foundation. After the recent recession of world economy in 2008 which originated in the US banking sector (the recession first started in two US banks Marylinch and Lehman brothers because of their faulty premises in their prime lending policies), engulfed the highly connected global economy particularly European countries, since then the Britton Woods based world political economy has been questioned particularly from BRICS countries.
The questioning on modern structure of political (United Nations Organization) and Financial (IMF &WB) institutions by the BRICS countries is justifiable on many accounts and indices which does reflect the contemporary realities. The BRICS countries represent worlds 43 percent population, 18 percent of global trade and attract 53 percent of global financial capital. There is one forecast that BRICS countries aggregate GDP will exceed that of G7 (group of seven industrialist developed countries) countries, which currently dominate the world order, by 2027. Therefore, the new development bank unfolded by the sixth BRICS summit is in right direction as it will provide the right place to the countries that deserve to be at higher echelons of international decision making.
The prospects of the BRICS New Development Bank shall be determined by more intra BRICS cooperation rather than political-cum-financial architecture of the world. There is no doubt that the G7 will not be pleased by this new development as no one like to see that someone else will take its chair which it has occupied since long. The problem with BRICS is that it is more heterogeneous than homogeneous on many accounts as compared to G7. Unlike G7 all BRICS countries are not democracies as China and Russia are communist states, BRICS states are not close allies as the G7 are and unlike G7 all BRICS states are not symmetrically economic developed as there is an asymmetry in their economies. China is more vibrant and powerful among all within BRICS both in political as well as in economic domain. Therefore, there is an apprehension that this new initiative shall be China centered. Moreover, within the BRICS there are two permanent members of UN Security Council viz China and Russia and the rest three in the grouping are aspirants of the same.
One more irritant in the grouping is bilateral relations particularly of India and China. One narrative believes that the Sino-India bilateral relations shall be having veto over the success of the BRICS new initiative. The bilateral disputes between China and India will definitely play its role in the future prospects of the BRICS cooperation. There are already some circles within Indian state who are unhappy about NEW Development Bank headquarter at Shanghai. But one should not be too pessimistic about their bilateral relations. The problem with developing countries is that we least theorize about the future world. We more believe or accept what west propagates. There are some positive signs emerging from Indo-China bilateral meeting on the sidelines of sixth BRICS summit at Brazil. The Chinese President has invited Indian Prime Minister to attend the upcoming meeting of APEC. Therefore, both India and China should not be trapped in the western conspiracies and should look forward for their prospective bilateral relations.
The bigger question is now that will BRICS succeed to replace the western dominated world order? Will they be able to make this new initiative successful and lead the foundation of New World Order based on equity and sustainable development? All this depend on how BRICS countries will play the new initiatives and how they will overcome asymmetries lying within the grouping.
The sixth BRICS (Grouping of Brazil, Russia, India, China and South Africa) summit at Fortaleza, Brazil unveiled its New Development Bank, which sue generis is an important landmark in the evolution of ‘New World Order’ as this new development may lead towards the culmination of current world order based on ‘Washington Consensus’ which per se is based on US hegemony and dominance in the political and economic landscape of the world.
The sixth BRICS summit from 14th to 16th July 2014 produced ‘Fortaleza Declaration’ that announced the agreement to establish the New Development Bank for infrastructure and sustainable development in BRICS and other developing economies in the world. The initial capital of the bank shall be of US$100 billion with initial subscribed capital of US$50 billion to be equally shared by its founding members. The declaration also announced to put in place BRICS Contingent Reserve Arrangement (CRA) with initial size of US$ 100 billion to forestall liquidity pressures in the near future. It was also announced that headquarter of the bank shall be at Shanghai, China and it first president shall be from India. The noteworthy point about the new bank is that voting share shall be equal irrespective of contribution to the bank which will differentiate it from the Britton Woods Institutes. It is also declared that the business shall be in domestic currencies rather in US dollar.
The BRICS which was earlier BRIC as South Africa joined lately in 2011 to this grouping is an acronym invented by Jim O’Neill, chief global economist at Goldman Sachs in 2001 to describe the most emerging economies in the world. The first official summit of this grouping was held at Yekaterinburg, Russia in 2009. The main raison d’être of its formation was to promote a fairer world order and to influence international economic and financial policies.
The world in post Second World War era is predominantly dominated by the western countries headed by the United States of America not only in the political sphere but in economic sphere as well. The modern International Political Economy established by the Britton Woods Conferences in 1944 has been structured and evolved in the interest of western countries as it were these countries who laid its foundation. After the recent recession of world economy in 2008 which originated in the US banking sector (the recession first started in two US banks Marylinch and Lehman brothers because of their faulty premises in their prime lending policies), engulfed the highly connected global economy particularly European countries, since then the Britton Woods based world political economy has been questioned particularly from BRICS countries.
The questioning on modern structure of political (United Nations Organization) and Financial (IMF &WB) institutions by the BRICS countries is justifiable on many accounts and indices which does reflect the contemporary realities. The BRICS countries represent worlds 43 percent population, 18 percent of global trade and attract 53 percent of global financial capital. There is one forecast that BRICS countries aggregate GDP will exceed that of G7 (group of seven industrialist developed countries) countries, which currently dominate the world order, by 2027. Therefore, the new development bank unfolded by the sixth BRICS summit is in right direction as it will provide the right place to the countries that deserve to be at higher echelons of international decision making.
The prospects of the BRICS New Development Bank shall be determined by more intra BRICS cooperation rather than political-cum-financial architecture of the world. There is no doubt that the G7 will not be pleased by this new development as no one like to see that someone else will take its chair which it has occupied since long. The problem with BRICS is that it is more heterogeneous than homogeneous on many accounts as compared to G7. Unlike G7 all BRICS countries are not democracies as China and Russia are communist states, BRICS states are not close allies as the G7 are and unlike G7 all BRICS states are not symmetrically economic developed as there is an asymmetry in their economies. China is more vibrant and powerful among all within BRICS both in political as well as in economic domain. Therefore, there is an apprehension that this new initiative shall be China centered. Moreover, within the BRICS there are two permanent members of UN Security Council viz China and Russia and the rest three in the grouping are aspirants of the same.
One more irritant in the grouping is bilateral relations particularly of India and China. One narrative believes that the Sino-India bilateral relations shall be having veto over the success of the BRICS new initiative. The bilateral disputes between China and India will definitely play its role in the future prospects of the BRICS cooperation. There are already some circles within Indian state who are unhappy about NEW Development Bank headquarter at Shanghai. But one should not be too pessimistic about their bilateral relations. The problem with developing countries is that we least theorize about the future world. We more believe or accept what west propagates. There are some positive signs emerging from Indo-China bilateral meeting on the sidelines of sixth BRICS summit at Brazil. The Chinese President has invited Indian Prime Minister to attend the upcoming meeting of APEC. Therefore, both India and China should not be trapped in the western conspiracies and should look forward for their prospective bilateral relations.
The bigger question is now that will BRICS succeed to replace the western dominated world order? Will they be able to make this new initiative successful and lead the foundation of New World Order based on equity and sustainable development? All this depend on how BRICS countries will play the new initiatives and how they will overcome asymmetries lying within the grouping.
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