& çâÌæÚUæð´ ·¤è ¥ôÚU Îð¹Ùæ ÁæÚUè ÚU¹ð´ ¥ÍæüÌ ¥ÂÙð ÜÿØ ÂÚU ŠØæÙ ÚU¹ð´Ð ãæÚU Ù ×æÙð´, €UØô´ç·¤ ·¤æ× ·¤ÚUÙð âð ¥æÂ·¤ô ©gðàØ ·¤è Âýæç# ãôÌè ãñ ¥õÚU ÁèßÙ ·¤æ ¹æÜèÂÙ ÎêÚU ãôÌæ ãñÐ ÖÜð ãè ÁèßÙ ×ð´ ç·¤ÌÙè Öè ·¤çÆÙæ§ü €UØô´ Ù ¥æ°, çÁ™ææâæ ¥õÚU ©ˆâæã ÕÙæ° ÚU¹ð´Ð ŠØæÙ ÚU¹ð´, ÜÿØ ã×ðàææ ¥æÂ·Ô¤ Âæâ ãôÌð ãñ´ çÁ‹ãð´ ÂæÙð ·Ô¤ çÜ° ÂýØæâ ¥æÂ ·¤Öè Öè àæéM¤ ·¤ÚU â·¤Ìð ãñ´Ð

BRICS Bank: Will it challenge Bretton Woods?

Mahmood Hasan
The five emerging economies - Brazil, Russia, India, China and South Africa (BRICS) - met for their sixth summit in Fortaleza, Brazil on July 15-16. Brazilian President Dilma Rousseff hosted Russian President Vladimir Putin, Chinese President Xi Jinping, Indian Prime Minister Narendra Modi and South African President Jacob Zuma.
BRICS, a loose grouping, are among the top 10 economies of the world and can be labeled as the rebel group within the G20. BRICS got together for the first time in 2009 following the recession of2008 — looking for ways to contain the economic meltdown at that time. These countries account for almost half of world population and about one-fifth of global GDP.
The summit theme "Inclusive Growth: Sustainable Solutions" was reflected in the 72-paragraph “Fortaleza Declaration." The Declaration dealt with international political and economic issues as do all intergovernmental groups. On the political front, the BRICS leaders expressed their opinion on all international conflicts that threaten peace and security - Palestinian-Israeli conflict, Afghanistan, Syria, Iraq, different conflicts in Africa, nuclear proliferation, climate change etc. Though events in Ukraine are rapidly getting out of hand, the Declaration refrained from criticising Moscow for its alleged role in Ukraine and the annexation of Crimea. It called upon all concerned to resolve the crisis peacefully.
Actually, the Agenda on economic issues was the highlight of the summit. The leaders have been "disappointed and seriously concerned with the non-implementation of IMF reforms, which negatively impacts on the IMF's legitimacy, credibility and effectiveness...”. As a consequence, BRICS and the Emerging Markets and Developing Countries (EMDC) continue to face significant financing constraints to address infrastructure gaps and sustainable development needs.
To recall, following the onslaught of the 2008 recession, the G20 summit held at Pittsburg in 2009, agreed that at IMF, the over-represented developed economies of G7 will transfer 5% in quota share to the under-represented BRICS members. The voting rights of emerging economies were also supposed to increase by 3% at the World Bank.
The financial assistance currendy provided by IMF and WB mostly come with stringent conditions, making it difficult for many EMDCs to comply. The agreed realignments of 2009 were supposed to decrease the domination of G7 and increase the voice and representation of the emerging economies - both at IMF and World Bank. Efforts to reform these two institutions have not happened. Hence, the criticism of Bretton Woods institutions by BRICS.
Exasperation and "anti-dollar sentiments" drove BRICS to sign the Agreement establishing the "New Development Bank” (NDB). The Bank will mobilise resources for infrastructure and sustainable development in BRICS and EMDCs. It will start functioning from 2016. Clearly, the intentions are that NDB will
replicate and possibly replace the role ofWorld Bank.
The Bank shall have an authorised capital of $100 billion. The initial subscribed capital shall be $50 billion, equally shared among the five founding members. The first chair of the Board of Governors shall be from Russia, while first chair of Board of Directors will be from Brazil. The first President of NDB shall be from India. The headquarters will be in Shanghai. The African Regional Center will be in South Africa. What is noteworthy is that the voting power of each member shall equal its subscribed shares in the capital stock. Any UN member can become member of NDB.
The summit also created the BRICS ‘Contingent Reserve Arrangement" (CRA) with an initial size of $100 billion. This arrangement will have positive effect helping countries to forestall short-term balance of payment pressures and strengthen global financial safety net. The idea is that CRA will replicate the job of IMF, but with softer conditions.
Though the setting up of NDB is welcome, there are some pertinent points to note. First, the sizes of the economies of the five members are grossly lopsided, GDP wise - China $ 9.2 trillion, Brazil $2.3 trillion, Russia $2.1 trillion, India $1.7 trillion and South Africa $382 billion only. There will always be suspicions that China with its enormous economic weight will tend to dominate the NDB. Second, the political architectures of the members are quite different, though all of them claim to be democracies. Third, interestingly, the external relations of each are quite different from the other. With such diverse interests can they assert themselves as a group in different international fora? Fourth, the denominated currency of NDB is US dollar not the Chinese "Yaun.” Will 'yuan’ eventually replace the 'dollar'? Finally, will NDB really be able to cater to the needs of countries of the South - particularly considering EMDCs immense appetite for funds at favourable conditions.
Isolated from the West and with the bitter standoff over Ukraine continuing, Vladimir Putin seemed relieved that he still has some friends. Latin America provided him a stage and welcomed him warmly. Besides, the 2018 FIFA World Cup will be hosted by Russia. For India's Narendra Modi it was his first foray in multilateral diplomacy.
No doubt world capitals will be watching keenly to see - if the stone (?) ‘Fortaleza BRICS" replaces the timber (?) "Bretton Woods." Both stone and timber are required for infrastructure development. It would be unfortunate if NDB and ACR try to challenge and replace the IMF and WB. Instead of undermining each other, they should complement each others' work, particularly because the demand for developmental funds across the world is high and increasing.
Despite all the skepticism, BRICS leaders have converted their rhetoric into reality through the establishment of the NDB. Although Brazilian football team did not make it to the FIFA final, President Dilma Rousseff is happy at the successful conclusion of the BRICS summit.
The writer Is former Ambassador and Secretary.