The finance ministers of Brazil, Russia, India and China (BRIC) and their representatives issued a statement at the end of the G20 Finance Ministers and Central Bank Governors meeting in Horsham, Britain, on March 14.
In the statement, the BRIC countries reached consensus on stabilizing the international financial system, promoting domestic demand in their national economies and opposing trade protectionism. They also called for "urgent action with regard to voice and representation in the International Monetary Fund (IMF)" to better reflect their real economic weight.
"Reform of the global financial system is inevitable, as the old and unilateral one is not suitable for the new multilateral tendencies," Chen Fengying, Director of the Institute of World Economic Studies at China Institutes of Contemporary International Relations, told Beijing Review. "The timing of the BRIC countries' demand for more say in the reform is opportune."
Reform is a must
Chen said the rapid growth in the 21st century in emerging economies, like the BRIC countries, is changing the world economic structure; their GDP as a percentage of the global total is increasing as well. But the IMF is dominated by Western countries whose policies are mostly based purely on their core interests.
"It seems that the IMF's supervision is valid only in developing countries and the emerging markets," she said. "The world economy has taken on multilateral tendencies. Unfortunately, the unilateral global financial system remains unchanged. Under such circumstances, how could an international financial institution like the IMF supervise it with fairness and justice?"
"Reforming international financial institutions is a must, because the tensions--between a changing world structure and an unchanging financial system, and between a multilateral world and unilateral supervision--are increasing and escalating," she noted.
"The hands of both the IMF and the World Bank are tied due to their fatal structural flaws," Chen added. "Letting the developing countries and emerging markets, like the BRICs, have more say in the global financial system is an important part of reform."
Zhen Bingxi, a researcher on the world economy at the China Institute of International Studies, echoed Chen's view. "The significance of the meeting is that the voices of developing countries and emerging markets were heard," he said.
In response to calls from the BRICs, the G20 finance chiefs backed plans to triple the Asian Development Bank's capital to over $150 billion from the current $50 billion. They also urged the World Bank to reform ownership and internal governance to give more say to emerging markets and developing economies by the 2010 Spring Meeting.
A gradual process
Zhen said there is a long way to go to reform the global financial system, although some of the BRIC demands have been addressed by the G20.
"More detailed measures should be taken afterwards. For example, the areas for more decision making and voting should be specified."
The reform, in Chen's view, will take a long time and it seems impossible to restructure the current financial system.
"This is the last thing the U.S. wants to see. Moreover, the European Union, the BRICs and other developing countries are incapable of restructuring. The dominant U.S. currency remains unchanged even if it is losing value," Chen said.
"What developing countries and emerging markets called for can hardly be realized through one or two meetings. But the meeting in Horsham is a good start that will intensify bonds among these countries," she continued.
Chen said she believes the global economic structure will change gradually if developing countries make lasting joint efforts and make sure their demands are heard on international occasions.
More say = more responsibilities
Zhen suggested that the BRIC countries should increase their investment in the IMF, nurture high quality financial professionals and participate more in the management of international financial institutions.
"The BRICs are calling for amendment of unreasonable rules and more participation in the policy-making process. At the same time, it requires them to abide by those rules," Chen said. "Take China as an example. The banking sector in China must abide by new rules and get ready for supervision if the IMF strengthens its role after the new rules come out."