UN optimistic about BRICS' development bank

By Chen Boyuan
0 Comment(s)Print E-mail China.org.cn, March 29, 2013
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BRICS nations -- Brazil, Russia, India, China and South Africa -- on Wednesday agreed to jointly establish a development bank to fund infrastructure in the five emerging economies. The bank, expected to rival Western-backed financial institutions, will operate on capital injections from the five member states.

'One way to do that is to create a new financial instrument, instead of putting money in the stock markets in New York or London. Through the creation of this bank, the five governments will get higher returns for their citizens,' Malik said at the UN China headquarters in Beijing on Thursday. [Chen Boyuan / China.org.cn]

"One way to do that is to create a new financial instrument, instead of putting money in the stock markets in New York or London. Through the creation of this bank, the five governments will get higher returns for their citizens," Malik said at the UN China headquarters in Beijing on Thursday. [Chen Boyuan / China.org.cn]

The initiative has been widely seen as the emerging economies' joint effort to look for a better way to invest their money globally. Developing countries' foreign reserve reached US$6.08 trillion, according to the latest UN figures.

Khalid Malik, development economist and Director of the United Nations Development Programme (UNDP) Human Development Report Office, said the volume of foreign reserve in BRICS nations is far beyond any level of self insurance in terms of protecting their own currencies, and there should be a better way use the money to benefit their citizens.

"One way to do that is to create a new financial instrument, instead of putting money in the stock markets in New York or London. Through the creation of this bank, the five governments will get higher returns for their citizens," Malik said at the UN China headquarters in Beijing on Thursday.

Other financial experts have been supportive of the idea, saying a foreign reserve bank jointly managed by BRICS nations will effectively lessen the impact of currency fluctuation, for example, quantitative easing, in countries like the United States and Japan.

Prof. Tu Yonghong, vice director of the International Monterey Institute at Renmin University of China, said the BRICS development bank in conception could earn developing countries a stronger voice in influencing commodity prices.

Malik said the U.N. believes the new financial mechanism of the BRICS nations is an opportunity not only for money from the South but also from the North, because "capital in its nature is always searching for higher returns." There's a lot ways that money can search for a higher return. This is an opportunity where developing countries can benefit themselves before benefiting others.

The latest BRICS summit held in South Africa coincided with the Chinese President Xi Jinping's first African tour after he was elected to office in March of this year. Xi on Thursday in Durban, South Africa, called on closer ties with African countries.

Trade between China and Africa was two billion dollars in 1999, and touched 200 billion last year.

Malik, who served as the U.N. Resident Coordinator in China (2004-2011), noted in the first years of the China post, the first batch of Chinese entrepreneurs investing in Africa had no idea what Africa was like.

"They thought Africa was like in Hollywood movies, and there would be a lion somewhere and tree hotels," said Malik. "I think BRICS is a sign of things to come. It shapes the world that is changing."

The notion to establish a development bank reflects the BRICS nations' urge for a better representation in the world through a louder and united voice.

"So I think the BRICS is one 'brick,' but there would be other 'bricks' very soon. I hope they will make a diverse world," Malik said.

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