The BRICS grouping of five emerging powers on Tuesday agreed to establish a development bank with the four Presidents and Prime Minister Manmohan Singh expected to put the finishing touches on the broad parameters at their summit meeting on Wednesday. Technically the summit began on Tuesday with a gala dinner, but the business end of confabulations will take place on Wednesday.
However, BRICS appeared to have divergent views on the pace at which the bank should be set up. At an internal meeting convened by Dr. Singh and attended by National Security Adviser Shivshankar Menon, the consensus was not to go too fast with the concept. There is an apprehension that China, along with South Africa as a willing ally, might try to push through its ideas on the location, capitalisation and shareholding pattern at this summit itself.
The meeting assessed the stand of other countries and felt Brazil had no issues with the pace or ideas that might be pushed through by Beijing. On the other hand, Russia was seen to be thinking on the same lines as India and wanted greater deliberation, preferably spread over two more summits, before the norms were finalised and implemented.
Though South African Finance Minister Pravin Gordhan expected it to rival the two Bretton Woods Institutions, the World Bank and the International Monetary Fund, dominated by the U.S. and its allies, Indian officials felt it would be more like an auxiliary funding institution aligned to the BRICS developmental agenda.
“It’s done. We made very good progress, the leaders will announce the details,” Mr. Gordhan said, emerging from a meeting with his India, Brazil, Russia and China counterparts.
The bank is expected to focus on infrastructure financing, the domain of the World Bank. FICCI president and HSBC Country Head Naina Lal Kidwai wanted the proposed bank to concentrate on credit enhancement so that infrastructure projects with a long gestation period could be seen as viable by other banks.
It is the first time since the inaugural BRICS summit four years ago that such a big bang announcement has been made. This, said Indian officials, was a reflection of the unwillingness of the World Bank and the IMF to give them a greater say in their functioning.
The Finance Ministers’ meeting which cleared the concept also saw carry-over deliberations on financial issues from the previous summits at New Delhi and Sanya (China). These include currency swap lines among BRICS members which are likely to be about $100 billion and said to be a step towards liberating themselves from the total dependency on the U.S. dollar.
Besides announcing the consensus on setting up a bank, BRICS will establish business and think tank councils.
But the announcement about the three institutions — a bank, business council and consortium of think tanks — does not mean political issues will recede to the background.
A major issue of discussions will be Syria, whose President Bashar al-Assad has called on BRICS to intervene in his country’s civil war in which a gang-up of Arab League countries, The European Union and the U.S. is trying to overthrow his regime by attempting to recognise a government in rebel-held areas, especially in the north of the country. Also up for discussions will be the deteriorating situation in the Central African Republic and tenuous balance-of-power in Mali. BRICS feels that Western military intervention in Libya led to rebels, ammunition and ideology seeping southwards into other African countries. They will also be taking stock of the Iranian nuclear file amid signs of toned down rhetoric by the two principals — Tehran and Washington.