Home' Trinidad and Tobago Guardian : April 30th 2015 Contents BRICS and The New
BRICS is the acronym for a group of five large emerging-
market countries (Brazil, Russia, India, China and South Africa)
that together account for one-quarter of the world s GDP.
Because of its size and economic strength, China has become
the central figure of the Group. The other partners have vastly
different economic and political systems with few things in
i) their now significant trading relationship with China and
ii) their mutual disgust at their under-representation in the
Bretton Woods institutions.
In July 2014, the BRICS Group announced its decision to
establish the New Development Bank (NDB, but also called the
BRICS Bank), with an authorised capital of US$100 billion (initial
paid-up capital of US$50 billion), along with a Contingency
Reserve Facility (CRF) also of US$100 billion.
According to the memorandum, signed by the leaders of the
four BRIC countries, the main purpose of the NDB is to "
mobilise resources for infrastructure and for sustainable devel-
opment projects in BRIC and other emerging-market and devel-
oping countries". Membership of the NDB will be opened to all
members of the United Nations. Based on its mandate the NDB
could be seen to be in direct competition with the World Bank.
The main purpose of the CRF is " to provide liquidity protection
for countries with balance of payments difficulties." As such,
its mandate closely resembles that of the IMF.
Unlike the Bretton Woods institutions with its weighted
voting, the BRIC members will contribute equally to the Bank s
initial authorised capital. It has also been decided that the Bank s
headquarters will be located in Shanghai, the first president of
the bank will be from india and the chairman of the board of
directors, from Russia.
A branch of the NDB will be set up in South Africa to handle
operations with the African continent. Clearly the BRICS bank
has gone out of its way to showcase its egalitarian and democratic
The bank is now expected to begin operations before the end
of 2016. While the operational modalities have not yet been
finalised, the expectation is that lending by the NDP would
carry fewer and less onerous conditionalities than World Bank
loans. The World Bank, IMF and the G7 have given a polite
reception to the NDP and CRF, " welcoming the initiative and
hoping they could work to the same goal."
At the Asia-Pacific Cooperation Conference meeting, held
in Beijing earlier this year, China spearheaded the creation of
Asian Infrastructure Investment Bank (AIIB) to provide finance
to infrastructure projects in the Asia region.
The proposed bank is regarded by some to be a rival to the
Asian Development Bank (ADB), which is perceived to be
dominated by the United States and Japan. In the ADB, Japan
and the US each claim around 13 per cent of the votes compared
with less than six per cent for China. Also, the President of
the ADB is always Japanese.
Even though the AIIB s Articles of Agreement are yet to be
finalised, reportedly over 50 countries have already indicated
their interest in being founding members. The UK was the
first of the developed countries to announce its intention to
join the AIIB. The announcement drew a barbed reaction from
the US, with a White House official accusing Britain of "con-
stantly accommodating China." However, notwithstanding the
US concerns, there has followed a flow of applications from
US allies such as Australia, France, Germany, South Korea,
Turkey and Spain.
Many commentators see the decision of US allies to join
the AIIB as a big blow to American Super-power status. Former
US Treasury Secretary Larry Summers sees it as "the moment
the US lost its role as the under-writer of the global economic
The AIIB is also expected to
begin operations in 2016
China s membership in the G20 and its central role it is
expected to play in the BRICS bank and the AIIB have given
the a country a new and higher profile in current global gov-
China has now shifted focus to having its currency---the
renminbi (RMB)---join the US dollar, euro and pound sterling
in the IMF s special drawing rights basket.
When this happens, the use of the renminbi in international
transactions, which has been increasing in the past few years,
is expected to soar.
This act would give the renminbi official reserve currency
status and central banks that have not already done so will
begin to invest part of their reserves in RMB.
The final decision on the RMB inclusion will be made by
members of the IMF. Judging from the recent support shown
China in seeking membership in the AIIB, European govern-
ments, who have the largest combined vote in the IMF are
expected to back China. This time the US does not have a
veto since the decision requires a 70 per cent majority of IMF
The IMF vote is expected to take place later this year.
Including the RMB would instantly make the SDR more reflec-
tive of the realities of the new global economy in which China
is the largest exporter and has the second largest GDP. IMF
arithmetic may also force the US to reluctantly support the
majority. In this event it would further highlight the US incon-
sistency in not approving the voting amendment.
Many observers feel that given the rate at which China is
gaining acceptance and recognition as a genuine global economic
power its inclusion as part of a multi-currency reserve system
is inevitable. But is a change that the US would first need to
Ewart Williams is an economist who served two five-
year terms as Governor of the Central Bank of T&T between
2002 and 2012. For 30 years, before joining the Central
Bank, he worked at the International Monetary Fund.
APRIL 2015 • WEEK FIVE www.guardian.co.tt BUSINESS GUARDIAN
ENERGY | BG9
The use of the renminbi in
which has been increasing
in the past few years, is
expected to soar.
From Page 8
An audit has found that Nigeria s state oil
company overpaid the government US$750m
(£490m), but also found it had not properly
accounted for US$1.48bn.
The financial report follows allegations in 2013 by then-
central bank chief Lamido Sanusi that the firm had failed to
account for about US$20bn.
It caused a huge uproar in Nigeria, forcing President Good-
luck Jonathan to order an independent audit.
His office released the findings as he prepares to step
down in a month.
Ex-military ruler Muhammadu Buhari will be inau-
gurated on May 29 after he defeated Jonathan in elections
last month. He has vowed to tackle corruption in Nigeria,
Africa s main oil producer where most people live on
less than US$2 a day.
The BBC s Chris Ewokor in the capital, Abuja, says
the findings suggest that Sanusi s claims were exag-
However, many Nigerians still believe that corruption
in the oil sector runs deep, our correspondent adds.
Former bank chief Lamido Sanusi is now an influential
religious and traditional leader
The audit into the accounts of the Nigerian National
Petroleum Corporation (NNPC) was carried out by
PwC, one of the world s leading accounting firms.
It stated that it could not vouch for the integrity of
the information it was given when it conducted the
audit, our reporter says.
PwC said the oil company should be overhauled and
pay the government about $1.5bn arising from duplicate claims
and accounting errors.
Sanusi, then a respected banker, caused shockwaves in
September 2013 when he claimed that the NNPC had failed
to account for $20bn of oil sold between January 2012 and
He was forced out of office following a heated row with
Jonathan and the NNPC over the allegation.
Sanusi, now a powerful Muslim traditional leader in Nigeria,
has not commented on PwC s findings. BBC news
Nigeria oil firm overpaid Goodluck Jonathan's govt
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