THE failure of the International Monetary Fund to democratize its system led Brazil, Russia, India, China and South Africa, countries with emerging economies, to form the BRICS Group and create their own New Development Bank to complement IMF’s World Bank.
Specifically, the refusal of the IMF, under the leadership of the United States, to allow greater participation in the fund’s decision making led the BRICS to form their own grouping which is headquartered in Shanghai, China. The BRICS member countries intend to be “at the forefront of a growing chorus of emerging and developed nations.”
The new economic formation came about in 2009 after two years of negotiations and it is considered by its five founding countries to be “a major step for the diverse group known more for its anti-Western rhetoric than coordinated action.” Moreover, there are reports saying the BRICS group leadership is said to be considering Pakistan, Bangladesh, Iran, Nigeria, South Korea, Mexico, Turkey, Indonesia, the Philippines and Vietnam as future group members.
As of 2015, the five BRICS countries represent over 3.6 billion people, or half of the world population. All five member countries are in the top 25 tier countries by population while four of them are in the top 10.
BRICS countries have a combined nominal Gross Domestic Product output of US$16.6 trillion, equivalent to approximately 22% of the gross world gross product, combined GDP (PPP) of around US$37 trillion and an estimated US$4 trillion in combined foreign reserves. The World bank expects BRICS growth to pick up to 5.3% in 2017.*
The rise of BRICS New Development Bank and the reserves fund are a “response to failed attempts to increase the BRICS’ influence within the IMF, at the center of the post-war Bretton Woods monetary order created by the United States and Europe.”
China’s Shanghai City is set to become the headquarters of the said development bank recently launched by the BRICS emerging market nations, “despite fears by some members of the group that China could hijack the bank to serve its interests.”
Russian presidential adviser on Finance, Yuri Ushakov — citing discussion papers prepared by the member countries – had confirmed that the new bank would be based indeed in Shanghai, mainland China’s financial capital.
The Russian finance minister also said that India was vying with China to host the new infrastructure lender.
But Ushakov reported that: “The bank’s headquarters will be located in Shanghai, and this is fixed in the documents.”