HOW percent to 3.1 percent based upon

 

   HOW EMERGING MARKETS ARE CHALLENGED BY
FRONTIER NATION

 

Emerging Markets v/s Frontier Nations:

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An emerging market is a country that has
few characteristics of a developed market,
but does not fall into the category of a well developed market. Frontier market is
used to denote the economies which are developing countries with slower growth rate than
“emerging”.

Frontier market is that kind of developing
country’s market which is more suitable for the developed countries.

 

The potential challenges imposed by Frontier
nations on the Emerging nations are as follows:

 

Emerging nations are being treated as a
blow to the U.S. monetary policy which continues to be shifting. Moody’s
estimates that emerging market nations could face a cumulative 2013 to 2016 GDP
growth loss of between 2.8 percent to 3.1 percent based upon the speed of the
growth of the economy.

 

Among nations most that are mostly exposed
to a reduction or reversal of financial flows, emerging markets rank high,
given that they were the recipients of large amounts of capital inflows.

 

This reversal in growth prospects and
the ongoing decrease of excessive and above liquidity led to a fall in the marginal
return on assets in developed and frontier nations over the emerging or growing
nations. This resulted in to capital outflows, which in return  caused to the fall in equity and bond values
as well as decrease in the currency denominations in the same developing
markets that had benefited from the original inflows,”

 

The major emerging markets are seeing
their phenomenal growth over the last decade or more slow considerably. And as
some of the emerging markets ascend to developed status, the better returns in
the future period is most likely to be from frontier or developed markets.

 

 

 

WORLD SCENARIO
BEFORE THE EMERGENCE OF BRICS.

 

We are currently
in the edge of seeing a sharp shift towards adoption of  new global superpowers.  If we look at the powers held by the
different nation in the current scenario, The United States of America will be
in top of globally dominant and dominative position list.  Before this, Great Britian and its associate
regions was the dominant power and  force
and prior to that there is a long list of countries which have  at least once topped the list of the
dominating power list in the entire global. Great nations are also subjected to
the concept of declining so called as concept known as declinism where
simultaneously other nations are busy evolving into powerful states.  For a number of years now, a handful of
nations have been developing at a rapid face and today we compare them with the
mighty USA.

 

BRICS

 

BRICS is an
acronym standing for the five countries who represents BRAZIL, RUSSIA, INDIA, and
CHINA AND SOUTH AFRICA.  The acronym at
first was just BRIC until SOUTH AFRICA made an appearance in the association in
2010.  Together BRICS is a strong union
which constitutes 42.8% of the world population and in monetary terms about 22%
of the world’s GDP.

However, The BRICS creation does
signal a growing disgruntlement or dissatisfaction among developing nations as
the policies have penetrated and of these are mainly US dominated policies which
are mostly customized as per the wishes and whims of the developed nations that
are followed by both International Monetary Fund and the World Bank.

 

The
BRICS which has a common agenda of removing the international economic and
policies governance away from the neoliberalism approach and the western
dominance was also in the manifestation and that is when they complained that
strictness flowing from the west was holding or slowing back the world growth
rate and prosperity and that the central banks traditional and unconventional
monetary policies were designed in such a manner that encouraged speculation
worldwide rather than the potential growth domestically.

 

BRICS
frustrations over the current system that suggests a political standstill which
inspired these new enterprises. Interestingly and studies found that these not
only not set an example in a global balancing of economic and political power
within the financial institutions but also the balancing of powers within BRICS
among themselves. However, what makes these separate them from their dominating
international financial counter-parts is the capital invested which equals the
votes received. Whereas it is always difficult to influence votes as a
coalition of non-founding and non participating members as there will be less
financial interest at stake. It is strongly believed that without having any
regards of internal power distribution among the BRICS, the NDB will
decentralize the global economic and financial powers by paralleling the
current scenario.

Financial
structure of the BRICS

Presently, there are two
aspects that make up the financial structure of BRICS, the first one being New
Development Bank (NDB) or frequently referred to as the BRICS Development Bank
and the second one being the Contingent Reserve Arrangement (CRA). Both of
these aspects were signed at the treaty in 2014 and this became active from
2015.

 

The
New Development Bank (NDB),
formerly known to the world as the BRICS
Development Bank, is a multilateral and multi dimensional bank operated
by the BRICS nations. The primary focus of the bank is to assure that lending
of the funds will be mainly in the infrastructure projects with an authorized
lending of up to $34 billion per annum. South Africa will have the African
Headquarters of the Bank with the name “New Development Bank Africa
Regional Centre”. The bank will start starts its operations with an
initial capital of 50 billion USD, which will be later and gradually increased
to 100 billion USD over time. Brazil, Russia, India, China and South Africa
will initially contribute USD 10 billion each to make to the total of USD 50
billion.

