Don’t write off BRICS; bank on BRICS. The journey that started in Delhi two years ago culminated in the Brazilian seaside resort town of Fortaleza July 15, with the formal launch of a BRICS-patented New Development Bank that seeks to provide an alternative source of infrastructure finance to emerging economies and the larger developing world.
The BRICS Bank, as it was informally called, found crystallisation at the sixth summit of the grouping in Brazil, with the leaders unveiling key facets of the bank that marks a major defining step in remapping the West-dictated global financial architecture. Finally, the developing world has a Development Bank of its own sans assymmetries of the post-war Bretton Woods institutions. The negotiations had gone down the wire, with the leaders agreeing on the architecture of the New Development Bank, based on the principle of equity.
In a pithy and eloquent speech at the plenary session of the BRICS summit at the Ceara Convention Centre in Fortaleza, India’s Prime Minister Narendra Modi encapsulated the spirit and essence of the BRICS Bank. “The vision of a New Development Bank, at the Delhi Summit two years ago, has been translated into a reality, in Fortaleza. It will benefit BRICS nations, but will also support other developing nations. And, it will be rooted in our own experiences, as developing countries.”
Intense partisan lobbying preceded before the details of the bank were firmed. The location of the headquarters of the Bank was embroiled in last-minute hectic negotiations, with India pushing hard for Delhi to host this prized institution and China pulling out all stops to get other BRICS leaders to endorse Shanghai as the HQ of the new bank of the developing world, managed and driven by emerging powers of the global South.
In the end, China, the largest economy within the BRICS grouping with over 3 trillion dollars in foreign exchange reserves, prevailed, with Shanghai declared as the seat of the Bank in the July 15 Fortaleza Declaration. It could have been a disappointment for India, but it was somewhat mitigated by the collective decision by BRICS leaders to get an Indian to head the Bank. Reliable sources said that there was a trade-off between Indian and Chinese negotiators, with India willing to concede China’s case to host the bank in return for an Indian to get the rotating presidency of this signature project. The Fortaleza Declaration reflected consensus and a generous spirit of give-and-take on the broad contours of the NDB.
Clearing the thicket of confusion and speculation surrounding the Bank, the Fortaleza Declaration spelt out key features of the Bank: I) The Bank shall have an initial authorized capital of US$ 100 billion. The initial subscribed capital shall be of US$ 50 billion, equally shared among founding members. II) The first President of the Bank shall be from India. III) The first chair of the Board of Governors shall be from Russia. IV) The first chair of the Board of Directors shall be from Brazil. V) The New Development Bank Africa Regional Center shall be established in South Africa concurrently with the headquarters.
The BRICS leaders directed their finance ministers to work out the modalities for its operationalization. If all goes well, and there are all indications it will, the Bank will start lending by 2016.
Touted as an alternative to the West-dominated IMF and World Bank, the Fortaleza Declaration was more grounded and pragmatic in the mandate and agenda of this first multilateral institution of the South. “The NDB will strengthen the cooperation among our countries and will supplement the efforts of multilateral and regional financial institutions for global development, thus contributing to our collective commitments for achieving the goal of strong, sustainable and balanced growth.”
The leaders of BRICS countries also formally announced the signing of the Treaty for the establishment of the BRICS Contingent Reserve Arrangement (CRA) with an initial size of US$ 100 billion. “This arrangement will have a positive precautionary effect, help countries forestall short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements,” said the Fortaleza Declaration.
With the concretisation of these two signature initiatives, the BRICS club of emerging powers has proved beyond a shade of doubt that the BRICS is not a glorified talk shop, but a powerful instrument for recasting the world order. Dial B for BRICS, and dial B for business.
(Manish Chand is Editor-in-Chief of India Writes Network, www.indiawrites.org, a portal and e-magazine-journal focused on international affairs, emerging powers and the India Story. He is in Fortaleza to report and analyse the sixth BRICS summit for India Writes Network)
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- Manish Chand is Founder-CEO and Editor-in-Chief of India Writes Network (www.indiawrites.org) and India and World, a pioneering magazine focused on international affairs. He is CEO/Director of TGII Media Private Limited, an India-based media, publishing, research and consultancy company.
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