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NEW DELHI: BRICS nations on Thursday decided to examine the viability of a development bank for developing countries, besides agreeing to make it a little simpler for those trading within the group by settling transactions in local currency.
But in both cases, the outcome fell short of expectations as four members - India, Russia, Brazil and South Africa - seemed to fear the clout that China would enjoy if the proposal to set up a bank and move to a single currency went through.
As a result, finance ministers have been tasked to study the feasibility of a multilateral agency modeled on the lines of the World Bank or the Asian Development Bank to generate resources for funding infrastructure and core sector projects in the BRICS nations as well as other emerging economies. The idea is also to ensure adequate financing during a period of global economic uncertainty. The joint working group will submit a report at the next meeting, a joint declaration said.
On the issue of making credit available, the five countries signed a master agreement to ensure that purchases from the other members of the groups are settled in local currency. Although the stated goal is to boost trade within the group by cutting down on transaction cost, the move is being seen as a step towards replacing dollar as the main currency of trade. Once the arrangement is in place, funds routed through the five designated banks, an Indian buyer can make the payment to a Chinese supplier in yuan instead of first converting the rupee into dollars and then reconverting it into the Chinese currency.
Although the summit may have ended a little short of expectations on the overall substance, the five countries were not short of words. They blamed the US and Europe for generating excessive liquidity in the global financial system as part of their strategy to boost local economic activity. On Wednesday, Brazilian President Dilma Rousseff had said that the steps taken in the developed countries had created "monetary tsunami" as most BRICS nations had to initiate measures to check excessive volatility in capital flows and commodity prices. "It is critical for advanced economies to adopt responsible macro-economic and financial policies, avoid creating excessive global liquidity and undertake structural reforms to lift growth that create jobs," the Delhi Declaration said.
Times View
Brics has so far been nothing but a catchy phrase under whose umbrella leaders from the five global powers meet for little more than photo opportunities. With the five members competing for investment and trade opportunities and a place on the global high table, the group whose name was coined by Goldman Sachs a few years ago has little to show by way of concrete measures. Be it currency, where China has sensitivities, or commodities, a key area of interest for Russia and Brazil, Brics members can only agree to disagree on most things. They have not been able to even finalise a candidate for top jobs at the World Bank or the IMF. The summit in Delhi presented the leaders of the five countries an opportunity to disprove such an assessment, but this must go down as another largely wasted chance.
http://m.timesofindia.com/PDATOI/articleshow/12462714.cms
But in both cases, the outcome fell short of expectations as four members - India, Russia, Brazil and South Africa - seemed to fear the clout that China would enjoy if the proposal to set up a bank and move to a single currency went through.
As a result, finance ministers have been tasked to study the feasibility of a multilateral agency modeled on the lines of the World Bank or the Asian Development Bank to generate resources for funding infrastructure and core sector projects in the BRICS nations as well as other emerging economies. The idea is also to ensure adequate financing during a period of global economic uncertainty. The joint working group will submit a report at the next meeting, a joint declaration said.
On the issue of making credit available, the five countries signed a master agreement to ensure that purchases from the other members of the groups are settled in local currency. Although the stated goal is to boost trade within the group by cutting down on transaction cost, the move is being seen as a step towards replacing dollar as the main currency of trade. Once the arrangement is in place, funds routed through the five designated banks, an Indian buyer can make the payment to a Chinese supplier in yuan instead of first converting the rupee into dollars and then reconverting it into the Chinese currency.
Although the summit may have ended a little short of expectations on the overall substance, the five countries were not short of words. They blamed the US and Europe for generating excessive liquidity in the global financial system as part of their strategy to boost local economic activity. On Wednesday, Brazilian President Dilma Rousseff had said that the steps taken in the developed countries had created "monetary tsunami" as most BRICS nations had to initiate measures to check excessive volatility in capital flows and commodity prices. "It is critical for advanced economies to adopt responsible macro-economic and financial policies, avoid creating excessive global liquidity and undertake structural reforms to lift growth that create jobs," the Delhi Declaration said.
Times View
Brics has so far been nothing but a catchy phrase under whose umbrella leaders from the five global powers meet for little more than photo opportunities. With the five members competing for investment and trade opportunities and a place on the global high table, the group whose name was coined by Goldman Sachs a few years ago has little to show by way of concrete measures. Be it currency, where China has sensitivities, or commodities, a key area of interest for Russia and Brazil, Brics members can only agree to disagree on most things. They have not been able to even finalise a candidate for top jobs at the World Bank or the IMF. The summit in Delhi presented the leaders of the five countries an opportunity to disprove such an assessment, but this must go down as another largely wasted chance.
http://m.timesofindia.com/PDATOI/articleshow/12462714.cms
