Recently, the leaders of the BRICS countries – Brazil, Russia, India, China and South Africa – made a bold step in setting up an international development bank. They have agreed to raise $100 billion to that effect, with plans for the headquarters of the financial institution to be based in Shanghai, China.
This decision came after years, of intense negotiations.
According to The Guardian:
The BRICS were prompted to seek coordinated action after an exodus of capital from emerging markets last year, triggered by the scaling back of US monetary stimulus. The new bank reflects the growing influence of the BRICS, which account for almost half the world’s population and about a fifth of global economic output.
The bank will begin with a subscribed capital of $50bn divided equally between its five founders, with an initial total of $10bn in cash put in over seven years and $40bn in guarantees. It is scheduled to start lending in 2016 and be open to membership by other countries, but the capital share of the BRICS cannot drop below 55%.
This significant development in international economic relations has been eclipsed from global headlines by the latest eruption of the tragic Israel-Palestinian conflict and the shooting down of yet another plane of the Malaysian Airlines fleet.
Discussing the new BRICS Bank with friends online and offline raised a number of pertinent issues:
First, can China’s dominance provide the decisive leadership needed to get the BRICS Bank up on its feet, as the US did for the IMF, the World Bank and the UN in the immediate post-War era in 1945? Or will its dominance be too overbearing, and actually derail the Bank even before it takes off fully?
Second, will the China-dominated BRICS bank vis-à-vis a US-dominated Bretton Woods system reincarnate another bipolar world order? Do we even want bipolarism dominated by two competing economic and political systems, the Washington Consensus and the Beijing Consensus?
Third, will the BRICS countries successfully manage their numerous differences (and there are many – language, size, spatial differences, financial clout and variations in political systems to mention a few).
Fourth, will the establishment of the BRICS Bank provide more diverse sources of development finance for the global South? Will it further enhance South-South cooperation? Is the new development bank capable of serving as an effective competition to the US-dominated Bretton Woods institutions, to at the very least, inspire needed reforms in these multilateral institutions to make them more inclusive (in voting rights, decision-making and staff composition)? Do we want competition, diversity, or both?
Fifth, where does (sub-Saharan) Africa fit into all this? What is the African Union’s position on this new institution?
And finally, why is Nigeria not included? Why isn’t it a BRINCS or an N-BRICS Bank? After all, with a GDP of $509 billion Nigeria is Africa’s largest economy, and is over $100 billion richer than South Africa’s $372 billion economy. Although the BRICS acronym was coined years before Nigeria transitioned to Africa’s largest economy in May 2014. One still can’t help wondering whether this is the price Nigeria has to pay for its severe domestic political and security challenges.
What are your thoughts?