With Brazil, Russia, India, China and South Africa concluding in Durban a cycle of one summit in each country, the BRICS bloc, in a rather short span of time, seems to have arrived as an influential voice on the geopolitical space and some decisions like a development funding arm for poor and emerging economies, when executed, will have the potential to even challenge the World Bank and the International Monetary Fund (IMF).
Unlike the previous four summits, the fifth one in the South African city March 26-27 had something concrete to show, notably the nod for BRICS Development Bank, creation of a USD 100-billion contingency arrangement to be used when any of these five economies is in distress, a lot of money and a pledge for African resurgence and several initiatives to promote trade and commerce among the five countries. Intra-BRICS trade already stands at USD 360 billion and a target has now been set at USD 500 billion by 2015.
The BRICS Development Bank in particular, proposed by Prime Minister Manmohan Singh when India hosted the previous summit in New Delhi last year, can be a game-changer, as the Bretton Woods twins, the two funding institutions of significance with an appetite for big-ticket lending, were seen toeing the line of the West (read the US) with voting rights for decision-making also skewed heavily in favour of rich nations.
Memory is still fresh about how the current World Bank President Jim Yong Kim made it to the top post last year. Ever since the World Bank was founded in 1944, its president has always been an American. Last year, there was a call to name a person from emerging economies as its chief. The US rather craftily pushed for Jim who may be born in Seoul, but is a Korean American with a US passport.
Similarly, when the Asian economies - including India when Manmohan Singh was finance minister - were forced to knock on the doors of the IMF in the 1990s, they were treated differently vis-a-vis European nations, with harsher conditionalities, higher interest rates and stricter reforms directive. With such history, Presidents Dilma Rousseff of Brazil, Vladimir Putin of Russia, Xi Jinping of China and Jacob Zuma of South Africa, along with India's Manmohan Singh, collectively representing the world's major emerging economies, will certainly want a World Bank- and an IMF-like institution of their own.
For the record, what people have been talking about is that BRICS countries account for 40 percent of the world population and 27 percent of global Gross Domestic Product. But among them, they boast a whopping USD 4.5 trillion in foreign exchange reserves, or 40 percent of what is held globally, compared to the capital of USD 205.4 billion contributed by the 188 member countries of the World Bank.
Little wonder both the World Bank and the IMF were quick to react. "On the development bank we're following the initiative with great interest," IMF spokesman Gerry Rice said in Washington. "The issue it seeks to address, which is the infrastructure gap in the developing countries, is indeed a key constraint to sustainable growth, especially in Africa, and hence of direct concern to us." The World Bank had a similar comment.
The Doubting Thomases point out that some major contours of the proposed BRICS bank have yet to be defined and crucial issues remain unaddressed: Will its governance model go by consensus or voting rights? Where will it be domiciled? What will be the size of the corpus, for China is pushing for USD 100 billion and some others are comfortable with USD 50 billion? No doubt these will require a lot of effort to reconcile.
Yet what goes without saying is that on matters such as these, political will is very important and once that signal is conveyed in clear terms, the sherpas often manage an acceptable document for the high table after a nudge here or two, some green-room talks and behind-the-scenes give-and-take. In this case, the leaders have given a clear 12-month time-frame to the finance ministers. That's where the BRICS Bank stands.
The Durban Summit in many ways also showed the benevolent face of the five-nation bloc by choosing the theme "BRICS and AFRICA: Partnership for Development, Integration and Industrialisation". No other region in the world needs the kind of assistance for nation building as does the vast and largely impoverished 54-nation continent of Africa. These countries, which have witnessed much exploit and plunder by European countries, will be far more comfortable dealing with the BRICS-led compassionate institutions than the West-led establishments that are often dictatorial.
With the leaders announcing two funding mechanisms for African countries forged among the Exim Banks of the five BRICS members - one for sustainable development and another for infrastructure building - and once the development bank takes shape, the fiscal needs of several of these poor economies will be well-addressed in a much more organised manner. This is also because while global institutions have preferred single-country dealings and funding, the BRICS approach has been more multi-country projects that help in regional integration.
True, some countries have issues with respect to the dominance of China in BRICS. But this is a reality that cannot be wished away either. Besides its sheer size, China is also the largest trading partner for each of the other BRICS countries. Yet, as a member of the new bloc on the horizon, an otherwise aggressive Beijing is getting the kind of standing it cannot aspire for on its own. That realisation alone should lead Beijing to leverage as much from BRICS, as the bloc does from China.