What are the Bretton Woods Institutions?
The Bretton Woods Institutions are the World Bank, and the International Monetary Fund (IMF). They were set up at a meeting of 43 countries in Bretton Woods, New Hampshire, USA in July 1944.

The Yomiuri Shimbun
Can BRICS bank be counterweight to current intl financial order?
BRICS開銀 欧米主導への対抗軸となるか

A recent announcement by the BRICS countries, which have grown in economic stature, can be considered a demonstration of a stance that rivals the international financial order led by the United States and European countries.

The BRICS emerging economies—Brazil, Russia, India, China and South Africa—decided at a recent group summit to create a new development bank.

The new bank is intended to fund infrastructure projects in emerging economies and developing countries, with each of the five countries contributing $10 billion. The bank will be headquartered in Shanghai, and its first president will be from India.

In addition to the planned development bank, the BRICS countries have also agreed to create a joint foreign reserve fund of $100 billion. The fund will assist these countries, by providing a well of foreign currency at the time of a future financial crisis.

With their growing presence, the attempt by these economies to take on important roles in assisting developing countries and maintaining the international financial order warrants recognition.

Behind the creation of the new development bank lies a strong sense of discontent among emerging and developing countries over the current U.S.- and Europe-led international financial order.

The International Monetary Fund and the World Bank have long contributed to the world’s economic system, such as by assisting developing countries and working to check financial crises.

Yet in crucial times, such as Asia’s currency crisis in the 1990s, the two institutions imposed fiscal austerity and other strict conditions on developing countries, which led these countries to feel strongly dissatisfied over the institutions’ lack of consideration for their particular circumstances.

Lack of weight

The BRICS powers have grown to account for about 20 percent of the global economy, and for around 40 percent of the world’s population. Yet their combined contributions to the IMF, which reflect the force of their voices in the institution, constitute only 11 percent of the IMF’s total funding. The BRICS have also expressed opposition to the lack of weight they carry in the IMF.

The IMF has compiled a reform plan to raise the contribution ratio of the BRICS to 14 percent, but, due to opposition from the United States and other countries, this plan has yet to be realized.

It is necessary to promote IMF reform from the viewpoint of allowing the emerging economies to assume responsibility proportional to their economic might.

It remains to be seen whether these two new multilateral institutions can function as the Bretton Woods institutions have been doing.

The BRICS countries have not specified when these institutions will be established, and uncertainty remains over the concrete frameworks through which they will extend financial assistance.

It would be troublesome if the new development bank were to attach importance solely to expanding the natural resource interests or corporate profits of contributing countries, and to extend financial assistance without careful consideration.

There is also a likelihood that lax screening on loans and investments by the bank could lead to a massive increase of irrecoverable loans and investments, which would upset the international financial system.

No assistance should be extended to countries beset with records of suppressing human rights and overdevelopment of natural resources. Highly transparent management is a must for the new bank.

The BRICS countries are by no means a monolithic group.
The territory dispute between China and India is just one example of their differences.

It is also questionable whether the members can deal with financial crises and other problems through close cooperation.

(From The Yomiuri Shimbun, July 22, 2014)