By DIDI KIRSTEN TATLOW
First it was called BRIC, a group of emerging economies thought up in 2001 by a Goldman Sachs economist, Jim O’Neill, made up of Brazil, Russia, India and China. Then it acquired an “s” for South Africa and become BRICS. Now there’s talk of Indonesia, which has a strongly growing economy, maybe wanting in: BRICSI, anyone?
As the leaders of the BRICS nations met in South Africa this week and announced they would establish a development bank to help fund five-year infrastructure investment sums, plans for a financial “safety net,” or reserve, and a string of councils to add business and intellectual heft to the group, some are wondering if Indonesia should be in.
“You can add it as a sixth BRICS, perhaps, making it BRICSI,” PK Basu, regional head of Maybank in Singapore, told the BBC.
Here’s the argument, from The Jakarta Post: Indonesia is the strongest Southeast Asian economy.
“McKinsey & Co. predicts that Indonesia will be the seventh-largest economy in the world and will add 90 million people to its middle class by 2030. There are 45 million middle-class Indonesians today, and the country ranks as the 16th largest economy in the world,” the newspaper wrote.
For now, though, it’s called BRICS, known in Chinese as “Gold Bricks” (and China is a major, perhaps the major, driving force behind it, some commentators say). The concept of BRICS has been viewed skeptically by some who are asking what these nations actually have in common. But there is a sense it may be strengthening as a group – and growing as a challenge to the established world financial order, crafted principally by the World Bank and the International Monetary Fund.
That sense of change was on view in South Africa this week when the group held its fifth summit meeting in Durban and agreed to some key things, even naming figures.
Infrastructure investment over the next five years: About $4.5 trillion would be needed, as Xinhua, the Chinese state-run news agency, reported from Durban.
A figure for the financial reserves, called a Contingent Reserve Arrangement, would initially be $100 billion, Xinhua reported.
Also in the works are a BRICS Business Council, to provide business-to-business links within the group; a BRICS think-tanks council, to get ideas rolling; a BRICS academic forum as a way to promote specialist dialogue. (India seemed especially keen on this, with its president, Manmohan Singh, urging it at the meeting, according to Xinhua.)
How much of this is a vehicle for Chinese ambitions? China has long complained that the current world financial architecture is too American and European-focused, and said it wants a bigger voice.
Apple Daily, a Hong Kong- and Taiwan-based Chinese-language newspaper, reported that the currency reserve would be heavily financed by China – to the tune of 41 percent of its assets, or $41 billion. That has its own logic – China is after all the world’s second-largest economy.
The report quoted a Peking University economics professor, Xia Yeliang, as saying that China is putting up the money to win influence.
“China is doing it to increase its say; it’s playing the part of investor in many international organizations in the hope of being able to formulate things, even rewrite the rules of the game,” Mr. Ye was quoted as saying.
In another sign of change, China and Brazil agreed in Durban to a $30 billion currency swap, a kind of an insurance policy, to be used to finance trade in case of another global financial crisis such as the one that saw dollar liquidity dry up starting in 2008.
In January, its trade minister, Gita Wirjawan, noted that Indonesia did not want a status that it did not deserve, The Jakarta Post reported. But the country had reached the same economic standards as the BRICS countries, Mr. Wirjawan told a panel discussion at the annual gathering of the World Economic Forum in Davos, Switzerland, the newspaper wrote.