SUMMIT
… the development bank is necessary as demand
for funding in BRICS countries and other
emerging economies will continue to be high,
as these countries have pent-up demand to
rehabilitate and build new infrastructure, such as
roads, power and water utilities.
Details of the funding, structure and mandate of the development
bank have been sketchy, although its establishment was endorsed by
the leaders of the BRICS countries who at their last summit in India,
March 2012, mandated that a joint working group be established to
study the feasibility of its establishment.
The leaders want the institution to mobilise funding for infrastructure and sustainable development projects in the BRICS
countries and other emerging economies and developing countries. They also want it to play a key role in promoting intra-BRICS investment, economic growth and intra-BRICS trade,
which currently exceeds US$230-billion and is projected to exceed
US$500-billion by 2015.
The development bank is being seen as a direct challenge to the
perceived stranglehold of the World Bank and the International
Monetary Fund over the provision of development finance to
developing and emerging economies.
But a South African-based diplomat
downplays the political significance of
establishing the bank. ‘I see the bank as more
of a realisation of the economic power within
the BRICS countries and the potential of
their economies to support global economic
growth, particularly after what happened
after the last credit crisis,’ he says. ‘However,
we should not be oblivious to the political
rivalry between the United States and
some of the BRICS member countries like Russia and China,’ the
diplomat says.
The BRICS leadership would have to define the relationship between the BRICS Bank, the large banking institutions, development
finance instituions and other existing institutions in such areas as
focus, model of financing and clients.
Analysts and bankers have mixed views about the need and role
of a BRICS development bank.
First National Bank CEO Michael Jordaan says a BRICS bank will
send a strong signal to the rest of the world that there is co-operation
between BRICS countries which has been mostly “theoretical” in
the past.
According to Nedbank CEO Mike Brown, the establishment of a
BRICS development bank is being motivated by concerns about the
World Bank’s hegemony and the influence of the US and Europe in
the World Bank’s operations and decision-making processes.
Brown says BRICS countries may also have felt that developing
countries could be more vulnerable during ‘periods of heightened
developed country needs,’ such as during the last global and
eurozone crises. Benefits will be varied, he says, citing the ability of
BRICS countri