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BRICS Bank: A Wake-Up Call for the Private Sector

2/27/2015

2 Comments

 

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There is a lot of buzz right now about the New Development Bank, also known as the BRICS Bank. Brazil, Russia, India, China and South Africa (together referred to as “BRICS” countries) decided in July 2014 to establish this new multilateral organization, as well as fund a $100 billion reserve currency pool. Since then, several steps have taken place to realize these plans. Just last Friday, Russia ratified its commitment, and this week, India followed suit.
The creation of this organization is concrete proof of the dramatically strengthening inter-collaboration between emerging market countries. Emerging markets are no longer as dependent on the developed world, often with its own agenda, to act as facilitators of their progress.

The world is holding its breath to find out whether the BRICS Bank will have the combined strength of its backing countries – and therefore go head-to-head with the World Bank and the IMF – or whether it will just be another of the many multilaterals considered somewhat junior in world influence, such as the African Development Bank, the Asian Development Bank, the Islamic Development Bank, and the Inter-American Development Bank.

Why should you care about the BRICS Bank if you are running a private sector company? This organization is possibly the biggest sign of the shifting power structure of the global economy. Those in denial need to wake up. Over half of the world’s commerce is now conducted in emerging markets, and the majority of global growth in the future will be in these markets.

Just as the International Monetary Fund and the World Bank have not reconfigured their power structures to fully reflect these new economic realities – thus creating the impetus for the formation of the BRICS Bank – the US corporate psyche has also not yet adjusted to the times. Both corporations and these institutions have clung to a mode of seeing the world which has become vestigial. US and European influence on the world, while expected to remain strong, is decreasing. In fact, in 2015 the combined GDP of BRICS (19.1 trillion USD), is projected to surpass that of the US (18.4 trillion USD), according to IMF statistics.

The implications are clear: if you are not growing your business outside of US borders, in the long run your company is dramatically limiting its profitability and success. Furthermore, as time passes and political, economic, and trade cooperation increases between these major emerging economies, US companies will slowly lose some of their leverage at the negotiating table when establishing global distribution channels. The time to expand into emerging markets is now.

What barriers does your company face in shifting its strategy to account for the changing economic realities of today’s world, and how can your company knock these barriers down? To succeed, your company needs to ask itself this question every day. SH International can help you with the answers.

2 Comments
Tarun Narayan Agrawal link
3/1/2015 01:19:04 am

When I attended the Wharton Reunion 2015, in the Dean's Townhall meeting, he outlined the dilemma of whether Wharton should educate those that might later become their enemies and use the tools and benefits of the tools against the US, including Wharton.

I think it is a mature step in developing the economies of the BRIC nations in an era where capitalism is being used as a means, or having the effect, of creating war or war sentiment, for example in cases like the destruction of the British pound, the Malaysian currency, and other currencies through speculation.

China has already moved to disintermediate the dollar by providing a second reserve currency to the world, the key to that being a strong Yuan. A Development Bank to provide sustainability along another block of countries than just the US will provide more global economic stability.

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Sara Haq link
3/1/2015 10:24:32 am

Thank you for your comment, Tarun. Many decisions are made on the premise that increasing the rate of literacy and the level of education for all people is good for global society as a whole. The US is a country that has always viewed the provision of high quality education to foreigners as a way of "winning" friends. After all, when you understand someone's way of life and have made friends with a country's citizens, it is harder to implement policies or take actions based on hatred and fear.

I am glad to know that you are confident that the New Development Bank will provide more global economic stability.

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