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UNDP Report: New Governance Trends

UNDP by Victoria Cole, July 27, 2015 Adjust font size:

2.2.4 Towards a Cross-Regional Architecture

Emerging economies are also paving the way in forming cross-regional groups. The 2009 BRICS grouping, for example, includes Brazil, Russia, India, China and South Africa – all G20 members and newly industrialized or developing countries, which are experiencing vast, fast-growing economic development and are increasingly influential at a regional and global level.

The BRICS summit was initiated to provide a new platform for these countries to work together to play a collective role in international affairs, with the aim of reforming the international order in a multi-polar way. The countries also share similar political interests in global governance reforms, and awareness of sustainable and inclusive development issues.

Along with the tremendous economic growth experienced by the BRICS countries, their average GDP growth rates increased far beyond the world growth rate. After the 2008 financial crisis, with strong economic growth momentum, the BRICS countries led the world’s economic recovery. The share of the BRICS countries' aggregate GDP almost doubled from 11.8% in 2006 to 20.9% in 2013.

The BRICS signed agreements in 2014 for the establishment of two new financial institutions: the New Development Bank (NDB) and the Contingent Reserve Agreement (CRA). These two agreements represent a very important moment in global economic governance, as they mark the first time that emerging economies have stepped away from the big "developed" powers to design their own proposals.

The authorized capital of the NDB will be apportioned equally by the five founding members. Membership of the Bank will be open to UN member countries; however, BRICS members' share in the total capital of the bank will not be less than 55%. The aim of the NDB is not only to provide funding for infrastructure and development projects in emerging markets, but also to promote a new mode of development finance to make up for gaps and failings in the current international financial system.

The CRA was initiated by the BRICS to be their "bank of last resort." It will strengthen the Global Financial Safety Nets (GFSN) provided by the IMF, confer on regional financial agreements, negotiate reciprocal currency agreements and manage foreign reserves.

Another significant outcome of the BRICS Summit is the Multilateral Cooperation Agreement on Innovation (MCAI). It aims to enhance interbank cooperation and support technological innovation and embedded projects, especially in areas such as infrastructure, clean energy, and agribusiness.

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