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| Will the Brics bank deliver a more just world order? | Will the Brics bank deliver a more just world order? |
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| At the first Bric summit in Yekaterinburg, Russia in 2009, then member states Brazil, Russia, India and China expressed mounting dissatisfaction with the inertia in the Bretton Woods institutions (the International Monetary Fund and the World Bank) and agreed to "advance the reform of international financial institutions, so as to reflect changes in the global economy." Russia's president, Dmitri Medvedev, said the main point of the meeting was to show that "the Bric should create conditions for a more just world order." This sentiment, to reform the global economy has been a primary point of convergence for the group ever since and a common position around which to establish a new institution. | At the first Bric summit in Yekaterinburg, Russia in 2009, then member states Brazil, Russia, India and China expressed mounting dissatisfaction with the inertia in the Bretton Woods institutions (the International Monetary Fund and the World Bank) and agreed to "advance the reform of international financial institutions, so as to reflect changes in the global economy." Russia's president, Dmitri Medvedev, said the main point of the meeting was to show that "the Bric should create conditions for a more just world order." This sentiment, to reform the global economy has been a primary point of convergence for the group ever since and a common position around which to establish a new institution. |
| Nearly four years later, Bric has gained an 's' with the addition of South Africa and that new, highly anticipated, institution spoken of in Russia was finally announced at the 2013 Durban Summit — but not quite as the international community expected it. The statement was based on a report by their finance ministers suggesting that a Brics development bank was feasible and viable, inspiring the heads of state of the member nations to conclude: "The initial contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure." Anticlimactic to say the least. | Nearly four years later, Bric has gained an 's' with the addition of South Africa and that new, highly anticipated, institution spoken of in Russia was finally announced at the 2013 Durban Summit — but not quite as the international community expected it. The statement was based on a report by their finance ministers suggesting that a Brics development bank was feasible and viable, inspiring the heads of state of the member nations to conclude: "The initial contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure." Anticlimactic to say the least. |
| The Brics members have been able to quickly establish a common purpose to diversify the current international financial institutions to be more inclusive and representative of today's economic realities. However, the details on how to do this seem to have been hard to agree on. Very little concrete information has been released on the proposed development bank. The leaders have positioned it as an institution to finance long-term infrastructure projects within the Brics countries, expanding to other low-income countries only after taking domestic actions. The location, leadership, start-up capital or indeed how the head of the bank will be chosen and other pivotal decisions made, have yet to be determined and no timeline on progress has been released. | The Brics members have been able to quickly establish a common purpose to diversify the current international financial institutions to be more inclusive and representative of today's economic realities. However, the details on how to do this seem to have been hard to agree on. Very little concrete information has been released on the proposed development bank. The leaders have positioned it as an institution to finance long-term infrastructure projects within the Brics countries, expanding to other low-income countries only after taking domestic actions. The location, leadership, start-up capital or indeed how the head of the bank will be chosen and other pivotal decisions made, have yet to be determined and no timeline on progress has been released. |
| This lack of information makes it difficult to gauge what the bank will and will not do, and therefore difficult to judge the kind of impact it is likely to have on global development. In its most successful form, it is hoped that the bank will achieve three things. First, it will respond to developing countries needs as opposed to the priorities of the lending institution. Second, it will fill any current gaps in financing, including access to finance for small and medium enterprises. Finally, it will finance infrastructure projects in places normally neglected by the private sector, and infrastructure projects to support an increased standard of living for all. | This lack of information makes it difficult to gauge what the bank will and will not do, and therefore difficult to judge the kind of impact it is likely to have on global development. In its most successful form, it is hoped that the bank will achieve three things. First, it will respond to developing countries needs as opposed to the priorities of the lending institution. Second, it will fill any current gaps in financing, including access to finance for small and medium enterprises. Finally, it will finance infrastructure projects in places normally neglected by the private sector, and infrastructure projects to support an increased standard of living for all. |
| On the other hand the bank could fail. The conflicting interests between the Brics members may be too great to reach agreement for implementation. It has been suggested that the start-up capital need would be $50bn (£32bn) and should be divided equally among the members, a $10bn contribution from each. However, tensions may arise as China has the capacity to contribute $50bn on its own while $10bn from South Africa is substantial. The breakdown of start-up contributions may affect decision-making and leadership. | On the other hand the bank could fail. The conflicting interests between the Brics members may be too great to reach agreement for implementation. It has been suggested that the start-up capital need would be $50bn (£32bn) and should be divided equally among the members, a $10bn contribution from each. However, tensions may arise as China has the capacity to contribute $50bn on its own while $10bn from South Africa is substantial. The breakdown of start-up contributions may affect decision-making and leadership. |
| The bank could also be considered a failure if it simply replicates the characteristics of the major development finance institutions, with rigid lending conditions and donor directed decision-making instead of being based on the needs of recipient governments. If the bank merely tries to trump the existing institutional architecture, it will prove to be redundant and fail to provide progressive services, to move the current development paradigm forward. When the bank is formally established, its functioning will indicate that the group has managed to find a way to balance the power and the relative capabilities of each country, based on their varying financial reserves and immediate development needs. | The bank could also be considered a failure if it simply replicates the characteristics of the major development finance institutions, with rigid lending conditions and donor directed decision-making instead of being based on the needs of recipient governments. If the bank merely tries to trump the existing institutional architecture, it will prove to be redundant and fail to provide progressive services, to move the current development paradigm forward. When the bank is formally established, its functioning will indicate that the group has managed to find a way to balance the power and the relative capabilities of each country, based on their varying financial reserves and immediate development needs. |
| To ensure success of the bank, the Durban eThekwini declaration outlined an action plan of ministerial and high-level officials meetings to facilitate ongoing dialogue on country positions and priorities. In theory these meetings should clarify the details necessary to get the bank up and running. As individual nations, the Brics have had varied success in developing fair societies. Ideally, as a collective and through this new bank, they will take the lead in championing sustainable development, and a participatory, collaborative approach that results in equitable growth. For now though, the world watches and waits. | To ensure success of the bank, the Durban eThekwini declaration outlined an action plan of ministerial and high-level officials meetings to facilitate ongoing dialogue on country positions and priorities. In theory these meetings should clarify the details necessary to get the bank up and running. As individual nations, the Brics have had varied success in developing fair societies. Ideally, as a collective and through this new bank, they will take the lead in championing sustainable development, and a participatory, collaborative approach that results in equitable growth. For now though, the world watches and waits. |
| Caroline Bracht is a senior researcher in the Brics Research Group at the University of Toronto | Caroline Bracht is a senior researcher in the Brics Research Group at the University of Toronto |
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