9 Dec, 2012
First Forum on BRICS Economies Charts Way Forward, Mulls Development Bank
Beijing, December 07, 2012 – The first Forum on the Economic Situations of BRICS Countries was held in Beijing on Dec. 4, and attended by about 200 diplomats, officials, experts, scholars, and entrepreneurs from 26 countries and regions. They had an in-depth discussion of the economic situations and prospects of BRICS countries (Brazil, Russia, India, China, and South Africa) as well as of practical ways to deepen the economic and trade cooperation among BRICS countries.
BRICS economies to move forward amid turbulence
Although more and more people believe that BRICS economies are fading, both officials and scholars at the forum remain confident about the future of BRICS countries despite a general economic slowdown in these countries.
“BRICS economies have been on a downward trend for some time, and are close to bottoming out according to the current economic situation,” said Gao Peiyong, director of the National Academy of Economic Strategy under the Chinese Academy of Social Sciences. BRICS economies will continue to move forward amid turbulence in 2013.
“There has been a general economic slowdown in emerging market countries, including BRICS countries, since the beginning of the year. This reflects a more adverse external environment and the decreasing effects of previous economic stimulus policies. The economic slowdown in emerging market countries is just a short-term phenomenon, and they still enjoy great growth room in the long run,” said Xu Rujun, president of the Economic Daily.
Jim O’Neill, chairman of Goldman Sachs Asset Management who coined the term “BRIC,” said he did not think anyone should exaggerate the importance of European and U.S. problems driving the environment of BRICs countries. “They should be perfectly capable of driving their own growth rates. Indeed, even with these rates I forecast, by 2014, they might become collectively bigger than the United States,” O’Neill said.
Only by cooperation can the BRIC countries have a brighter future
At present, the world economic situation still seems not optimistic. The fiscal cliff in the United States, the debt crisis in the Eurozone, and the financial regulatory measures in Europe and America all added uncertainty to world economic recovery. What should the BRIC countries do in order to maintain stable and rapid economic development?
“We already have a good basis for cooperation,” Vice Finance Minister Zhu Guangyao said, “What we need to do is strengthen the coordination in macroeconomic policies, including regulations in fiscal, monetary, financial and other aspects; enhance pragmatic cooperation, such as speeding up the process of construction of the Development Bank of the BRIC Countries; jointly promote the reform of the international financial system; and keep a high degree of vigilance, help each other, and jointly overcome the difficulties in the context of rising trade protectionism in some countries.”
Huo Jianguo, president of International Trade and Economic Cooperation Institute, Ministry of Commerce said that the BRIC countries have a huge potential for cooperation.
Taking the area of trade for example, he said: “During the 10 years from 2001 to 2010, trade between the BRIC five countries reached an average annual growth rate of 28 percent, up 15 times in scale, reaching the amount of 230 billion U.S. Dollars. However, in terms of absolute value, the volume of trade among the five countries is small and accounts for only three percent of global trade, much lower than the proportion of 15 percent which the total foreign trade of the five countries accounts for in global trade.”
“Of course, the BRIC countries are all relatively fast growing and naturally have competitions against each,” Huo said. “But we want to reach a consensus and mutual trust, and hope that such competition is mutually beneficial and with tolerance. Our aim is to make the pie bigger and to achieve common development.”
Jointly building a new international order
Since the global financial crisis in 2008, the BRICS countries, have been showing strong anti-crisis capacity. The contribution rate of BRICS countries to the world economy had exceeded 60 percent in 2010, with China accounting for 30 percent, which is a witness of the rise of BRICS countries and indicates the urgency and importance of reforming the governance mechanism of international economy.
“The BRICS countries should have more representative rights and voices in international economic affairs,” which is the consensus of all parties. “At present, the meeting mechanism of leaders of the BRICS countries is very sound and high-level officials have reached an agreement to promote the common development of the BRICS members,” Huo Jianguo, president of the Chinese Academy of International Trade and Economic Cooperation, said. “The BRICS countries have common interests in many international affairs and large space for cooperation in terms of investment, trade, industry, energy, finance and infrastructure.”
“The common goal of emerging economies including BRICS countries is to build a more compatible international order. In the process, emerging economies must prevent from the excessive precautions of developed countries about their vested interests,” said Yao Zhizhong, assistant director of Institute of World Economics and Politics under Chinese Academy of Social Sciences and executive director of BRICS countries research base.
Yao thought that the BRICS countries must strengthen cooperation to prevent from the excessive precautions of developed countries.
“The world has entered an integrated era and one of its characteristics is that the economic growth rate of poor countries is generally higher than that of rich ones. It is a diversified era and the phenomenon of polarization will not occur. Meanwhile, the interdependency of global economy is also increasing and no countries can achieve a high-speed development without other countries,” Yao said.
BRICS DEVELOPMENT BANK PROPOSED
BEIJING, Dec. 6 (Xinhuanet) – The BRICS countries should strengthen intra-BRICS cooperation, said experts, proposing the establishment of a BRICS development bank. This roadmap came appeared during a Moscow-Delhi-Beijing video conference Wednesday. By such a development bank, Xu Qiyuan, researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, said the BRICS countries can work together to shape a new international monetary system.
He added as export-led economies, the BRICS countries feel the impact sharply each time global financial crisis hits. Drawing on their successful experience of reform, he added, they have to set up such a bank for their common development according to their own conditions.
Noting that the IMF and World Bank have experienced many failures and setbacks, Xu also warned it’s better for the BRICS countries to build the development bank gradually, as there are “more than one potential risks and problems.”
Valuing the roles of the development bank, Xiong Aizong, also from the Chinese Academy of Social Sciences, said it can support many long-term infrastructure projects in the developing countries while vigorously promoting the investment and economic growth within the BRICS countries.
To build a BRICS development banks is not a new idea as it was talked about at G20 summit in Seoul in 2010, Unnikrishnan Vishvanatan, a former senior Indian diplomat said. There is a huge amount of savings in the BRICS countries, which is not fully unused. “So the idea started there,” Unnikrishnan added, “It’s about how to use the huge amount of savings which are unused.”
“Money is not a problem,” Nandan Unnikrishnan, Vice-president of India’s Observer Research Foundation, agreed. “There are enough savings from China, India, and other countries to put into this bank,” he said.
But Nandan said there is one problem, a “philosophical problem” to be solved. To him, there should be a clear distinction about whether the bank is going to be “in competition” with the IMF and World Bank, or it’s going to be “in cooperation” with them.
Furthermore, confronted with uncertainties brought by European debt crisis and lackluster U.S. recovery, the BRICS countries have difficulties of each own. Therefore, Nandan stressed, “I believe this bank has to be commercially viable. You can not mechanically say there are five countries, so each one will have 20 percent of staff. That is not going to work.”
The BRICS group, which is comprised of Brazil, Russia, India, China and South Africa, has become an engine of global economic growth in recent years. With a total population accounting for about 40 percent of the world’s total, its total gross domestic product accounts for nearly 20 percent of the world’s GDP and contributes half of the growth in global economy.
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