6 July 2015 (TSR-Bricspost) – Representatives of global investment firms and bankers from the G20, the BRICS and the China-Russia-led security bloc SCO will attend a financial forum in Russia and launch BRICS bank this week.
The Russian city of Ufa will host the BRICS and SCO Financial Forum where participants, including the new BRICS Bank President Kundapur Vaman Kamath, will discuss “the role of financial institutions in promoting the development of regions, supporting sustainable growth, innovation and social stability, and other important issues in global finance”, said an official statement.
The financial meet, to be held a day after the $100 billion BRICS Bank officially commences business, is being organised by Russian Vnesheconombank, which chairs the BRICS and SCO interbank associations.
The BRICS Bank will also offer loans to other middle- and low-income countries.
Membership of the BRICS Bank will be open to all members of the United Nations, subject to agreement from the bank’s board of governors, China’s Vice Finance Minister Shi Yaobin said in May.
“The establishment of the BRICS bank is a landmark event in financial cooperation, which will promote the BRICS countries and other emerging markets, and infrastructure construction and sustainable development in developing countries,” said Yaobin.
Apart from the new BRICS Bank head, those attending the financial meet next week in Russia are SCO Secretary-General Dmitry Mezentsev, Vnesheconombank Chairman Vladimir Dmitriyev, President of VTB Bank Andrei Kostin, President of the China Development Bank Zheng Zhijie, President of the Brazilian Development Bank Luciano Coutinho.
Many countries, including Greece, have stated in recent weeks that they are keen to join the new BRICS development Bank, NDB.
In a new report on the Greece crisis, the IMF has argued on Thursday that a new bailout package for Greece by the EU must include debt relief.
“At a minimum, the maturities of existing European loans will need to be extended significantly while new European financing to meet financing needs over the coming years will need to be provided on similar concessional terms. But if the package of reforms under consideration is weakened further—in particular, through a further lowering of primary surplus targets and even weaker structural reforms—haircuts on debt will become necessary,” said the IMF report.
The BRICS New Development Bank will be launched at the first session of its Board of Governors in Moscow on 7 July.
The New Development Bank will provide a financing alternative to the World Bank, where the five large emerging markets have sought more clout.
BRICS leaders also announced the establishment of the BRICS Contingent Reserve Arrangement, a 100-billion-dollar fund from which the BRICS member countries will be allowed to draw funds when going through a crisis.
The bank is set to be headquartered in Shanghai.
The group’s growth rate is still above that of the global average and its economic and political weight is increasing, evident from the decision of several European countries to join the China-led Asian Infrastructure Investment Bank.
‘BRICS Free Trade Zone’ being considered: Russia
BRICS are discussing terms of a free trade zone agreement although the bloc is not ready to “rush events” yet, top Russian officials said on Monday.
“We are already discussing the terms of the agreement regime… The correct decision is we do not rush events and not grind out an agreement on free trade zone now,” Russia’s First Deputy Economic Development Minister Alexei Likhachev told Russian agency Tass.
The Russian Minister claimed “it can happen within five years”.
A BRICS free trade zone would be a significant step further in boosting commerce between the rising powers. It would create a uniform economic zone for more than 2.8 billion consumers and eliminate many of the hurdles that obstruct trade across the five countries today.
Between 2002 and 2012, intra-BRICS trade increased 922 per cent, according to official statistics.
Negotiations for an ambitious free trade zone between Brazil, Russia, India, China and South Africa would be challenging as most of these countries have been accused by the Global Trade Alert (GTA) as adopting strident protectionist measures.
The EU and the US are also in the midst of long-drawn out negotiations on the Trans-Atlantic Trade and Investment Partnership or TTIP, which Washington claims would create the world’s biggest free trade zone.
Meanwhile, Moscow is aggressively pushing for the newly-proposed BRICS free trade zone.
“At first it will be a declarative document that will inspire our countries to cooperate more actively. Then it could be non-preferential agreements, which optimize regulatory system, simplify customs and investment procedures, create the so-called “green corridors” for goods. The third phase is a preferential regime – concessions that we will make in terms of commodity trade,” Likhachev said on Monday.
BRICS countries account for 42 per cent of the world population.
