The multifunctional investment platform will allow the BRICS countries and the Global South to attract up to $100 billion in investments annually. This conclusion was reached by experts from the consulting company “Yakov and Partners“ and the Central University. They assessed the prospects for the creation and development of a new global financial architecture focused on the needs of the BRICS countries and the Global South.
“In particular, the launch of a multilateral investment platform will attract up to $100 billion in investments annually, providing up to 0.25% additional GDP growth in developing economies“, says the report “Bridging the Gap: Developing Alternative Financial Infrastructure“, which was prepared by these experts for the conference “BRICS Week at UnB“ (UnB BRICS Week) in Brazil.
The materials note that the BRICS countries have demonstrated impressive economic growth rates in recent years. The combined share of these countries in world GDP has already exceeded that of the G-7 members, with emerging markets accounting for over 59% of world GDP. Despite significant natural and human resources, many of these countries still face the problem of untapped economic potential. In addition, these countries face the problem of an investment deficit, which, according to experts, exceeds $4 trillion - of which $1.4 to $2.5 trillion is for infrastructure needs. Unlike developed countries, where the financial system has developed in sync with the economy, emerging markets are experiencing a systematic lag.
„Current financial mechanisms are no longer up to par.“ In these conditions, it is important for BRICS members and countries from the Global South not only to increase investment, but also to form their own channels for capital movement - technological, independent, convenient and protected from external pressure. “In addition, abandoning the outdated payment system could save countries up to $ 30 billion per year,“ noted Ilya Ivaninsky, partner and expert at “Yakov & Partners“ and director of the Center for Business Education and Analysis at the Central University.
As part of the study, experts proposed two institutional solutions. The first is a decentralized infrastructure for depository accounting and payments, which would allow BRICS countries to invest directly in each other. According to experts, such an initiative would significantly reduce transaction costs, narrow the spreads between purchase and sale prices, as well as increase liquidity and reduce the cost of capital. The second is the creation of a multilateral investment platform that will increase the attractiveness of long-term projects. This will include tools such as guarantees, buyback of part of the tranches and other mechanisms to reduce risks for market investors. The effectiveness of the platform will be ensured by modern technologies, and the management of such a “market“ can be entrusted to an international organization or a development bank with a network of agents in the countries of presence.
“The model is built on the principles of mixed financing and depends on the volume of investments. If a platform operator invests $10 billion per year, this allows it to attract up to $100 billion to the economies of the countries in the region, thanks to the multiplier effect. We are talking about large infrastructure projects in the fields of transport, energy, production and ecology“, explained the consultant of “Yakov and Partners“. Alexander Raksha.
Experts emphasize that such mechanisms are particularly relevant in the context of new geopolitical turbulences, to which global financial institutions are becoming less neutral and are often used as tools for political pressure. Reducing dependence on them and developing their own solutions in parallel is a necessary condition for sustainable growth.
„Yakov and Partners“ - an international consulting company with headquarters in Moscow and a wide network of experts and partners in more than 120 countries around the world.