Welcome to BURK, Europe's new economic power

3rd February 2011, Comments 0 comments

You may not have heard of it and the acronym may sound a touch odd, but analysts at Russia's largest bank are convinced that a new economic power is rising in Europe -- BURK.

Sberbank coined the peculiar acronym for Belarus, Ukraine, Russia and Kazakhstan to put the four heavyweight ex-Soviet economies into a group rivalling the BRIC union of Brazil, Russia, India and China.

The state-run institution admits that BURK's combined markets account for little more than three percent of the world's gross domestic product and that its transparency record is not great.

But it argues that the vast region shares similar problems and could follow the same prescriptions to achieve growth similar to what Asia and Latin America have been witnessing for much of the past decade.

And to that end, the 170-year-old bank issued a novel report entitled "The BURK Countries. 2010 Results and 2011 Prospects."

The report's authors -- including the bank's Macroeconomic Research Centre Director Ksenya Yudayeva -- conceded that their term may not have the same ring as the BRIC acronym coined in 2001 by an analyst at Goldman Sachs.

But they brushed aside snickering comments and argued that the English word actually means "a very firm lump of solid ore."

"By this, we mean to say that we do not expect the necessary reforms in these four countries to follow a smooth course," said the study.

"Quite the contrary, these reforms will encounter significant resistance -- both political as well as administrative," it said.

The report went on to admit that the group of nations that Russia is hoping to bring into a closer union faces an uncertain future whose outlook is only "moderately optimistic".

"The uncertainty level is very high," it added. "But this makes work and adopting business decision here all that much more difficult and interesting," it concluded.

Unfortunately, the report was not received in Moscow with the level of seriousness its authors might have expected.

Some of the criticism was obvious. After all, there is little disputing that BURK sounds disturbingly similar to the British English word "berk" -- slang for a fool.

"This is amusing, but in the wrong sense," ING Wholesale Bank chief economist Rob Carnell told the Vedomosti business daily.

"I doubt that you would really want the term BURK to become too popular," he added.

Others saw the wrong kind of economics behind Sberbank's decision to invent a new term.

"I think this is probably related to Sberbank's own (expansion) strategy," said Renaissance Capital economist Ovanes Oganisyan.

"Sberbank has already made acquisitions in Belarus and is preparing to make more in Kazakhstan. I think that this will be their strategy -- coining this term before continuing their expansion into Eastern Europe."

The Russian bank essentially admitted as much by noting that it picked the three other nations because they "have a Sberbank presence."

Yet analysts agreed that despite its connotations, the term actually makes some economic sense.

Its creation coincides with a new round of calls to expel Russia from BRIC because of its much smaller economy and overwhelming reliance on energy and raw material exports.

In that sense, Russia has more in common with the three nations than it does with anyone else in BRIC, analysts said.

"The region clearly has many links and many different similarities," said Oganisyan, adding that the term essentially spells out the obvious.

"When investors and economists look at this region, they look at Russia and the CIS (Commonwealth of Independent States) as one."

© 2011 AFP

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