Development funding was a major topic at the BRICS Summit in New Delhi. Leaders of Brazil, Russia, India, China and South Africa moved a step closer to forming their own development bank. However, they did not indicate they wanted to replace the work being done by the World Bank.
John Kirton, head of the BRICS Research Group, said leaders sent a clear message about establishing a development bank.
“In the first instance, they said we’ll work as hard as we can to raise the resources available for the World Bank. So they put the good old World Bank first as the source of where they wanted to invest their money to do development. Then they said we’re going to give ourselves another year to design a BRICS development bank. So this is not a precipitous rush as a reaction to the fact that, well, we don’t like another American being appointed head of the World Bank,” he said.
President Obama has nominated Dartmouth College President Dr. Jim Yong Kim to be the next World Bank president.
Gaining some leverage
Kirton said, “If you look at guidelines for the design of the BRICS bank, it was clearly a BRICS bank that would lend to not just BRICS countries, but poor countries throughout Africa at least. So it is that spirit of inclusiveness.”
But Kirton, who attended the summit, believes the proposed development bank gives the BRICS countries some leverage.
“I think behind it is a grand bargain. Look—we’ve got all this money we’re going to put into a development bank. If the World Bank reforms enough on time we’ll put it there. But if not, a year from now we’re going to put it into our new own BRICS bank. In the raw politics of it, they’re basically saying, OK, South Africa—it’s your call, because a year from now South Africa is chairing the next BRICS summit,” he said.
Some have questioned South Africa’s inclusion in the group. However, Kirton said South Africa is considered a full-fledged member.
“They survived, as did their BRICS buddies, the great American turned global financial crisis without their own financial system seizing up. They’ve got a very sound financial system based on four big banks. Their financial system is quite closely connected to London. So their banking system is of international quality, top tier, whereas China’s and Russia’s is not. And then you move outwards in finances in so many other things,” he said.
BRICS leaders expressed concern at what they call the slow pace of reforms at the International Monetary Fund, the IMF. They say they want the IMF to “enhance the voice of representation of emerging markets and developing countries” by next January.
Overall, Kirton said the BRICS summit had a comprehensive agenda.
“A very long agenda – 50 paragraphs – is as broad as the G8. Much broader than just the G20, so it’s way ahead of the G20 in the breadth of the concerns it deals with. And thus it’s able to make the linkages, which are more difficult for G20 to do,” he said.
One of the linkages made at the BRICS summit was how the Iran nuclear issue could trigger much higher fuel prices and affect the global economic recovery.