The
BRICS second aspect or the component
which is the Contingent Reserve Arrangement is a framework for providing
the protection against global liquidity pressures. This also includes issues of
the currency where the currencies of the nations who are members to the group
are adversely affected by the financial pressures arising from the world. It is
critically analyzed that and found that emerging economies which experienced a
rapid economic and financial liberalization experienced an increased economic
and financial volatility, bringing the uncertainty in the macroeconomic
environment across the globe. The CRA is generally considered as the competitor
to the Breton Wood sisters, the International Monetary Fund and the New Development Bank
is taken as an example of increasing the South-South cooperation as against the
West. This was established in 2015 by the BRICS nations. A legal basis and code
of conduct is formed by the treaty for
the establishment of the Contingent Reserve Arrangement of BRICS which was
signed at Fortaleza, Brazil on 15 July 2014. With these inaugural meetings of
the BRICS CRA, the governing Council and Standing Committee was held on
September 4, 2015, in Ankara, Turkey and they entered into an agreement for ratification
by all BRICS nations which later was announced in  the 7th BRICS summit
.

 

NATIONS CAUSING
THREAT TO BRICS….

 

Since the
population and landmass of BRICS nations is enormous consisting of Brazil,
Russia, India, China and South Africa where China has taken a lead in economic
development among all the nations, BRICS has the potential to abandon the use
of US dollar leaving the western market mechanisms in trouble. It is also a
great threat to the exchange value of dollar as more of developing and under
developed nations is showing a shift in the preference in terms of currency,
the imports of technology, the goods, the services.

 

China’s
deep engagement economic and political dialect with Russia on economic issues
can be seen as avoiding the U.S. policy on Russia, which again is in
conjunction with the Economic Union that has imposed sanctions on Russia for
annexing Crimea. However, this version of China may be to
some extent a biased perspective. After all, the ultimate objective is to
pressurize the dominance of the U.S. dollar and the growth which dampens the
impacts of International Monetary Fund, the loan conditions, the creation of
dollar reserve currency which may not be necessary. In addition to this, the
imposition of economic and political sanctions on Iran for which they have yet
to achieve their end goal. So, is it wrong on China’s part  to engage Iran and Russia as an alternative
to isolating them.

 

The Unites
States of America is very disturbed about the formation and successful
operations  of the BRICS. They  also distribute  the recent trade  deal between Russia  and India on the matters of defense, agriculture,
space atc.  And these nations do not  want India to be interfering  into the China and Russia alliance and so is
the one of the biggest reason that  they are
trying their best to destroy the relationship between BRICS nations.

 

The US Air force
is by far the most powerful in the world. 
The US Air force budget is more than the entire military budget of any
other nation.  Out of its 13344
aircrafts, US can choose one of the most advanced aircraft in the world. 

 

As no other air
force comes closer to this region or area except for Russia, India and China
have highly rated machinery which is often in the part of lists which contain
what it takes to be the best air forces of the world.  It’s worth nothing that the latter two
countries are investing heavily in aerial military developments.  India also has a considerable cache of
aircraft. 

China is playing
a catch up but it’s doing a great job. 
Currently the South African air force has nothing that compares to the
BRICS partners.  In terms of nuclear
weapons, USA and Russia own around half of the nuclear weapons in the world.

 

The Western policy
towards Moscow is toppling the political order of Russia from within and makes
Europeans less dependent on Russia because they haven’t got over their cold war
mentality which shall lose very large and is still the largest country in the
world despite the fact that the Soviet Union collapsed.

 

 It has very powerful strategic forces and
still considerably influence globally and sitting right next to Europe where
there are small countries there is a sense of Russia looming very large and
then the Baltic States who look at the United States to defend them from any
threat that may be caused by Russia in the future.  They want to make sure that Russia is
politically weakened so as to reduce the threat to Western Europe and NATO
alliance. 

 

The Russian view
to construct European security was not accepted by the West fully.  President Putin spoke recently after the
annexation of Crimea about his well-founded grievances with the West.

 

BRICS has also
seen a tendency of the western media showing a negative image and showing the
bias against it. Western media only decides on what the viewers should listen
to but also moulds their perspective and thinking capacity. Not only the
western or developing or frontier countries are making a plan against BRICS nations
to degrade or defame the organization and these are supported by few other
elements also which are included in the list including the media that degrades
the BRICS objective.

 

 

CRITICAL COMMENT

 

According to the studies and the reports
published in Global Competitiveness Index 2013 of the World Economic Forum, the
European Union is comparatively much ahead of the BRICS in terms of key factors
like health sector, infrastructure, education facilities and business
operations. This lack of development in some of the most essential and
potential  market areas will always keep
the BRICS and give an advantage to the BRICS from overtaking European Union’s
top position in the global market.

However, the European Union faces several
challenged and should always keep its focus on increasing the efficiency in the
operations and the competitive spirit at the times of global stringencies and
economic depressions or crises.