India summit to push for Brics bank

2012-03-03 08:53

South African technocrats were yesterday expected to fly out to New Delhi in India to discuss with their fellow Brics (Brazil, Russia, India, China and SA) partners the first steps of establishing a ­development bank.

The team is made up of experts from the Treasury and the ministry of international cooperation.

If an understanding is reached, the establishment of a bank would be a significant challenge to the World Bank’s dominance since its conception in 1944. This would ­also change the landscape of international financial institutions.

The Brics will meet again in ­India at the end of the month to discuss, among others, funding of developments in the emerging markets.

Brics nations are also calling to have a voice in the selection of the World Bank president. The post will become vacant at the end of June when current president, Robert Zoellick, an American, steps down.

As calls for an emerging market candidate increase, so are attempts to create an alternative to the powerful funding institution.

Experts say the envisaged bank would begin to erode the mandate of the World Bank – which is to eradicate poverty in the developing world.

It is envisaged that the new bank would loan to nations in the developing world and be comprised of such nations exclusively.

Professor Owen Skae of Rhodes University said: “It is extremely significant and long overdue. It has the potential to really provide a vehicle for the Brics to formalise their role as an economic grouping and begin to rival the traditional multilateral institutions.”

The five emerging economies will meet ahead of their summit on March 29 in India where the ­respective heads of state are expected to take action on their April 2011 resolutions taken at the last summit in China to “strengthen ­financial cooperation among Brics development banks”.

Said Bulelwa Boqwana, South African Treasury spokesperson: “We can confirm that there are on-going discussions amongst the Brics member countries regarding a Brics-led development bank.

“This matter is likely to be discussed by the leaders at their next summit in India. However, issues around location, shareholding and structure haven’t been worked out as yet.”

A member of the delegation that left for India yesterday told City Press: “We are meeting ahead of the Brics summit on the 29th of March. On the table are ­exploratory plans concerning the formation of a Brics bank.”

It is expected that South Africa will have to manage long-standing tensions between India and China – this as advisers to the Chinese government have been questioning the need for China to be ­involved with the new bank.

China is the third-largest contributor to the World Bank ahead of Germany, France and the UK. India is the seventh-largest shareholder in the World Bank.

The tension between the two Asian giants is likely to play out when the shareholding and voting rights of the proposed development bank are discussed.

The move to establish a bank in the emerging world comes amid increasing criticism about the marginalisation of the voice of the developing world by the World Bank as well as unhappiness with the bank’s governance structures.

The US is the largest shareholder in the World Bank and has traditionally chosen the institution’s president. In fact, since inception the incumbents have always been American citizens.

US Secretary of State Hillary Clinton is reported to be in discussions with the White House regarding the top post. Treasury Secretary Timothy Geithner has also been touted for the job.

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