The IMF says the combined GDP (by purchasing power parity) of the BRICS countries is $32.5 trillion.
Leaders from the five countries, Vladimir Putin, Xi Jinping, Dilma Rousseff, Jacob Zuma and Narendra Modi will meet in the Russian city of Ufa from 8-9 July to discuss a future roadmap for trade and investment ties within the BRICS.
BRICS to do their own thing; Bank to commence business on 7 July
The BRICS New Development Bank will be launched at the first session of its Board of Governors in Moscow on 7 July, Russian officials have confirmed, according to Bricspost.
Russian Deputy Finance Minister Sergei Storchak announced at the St Petersburg International Economic Forum last month that the BRICS Bank will be ready for action after the maiden meet of the governors.
The New Development Bank will provide a financing alternative to the World Bank, where the five large emerging markets have sought more clout.
BRICS leaders also announced the establishment of the BRICS Contingent Reserve Arrangement, a 100-billion-dollar fund from which the BRICS member countries will be allowed to draw funds when going through a crisis.
The bank is set to be headquartered in Shanghai. India has already announced the first president of the Bank.
It will eventually open membership to non-BRICS countries and coincides with plans for the Asian infrastructure development bank spearheaded by Beijing.
Russian Finance Minister Anton Siluanov will be the first chairman of the BRICS Bank’s Board of Governors.
The leaders of five of the world’s largest emerging markets will showcase a new currency reserve fund and development bank during the BRICS Summit in the Russian city of Ufa.
Brazil’s envoy to the IMF and newly announced BRICS Bank Vice President , Paulo Nogueirga Batista, said at the BRICS Business forum last month that the BRICS are “not fully satisfied with the international financial architecture, not fully satisfied with the role that our countries are allowed to have at the IMF and the World Bank”.
Batista clarified that these are not the views of the IMF.
“The BRICS are very different countries… We have very important common traits… We (four in the BRICS) are among the ten largest countries in terms of territory, population, GDP,” noted Batista at the forum.
“Our countries are very active in IMF….We work together at the IMF… Despite this active involvement in the Washington institutions, our countries have begun to realize that we need to do our own thing,” said Batista.
After being nominated by the Rousseff-administration as the Vice President of the BRICS Bank, Batista said he will be moving to Shanghai, where the Bank will base its headquarters, in July.
Batista last month said the BRICS have created a pre-management team in Shanghai even before the actual entry into force of the New Development Bank, Bricspost reported.
The BRICS to-do list is clear- free trade, economic growth, BRICS Bank, a new energy alliance.
“We are working closely on development of Russian exports with BRICS. We are taking some very important decisions from Summit to Summit,” said Alexey Likhachev, Russia’s First Deputy Minister of Economic Development.
“Priority of Russian Presidency is to reach an economic partnership strategy that will be unveiled during the Ufa summit,” he added.
The BRICS, however, face challenges of removing trade barriers, Likhachev warned.
“BRICS is a very important forum for us. Indian Prime Minister Modi said in Fortaleza, Brazil that BRICS represents the potential of the future. We have talked about common guidelines for investment principles,” said Didar Singh, head of Indian industry body FICCI.
India, which will host the BRICS Summit in 2016, has also proposed a “common and integrated trade fair organization for BRICS”.
The first meet of the BRICS Bank governors will be held in Russia.
The group’s growth rate is still above that of the global average and its economic and political weight is increasing, evident from the decision of several European countries to join the China-led Asian Infrastructure Investment Bank.
The BRICS have been gaining ground as the G20’s credibility is being undermined by its inability to deliver on previous headline commitments.
The G20, had in 2010, agreed to what were widely called “historic” changes to the governance of the IMF to recognise the growing power of emerging markets.
As the BRICS countries prepare to, the IMF has once again delayed voting reforms to give emerging countries greater say.
The IMF, however, yet again deferred the decision on voting reforms.
The board will now take stock of the situation in September.
In the meantime the BRICS nations – Brazil, Russia, India, China and South Africa – became so frustrated they have moved to set up a new financial institutions like the $100 billion BRICS Bank, the China-led Asia Infrastructure Investment Bank, and a $100 billion BRICS currency reserve fund on their own.
TSR/TBP
