BRICS Development Bank: Common and Different Features

27.03.2013

Investments among BRICS countries are staying on the very low rate. At the moment BRICS countries mainly invest to developed countries (USA, EU), and also to countries which are close with their geographic position. The BRICS Development bank could play the role of new integral institution.

Investments among BRICS countries are staying on the very low rate. At the moment BRICS countries mainly invest to developed countries (USA, EU), and also to countries which are close with their geographic position. However cooperation between BRICS countries, joint use of facilities, technologies and knowledge may supply more sizeable results.

BRICS members long to the rise of its role as a union in the global politics and economics, but this means that this is a time for more serious institutionalization. Difficulties with the adaptation to the existing institutions, unwillingness of the developed countries to take into account to the full the new role of the fast-growing developing countries in existing financial structures makes them think about creation of their own development bank. The BRICS Development bank could play the role of the integral institution in series of questions of economics and politics and to become the coordinator of financing strategic high-tech projects in BRICS group.

At the same time the group of BRICS must not set a goal to oppose the existing development institutions, and the produced development bank must not duplicate the World Bank and other multilateral development banks. The BRICS Development bank in financial part should never overcome in might national installments of the group member countries. That’s why it is truly important, that this bank deals with the subject, to which other development banks do not pay enough of attention or do not deal with. BRICS countries are united by the necessity of the rise of the level of the development after the first problems of the industrialization of poverty are solved. What is meant here is the marginal step forward in foreseeable future in the sphere of modernization, as it reflects more specifically in Russian plans and in the decisions of the latest convention of the Communist Party of China.

Issues of BRICS bank may include the overcoming of the demographic risks and lack of food, solving the problems of urbanization and usage of water and land recourses. Also the increasing importance have power efficiency, technological level of economy, infrastructure development, lifting of the human capital.

The BRICS countries are united by a considerable domestic inequality. The population of the large cities (over 1 million inhabitants) in China, India and Russia amounts to more than 20% of the population. In BRICS countries, except for Russia, a labor share with tertiary education is less than 10%. The share of the expenses on the food in budgets of families in all countries of BRICS is high and stays on the level between 16% and 30%. Thus in all countries of BRICS there are cities with good infrastructure, universities with the quality education, the qualified labor, in Russia and other countries there are certain technological capabilities.

The BRICS Development bank has to become a combination of a financial and analytical foundation. Therefore the activity of bank has to include the following directions: analysis of problems of development and production of the effective decisions; financing of projects; disbursement; rendering consulting services; analysis of tendencies of the development and risks of world and regional growth. According to the experience of the existing development banks, divisions of bank can carry out strategic research tasks in the interests of founders and partners, to publish scientific researches on the various subjects connected with projects financed by bank, including infrastructure development, energy efficiency, biotechnologies, environment protection. The team of analysts of the Development bank has to be connected with the best universities of five countries. In any case at a starting stage the full membership in the BRICS Development bank could be limited only to BRICS member countries.

The founder members of BRICS bank have to be presented by Board of directors which will be the higher authority making decisions and defining policy of the development bank. In this particular case Finance Ministers of BRICS countries of can be directors.

The BRICS Development bank can be registered in India as the country with the most favourable tax treatment or other participating country of BRICS group on the model of other Development banks. Inter-American Development Bank is registered in the USA, the Development bank of EurAsEC is registered in Kazakhstan, Asian Development Bank – on Philippines, the African Development bank currently passes a re-registration from Côte d'Ivoire to Tunisia.

Reforming of the world financial architecture is one of the most urgent questions standing on the agenda of meetings of representatives of the BRICS countries. Now, unlike the previous stages of the world financial architecture’s development (the gold standard, the Bretton Woods agreement), the institutionalized agreements on character and structure of operating financial architecture don't exist. The financial architecture is understood as a mild set of multilateral agreements and arrangements between the key countries about rules and norms which operate, or have to operate the cross-border monetary or credit operations of all types. The main directions of reforming of the world financial architecture include: reforming of the world currency system aside increase in a role of various currencies as reserve assets; reforming of the international institutions of development for increase in a role of developing countries in them; strengthening of regulation of the financial markets for the purpose of ensuring stability of the world financial system.

Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.

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