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The leaders of Brazil, Russia, India, China and South Africa ratified two pacts covering a BRICS Multilateral Infrastructure Co-financing Agreement for Africa, and a BRICS Multilateral Cooperation and Co-financing Agreement for Sustainable Development on Wednesday.
One of the most crucial achievements of this year’s summit was the formation of a new 25-member BRICS Business Council comprised of five members from each of the member nations. The Council will meet twice per year and submit a report at each of the BRICS’ annual gatherings.
“The Council will serve as a platform to strengthen and promote economic, trade, business and investment ties between the business communities of the five BRICS countries,” South African President Jacob Zuma said at the launch of the Council on Wednesday.
Key objectives of the Council include the strengthening of trade relations, promotion of business relations, technology transfer and cooperation in the areas of skills development, banking, the green economy, manufacturing and industrialization.
Zuma told the group that he wants to see “tangible and practical projects when we meet at the next Summit in Brazil.”
“Opportunity is immense,” said Zuma. “Now is the time for the BRICS Business Council to lead private engagements and projects for mutual benefit and cooperation.”
South African mining magnate Patrice Motsepe, chair of African Rainbow Minerals, was named as chair of the Council. The chairmanship will rotate on an annual basis among the five BRICS nations, aligned with the country hosting the annual BRICS Summit.
Motsepe said that the council will work hard to improve living standards, create jobs and “give a better future for all our people.”
To achieve these aims, “we also have to create opportunities for women-owned businesses, youth-owned businesses, businesses from the rural areas as well as [small-, medium- and micro-enterprises,” said Motsepe.
Speaking exclusively to The BRICS Post, Kirill Dmitriev, director general of the Russian Direct Investment Fund and a member of the new Council, said that the “BRICS Business Council is a very practical platform to develop and move forward specific projects between the member countries.”
Naina Lal Kidwai, President of the Federation of Indian Chambers of Commerce and Industry and leader of India’s business delegation to the Summit told The BRICS Post that the Council will “go a long way in strengthening the engagement levels amongst business communities.”
In slightly over a decade, the BRICS’ combined GDP has grown from approximately $3.0 billion to more than $13.0 billion. Foreign direct investment into the five nations more than tripled over the past decade to an estimated $263 billion in 2012. And intra-BRICS trade surged from to $27 billion in 2002 to $282 billion in 2012.
Currency FundBRICS leaders have also agreed to create a pool of reserves to provide financial support to the group’s five member countries in case of need.
The BRICS leaders first mooted the idea of a jointly-funded financial safety net at a meeting held on the sidelines of a G20 gathering in Los Cabos, Mexico in June 2012. At the time, the BRICS leaders tasked their respective finance ministers and central bank chiefs with exploring the possibility of establishing a Contingent Reserve Arrangement (CRA) amongst the five countries.
In a joint communiqué released today, the BRICS leaders reported that their teams have concluded that a reserve arrangement would benefit the five countries and should move forward.
“They have concluded that the establishment of a self-managed contingent reserve arrangement would have a positive precautionary effect, help BRICS countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability,” said the statement.
The leaders also agreed that a fund with an initial size of $100 billion is “feasible and desirable” and directed their governments and central banks “to continue to work towards its establishment.”
“The shares of participants in the $100 billion are as follows: China, $41 billion, all other countries but for South Africa, $18 billion, and South Africa, $5 billion,” Russian Finance Minister Anton Siluanov said today.
Although the communiqué did not provide details on the how the fund will operate, Brazilian Finance Minister Guido Mantega said in October of last year that the pool would be modeled on the Chang Mai Initiative for China, Japan, South Korea and 10 other Asian nations set up in the wake of the 1997 Asian financial crisis.
Between them, the BRICS hold total foreign-currency reserves of $4.4 trillion, $3.0 trillion of which are held by China alone.
BRICS Development Bank
The BRICS Development Bank was first proposed by India at last year’s Summit in response to criticism from developing nations that existing multilateral lenders – such as the World Bank and International Monetary Fund – are too dominated by Western governments.
Leaders of the five BRICS countries agreed today to establish the Bank and directed their finance ministers to expedite negotiations on size, structure, location and other operational details.
“We have agreed to establish the New Development Bank. The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure,” the BRICS leaders said in a joint statement.
South African Finance Minister Pravin Gordhan said that the five countries’ views on the total capital to be allocated to the development bank differed and a number of governance issues – including share structures and voting rights – still needed to be worked out, but expressed satisfaction that leaders approved the initiative in principle.
“The fact that in one year you can initiate an idea and get it to a point where you’ve got five different countries saying let’s establish it and having established its feasibility and viability is phenomenal progress which you rarely see around the world,” said Gordhan.
South African President Jacob Zuma said that ministers will soon return to work on the Development Bank.
Matt Quigley for The BRICS Post