BSP welcomes new BRICS dev’t bank

MANILA, Philippines - The Bangko Sentral ng Pilipinas has lauded the BRICS nations’ establishment of a New Development Bank which will fund infrastructure and sustainable development projects in emerging markets and developing countries.

BSP Governor Amando M. Tetangco Jr. made the comment after the BRICS – Brazil, Russia, India, China, and South Africa – last week agreed to create a bank with an initial $50-billion capital and a $100-billion contingency reserve arrangement that will act as an additional buffer against liquidity shocks.

“The BRICS bank is seen as reflective of developments in the global market place: e.g. shifting market dominance, the call or need for what would seem to be fair representation in multilateral agencies for growing economic power block in emerging countries,” Tetangco said in an e-mail to reporters.

The new vehicles set up by the BRICS countries will act as alternatives to the World Bank and the International Monetary Fund, which they find lacking in reforms in order to give emerging markets and developing countries more voting rights.

“While we have always believed that for a small open economy like the Philippines, the best policy option is to keep one’s own house in order, we continue to be mindful of external developments, particularly those that spill over from other jurisdictions to ours because of the interconnectedness of trade and financial markets,” Tetangco said.

“One part of keeping one’s house in order is building buffers — including maintaining ample reserves, ensuring banks are well-capitalized, disciplined monetary policy, sharp surveillance of domestic financial markets, and constant review of policy tool kit,” he said.

“Another part of this is being involved in the greater global policy dialogue and exchange. For the Philippines, therefore, having a strong EM (emerging markets) voice in the global policy debate is good,” he said.

Emerging markets and developing countries have longed called on the IMF to implement its reform process in order to reflect their increasing weight on the global economy. The 2010 quota reform of the IMF that was failed, was meant to double financial commitments from member countries and increase their voting rights in the process.

The initial $50-billion funding of the BRICS bank split between the core members, is expected to eventually amount to $100 billion. The membership is also seen further including other emerging markets and developing countries.

But at this point, BSP Governor Tetangco said it is too early to say if the Philippines should or would eventually buy in the BRICS bank.

“On the BRICS Bank, more specifically, however, there are still a number of questions that need to be addressed for its full implementability,” Tetangco said.

“As has been reported, the initial ground work has been done and we wait to see how the details will work themselves out. We would view this cooperative move as positive to the extent it can provide an additional layer of global safety,” he said.