BRICS nations appear set to challenge the current world economic and financial order.

Leaders of BRICS nations - Brazil, Russia, India, China and South Africa - meeting in Durban, South Africa from March 26-27, 2013 agreed to create a development bank. The infrastructure-focused institution is expected to challenge seven decades of dominance by the World Bank and the International Monetary Fund, IMF and will fund development projects in developing nations. However, further talks are needed to work out the details.  

Origin

The abbreviation BRICS was first coined in 2001 by Goldman Sachs to forecast global economic trends over the next 50 years. Five summits have so far held - Yekaterinburg, Russia in June 2009, Brasilia, Brazil in April 2010, Sanya, China in April 2011, New Delhi, India in March 2012, and Durban, South Africa in March 2013.

Objective

Members’ stated objective is to work for a more equitable global order by alleviating poverty and securing greater weight as emerging economic powers. According to China’s new leader, Xi Jinping, the global economic governance system must reflect the profound changes in economic landscape and the representation of emerging markets and developing countries should be increased.

Expanded Agenda

The agenda of BRICS summits has considerably widened over the years to encompass the situation in Middle East and North Africa, Afghanistan, Iran and Syria. Others are institutions of global governance such as the UN, IMF, World Bank Group and international terrorism. Climate change, food and energy security, Millennium Development Goals, MDGs, the international economic and financial situation have also been taking centre stage.

Economic Weight

BRICS countries represent about 43 per cent of the world’s population and hold more than one-third of global foreign reserves. In 2012, they accounted for approximately 11 per cent of global foreign direct investment flows and about 17 per cent of world trade. Their average annual economic growth rate in 2012 was 4 per cent, as against 0.7 per cent for the biggest seven financial countries. Virtually unscathed from the recent worldwide financial crisis, these countries are poised for long-term growth.

Future Plans

Rising from last week’s Durban, South Africa summit, BRICS leaders agreed to forge closer partnership for development integration and industrialisation and to remain committed to promoting greater economic cooperation, stronger, sustainable and more equitable growth. They will also encourage governance reforms in multi-lateral institutions, promote economic policies to bring about stability and certainty in global financial markets, and contribute to the expansion of trade and investment links between BRICS and Africa.

Prospects

The combined economic strength of BRICS members is undeniable. They will continue to attract foreign direct investmentThis category refers to international investment in which the investor obtains a lasting interest in an enterprise in another country. Most concretely, it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility, in the form of property, plants or equipment. as corporations gain access to their growing middle class markets.

These nations are increasingly rebalancing their domestic consumption to achieve more sustainable growth models. Increased economic power gives BRICS leverage to assert their needs and desires in the international arena. A Goldman Sachs report warns that the developed world cannot compete with the five BRICS countries in terms of growth and incremental consumption in the decade ahead and beyond. Goldman Sachs economist, Jim O'Neill, forecasts that by 2035, BRICS nations will be as big as the leading industrialised nations of the G7.

There is a new era in international relations with the rise of BRICS changing power dynamics in world affairs. These countries are flexing their economic prowess, demanding a larger role in decision-making. How and when they succeed, might just be a matter of time.