Brazil,
Russia, India, China and South Africa or together called BRICS have embarked on
a huge mission. They are calling it The New Development Bank. It has been
widely reported that BRICS nations wanted more say in the global economic
matters at the World Bank and the IMF. Failing to address their concerns, BRICS
decided to launch their own corpus to restore their waning clout in global
affairs.
BRICS, still
in its nascent stage - this is their sixth summit - have approved the creation
of a $100 billion Development Bank. China,
holder of the world's largest foreign exchange reserves, will contribute the
bulk of the contingency currency pool, or $41 billion. Brazil, India and Russia
will chip in $18 billion each and South Africa $5 billion. Designed to provide an alternative to receiving
finance from the World Bank or the IMF, the leaders have agreed to create a
$100 billion currency exchange reserve, which can be utilised by them in case
of balance of payment crisis.
“The BRICS are gaining political weight and
demonstrating their role in the international arena,” Brazilian President Dilma Rousseff said after a signing ceremony.
Together
BRICS have granted each member country a role in their new endeavour. China has
been granted the bank’s headquarters and India has been allotted the first
presidency which will keep rotating. The first chairperson
of the Board of Governors will be from Russia, while the first chairperson of
the Board of Directors will be Brazilian. South Africa will establish an
African regional centre for the bank. The leaders insist that this has
been decided ‘democratically’ but several reports suggest that China ‘insisted’
on hosting the bank’s headquarters. The leaders finally relented and now term
Shanghai as the bank’s most appropriate headquarters as it attracts substantial
private funding.
So why BRICS
are so keen to develop an entirely new bank when The World Bank and the IMF already
exist? They are terming this new bank as an organisation that plans to
challenge the World Bank and the International Monetary Fund (IMF), essentially
governed by the Americans and the Europeans.
The
emergence of this bank can be mainly attributed to this underlying but
prominent and common feeling among BRICS to rise up to the US and Europe who
continue to dominate the global economic situation. Unhappy at being sidelined
in the decision making process at The World Bank and the IMF, BRICS – through this
bank – aims to fall back upon their ‘own’ bank for their ‘needs’ without having
to toe the line suggested by these existing organisations controlled by the
Americans and the Europeans.
The New
Development Bank is their first concrete step towards reshaping the
Western-dominated international financial system. Speaking about the
bank, Russian President Vladimir Putin, in his interview to Russia Today
said that it sought to decouple dependency on the U.S. dollar and strengthen
the rule of international law:
“First
of all, this is the common intention to reform the international monetary and
financial system. In the present form it is unjust to the BRICS countries and
to new economies in general. We should take a more active part in the IMF and
the World Bank's decision-making system. The international monetary system
itself depends a lot on the US dollar, or, to be precise, on the monetary and
financial policy of the US authorities. The BRICS countries want to change
this.”
At this moment, what BRICS have set out to
achieve seems more like an attempt to pacify their ego than anything else. To
begin with, the member countries are poles apart – politically, economically
and futuristically speaking - from each other. While India and Brazil boast of a
thriving democracy, one cannot say the same about Russia or China. The group
has China and South Africa at completely opposite ends of the economic
spectrum. Their differences are wide and stark are reflected by the fact that
they took over two years to negotiate the formation of this bank. Brazil and
India fought China's attempts to get a bigger share in the lender than the
others. In the end, China’s might prevailed as the bank’s headquarters will be
in Shanghai, but fears remain that China would continue to act like a big
brother and ‘use’ this bank to increase its clout against United States. The
only respite at the moment for the remaining members is that China will not
preside over the bank for atleast two decades.
The future of this new venture
hangs in balance as besides
working out the modalities of the formation of this bank, little has been
thought about the vision or future endeavours. The biggest challenge for BRICS
will be to rise above its ‘personal’ agenda and stay together to counter the
monopoly of the Americans and the Europeans. Cause whatever the challenges
might be, as Nobel Prize Winner Joseph Stiglitz puts it, BRICS bank is “an
idea whose time has come.”
