The BRICS nations, consisting of Brazil, Russia, India, China, and South Africa, have been exemplifying remarkable performance since they began cementing their relations, and they still continue to put the world in awe as they take on ambitious plans for the future. In their latest summit, completing their first cycle of summits, country leaders talked about having closer ties with developing nations, about the success of their efforts versus those of the richest of the nations, and – not least important – about the establishment of their own institutions, particularly the establishment of a development bank, among others.
In his speech in Durban, Russia’s President Vladimir Putin reported that “the common annual economic growth rate in 2012 constituted 4%, in contrast to the 0.7% of the [biggest] seven financial countries”. Representing more than 40 % of the world’s population and 17 % of the world trade, Chinese President Xi Jinping sees the potential of BRICS development as “infinite”,and should, in his opinion, be used more effectively in trade, investment, and industrial andtechnical cooperation. This would be made more feasible with the construction of the development bank.
The BRICS development bank would be the first formal institution of the group and its greatest undertaking yet, if founded. As of today, decisions have not been finalized, however, and the group will need to assemble again to further discuss the details of the said proposal (i.e., where it should be based, how much capital it should be granted for management, and what currency the bank should use), according to bbc.co.uk and foreignpolicy.com. The Presidents of the BRICS countries are positive that the formation of a new development bank would contribute greatly to the fast advancement of their nations, with infrastructure and development projects as its main objectives and expenditures. Moreover, it will help BRICS countries’ economies cooperate with “other emerging markets and developing countries in the future”, South African President Jacob Zuma said.
However, many experts have been sceptical about the proposal and bombarded the political leaders with questions and negative comments such as; the BRICS countries do not have much in common and enough mutual goals to sustain a shared institution that would function effectively as a counterweight to the west; it will be a rival to the world bank, and probably not be stable enough to rival the world bank; the bank might be dominated by China; and so on.
Some have come up with educated guesses to answer these questions, yet others have succumbed to their own assumptions and conclusions.
Despite these, there are optimists who support the formation of a BRICS development bank.
The Guardian says that the BRICS countries actually share a lot in terms of experience and development model, and those that were able and willing to resist the neo-liberal development model developed faster. Historically, there have also been various groups that emerged successfully, regardless of their differences, thus making the success of a new development bank not farfetched at all, rather quite possible.
On posing a challenge to the World Bank, South African finance minister Pravin Gordhan stated that “certain parts of the world are still over-represented” even after years of promises to give the global South more voting power in the IMF and the World Bank. And now that the BRICS have earned the reputation of being a counterweight to the West, we know that this might be a case of schadenfreude and that some people are to blame for their actions should the BRICS development bank emerge as a challenge to Western supremacy.
Knut Harald Nylænde is the Chief Executive Officer of the Moxie Group, an Oslo-based group of investment firms. Knut keeps himself and his business circle updated with the latest business trends through his blog posts.