BRICS leaders to launch joint development bank

By Andrew Beatty, AFP

DURBAN, South Africa — Leaders from the BRICS emerging nations are expected to launch a joint development bank to rival Western-dominated institutions at a summit beginning Tuesday. The grouping of Brazil, Russia, India, China and hosts South Africa will meet in Durban to set up an infrastructure-focused lender that would challenge seven decades of dominance by the World Bank. Xi Jinping, who has underscored the growing importance of the group by making Durban his first summit as China’s president, expressed hopes for “positive headway” in establishing the bank.

If the leaders succeed it would be the first time since the inaugural BRICS summit four years ago that the group matches rhetorical demands for a more equitable global order with concrete steps. Together the BRICS account for 25 percent of global GDP and 40 percent of the world’s population. But members say institutions like the World Bank, the International Monetary Fund and the United Nations Security Council are not changing fast enough reflect their new-found clout. The World Bank has traditionally been led by an American and the IMF has been led by a European thanks to an unwritten transatlantic carve-up made possible by skewed voting weights. There is no Latin American or African permanent member of the U.N. Security Council, and India — despite it’s vast population and nuclear capabilities — remains a non-veto-wielding member.

Details of how the BRICS bank would work have yet to be finalized, but diplomats say it could start with US$10 billion seed money from each country. That would be dramatically scaled back from initial, more ambitious proposals for a US$50 billion buy in from each country. The exact role of the bank is also up for debate. Indian officials have pressed for a BRICS-led South-South development bank, recycling budget surpluses into investment in developing countries. Many developing nations inside and outside BRICS will hope that is a way of tapping China’s vast financial resources. Meanwhile China would no doubt like the bank to invest in trade-multiplying projects. “The bank will help BRICS sustain financial risks and provide support for the development of African countries,” state media quoted Ma Zhaoxu, a Chinese foreign ministry official, as saying. However BRICS expert Oliver Stuenkel at Getulio Vargas Foundation in Sao Paulo sees the development bank as partially a reaction to their dimmed economic outlooks.