The BRICS grouping’s grand plans for a development Bank to rival the West’s World Bank-IMF combine has managed to get mired in differences over the size of corpus, which nation will pay how much equity and where the bank will be sited, holding up an announcement on the issue in Durban earlier this week.
|The BRICS Durban Summit|
Top North Block officials said the tussle over stakes and with it control of the new development bank which could rival IMF held up announcement of the start-up at the just concluded Durban summit. Indian Finance Ministry economists together with Reserve Bank experts will now draw up a draft roadmap which could be informally discussed at the interim summit at St Petersburg in Russia this September and later fleshed out as a full scale plan before the next full BRICS Summit at Brazil in 2014.
BRICS, an acronym for Brazil, Russia, India, China and South Africa owes its begining to a report in 2001 prepared by Goldman Sachs which coined the term BRIC. The poltico-economic grouping started in 2006 as a club for the four emerging economies to gather and firm up strategies on trade and ecnomy. With the 2008 economic crisis, the grouping which represents 40 per cent of the global population and 20-25 per cent of the world's GDP assumed importance and in 2010 it turned into BRICS with the inclusion of South Africa.
India had floated the idea of starting the bank with an initial capital of $ 50 billion, with each BRICS nation chipping in with $ 10 billion, sometime last year. However, China’s whose economy easily drawfs the rest of the BRICS nation, wanted the corpus jacked up to $ 100 billion, promising to make up for any shortfalls in contribution by members. Other BRICS nations, who are hard pressed on finances, wanted the plan pared down to $ 10m billion with contributions of $ 2 billion each.
Russia and India played shy of the bank proposal after it became clear that Brazil and South Africa would not be willing to pay up much of their share of the corpus, and China by default might get the largest equity share in a bank floated at the current juncture.
Indian officials also wanted a window for participation by non-BRICS nations which were keen to join the bank such as developing world nations like Egypt and Indonesia as well as developed world participants like Japan and the US. Though none of the member-countries said `No’ to the proposal, China’s offer to underwrite any unsubscribed capital, seems to have sidestepped that part of the deal.
|Global economy share|
The problem with accepting China’s generous offer was that the BRICS bank would in effect have become a `Chinese Bank’ with China holding a dominant stake. China has already emerged as one of the biggest `donors’ in the developing world, where it has been accused of leveraging its massive $ 3.5 trillion foreign exchange reserves to dole out cheap loans for infrastructure projects in return for generous mineral or oil and gas concessions.
Officials said the `battle’ over the bank also extended on where to site it. China wants it in Beijing, where some fear it could manipulate staffing to suit itself, whereas South Africa wants it to be in Johannesburg, as Africa has the most underdeveloped nations which would be potential recipients of the bank’s lending. India is not against the bank being headquartered in Africa but would like ground rules cleared about staffing.
The World Bank-IMF combine have in the past been accused of being dominated by economic theories thrown up by Western nations’ and staff drawn from or trained in the West, besides being controlled at the board level by Western countries which put in most of the money required for the banks’ start-up. India, South Africa, Brazil and Russia consequently are cautious about how the new BRICS bank is set up and run.