Business and Economics Politics

BRICS Development Bank: More about political posturing than anything?

Photo Source: Photo/Agencies
Photo Source: Photo/Agencies

“The BRICS development bank will take shape at the fifth BRICS summit to be held in the eastern port city of Durban, South Africa, next month. The governments of Brazil, Russia, India, China and South Africa will each make an initial capital injection of $10 billion to fund the bank, which will not only symbolize the unity of the world’s five most dynamic economies and showcase the rise of emerging nations; it will also become a global tool for “mobilizing resources for infrastructure and sustainable development projects in the BRICS and other emerging economies and developing countries”. – China Daily

Calling the BRICS economies “the world’s five most dynamic” is likely to be an overstatement of fact. Whatever “dynamic” means in this context. Nevertheless, the direction of travel around the creation of this development bank will be interesting to follow. It is intended that the bank will act as an alternative to Western lending institutions such as the World Bank. I wonder where its lending criteria will be positioned – somewhere in between the generous EXIM Bank of China and the conditionality-obsessed World Bank?

Some points to ponder:

(1) How much of this is simply about political posturing? Should citizens of the five countries (particularly South Africa) be sceptical? The implications of being involved in the project (and the grouping itself) are costly (initial capital injection of $10 billion) and therefore how these countries will benefit needs to be made more obvious to citizens.

I suppose putting your money where your mouth is is an essential part to being a member of the big boys’ club.

That said, is there really a case for a global emerging markets/developing world development bank? It’s well-known that these plans are borne out of frustration at the lack of reform in the Bretton Woods institutions but how different will the BRICS bank be to the World Bank in its actual lending?

(2) How sustainable is the whole project? An initial capital injection of $10 billion as already mentioned is no small amount. And that’s just the beginning. Given the notion that it will be different to the World Bank, will it find itself trying to be all things to all people (i.e. serving the interests of its founders while also acting as flag bearer for “sustainable development projects in the BRICS and other emerging economies and developing countries”)? Surely its founders will, in the longer term, succumb to self-interested policies leading to accusations of it acting just like the World Bank?

It all remains to be seen.

Look out for the BRICS Conference from 26-27th March 2013 in Durban, South Africa.

See our December 2012 event report, ‘The BRICS: A view from South Africa.’


2 replies on “BRICS Development Bank: More about political posturing than anything?”

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