hankyoreh

By Lee Chun-jae, staff reporter and Seong Yeon-cheol, Beijing correspondent

The BRICS are setting up their own international monetary organization to challenge the International Monetary Fund and World Bank.

The five emerging economies - Brazil, Russia, India, China, and South Africa - are in the process of reaching an agreement on forming a new development bank to address the economic needs of developing countries and react to financial crises, Bloomberg reported. The report cited officials who are currently at a two-day BRICS summit that is taking place in Durban, South Africa, on Mar. 26-27.

The new bank would have assets of US$50 billion and available capital of up to US$240 billion, it was reported.

The development bank represents a longstanding dream for the BRICS, which would like to challenge the US- and European-dominated international financial order. The countries certainly do have weight in the global economy, with 43% of the world‘s population, US$4.4 trillion in foreign reserves, and US$282 billion in trade with each other (2012 figures).

But for all their strength, they account for just 11% of voting rights in the IMF.

Maite Nkoana-Mashabane, South Africa’s Minister of International Relations and Cooperation, said that changes were needed in the way the IMF has been operated.

Liu Guijin, China’s ambassador to South Africa, said the development bank had the potential to end the dominance of Bretton Woods institutions, mainly the IMF and World Bank.

With the launch of the bank, the BRICS would be able to put their capacities into their own efforts for development, Liu said.

The BRICS leaders also plan to discuss pooling foreign reserves to respond to a financial crisis. Back in October, Brazilian finance minister Guido Mantega proposed a pool modeled on the Chiang Mai Initiative, a currency swap agreement among South Korea, China, Japan, and ten Southeast Asian countries.

Noting the ample reserves of the BRICS, Yao Shumei, a researcher at China’s Foreign Economic Institute, said the pool could serve as a “firewall” in the case of a crisis.

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