BRICS emerging powers yesterday sought a deal on setting up a development bank that would rival Western-backed institutions, trying to iron out significant differences ahead of a leaders’ summit in Durban, South Africa.
The grouping of Brazil, Russia, India, China and hosts South Africa are racing to flesh out proposals for an infrastructure-focused lender that would challenge seven decades of dominance by the World Bank.
Just hours before leaders began the summit, finance ministers were still working to agree key elements of the plan.
Disputes remain over what the bank will do, with each side trying to mold the institution to their foreign or domestic policy goals, and with each looking for assurances of an equitable return on their initial investment of about US$10 billion.
Failure to secure a deal would be a major embarrassment for many of the participants and would play into the hands of those who argue the BRICS have little to bind them together.
Chinese President Xi Jinping (習近平), who has underscored the growing importance of the group by making Durban his first summit as China’s leader, earlier expressed hopes for “positive headway” in establishing the bank.
Meanwhile, host South African President Jacob Zuma has lauded the summit as a means of addressing his country’s chronic economic problems, including high unemployment.
“Ironically, it may be the cleavages within the BRICS grouping that more accurately hint at the future of the global order: tensions between China and Brazil on trade, India on security and Russia on status highlight the difficulty Beijing will have in staking its claim to global leadership,” Daniel Twining of the German Marshall Fund said.
However, if the leaders succeed creating the bank, 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.
That would send a loud message to the US and Western European nations that the current global balance of power is unworkable.
Together the BRICS account for 25 percent of global GDP and 40 percent of the world’s population, but members say institutions such as the World Bank, the IMF and the UN Security Council are not changing fast enough reflect their newfound clout.
Diplomats say it could start with US$10 billion seed money from each country, but the exact role of the bank is up for debate.
Aside from the development bank, the group will also try to establish a foreign exchange reserve pool worth as much as US$240 billion to be drawn on in financial crises.
China has the world’s largest foreign exchange reserves, worth US$3.31 trillion at the end of last year, and establishing currency swap lines could help other BRICS tap that massive resource.