Will the New BRICS Bank Make a Difference?

It looks as if the leaders of the five BRICS (Brazil, Russia, India, China and SA) nations will give the go-ahead at their Summit next week in Brazil to the new BRICS Development Bank. This may be an important step, as it will give substance to a bloc which until now has been more of a talking shop than anything else. What do our experts make of it?

Glenn Silverman, Chief Investment Officer at Investment Solutions, and co-author of a forthcoming book on the BRICS:
The BRICS bloc has been, first and foremost, a political alliance. It has now moved to the next stage, which is arguably the more important one, with the creation of the BRICS Business Council and the BRICS Development Bank. The latter has been mooted for some time, but details are still to emerge. It’s being positioned as a major event, but that remains to be seen. It faces two key challenges at the outset regarding its relevance and its positioning against the existing Western equivalents – the IMF, World Bank and so on – and then its positioning, structure and rules within the five BRICS member countries themselves. Both provide challenges, but with that, opportunities too. We await details and then will be able to comment further. It should be newsworthy and interesting either way.

Dr Martyn Davies, CEO of Frontier Advisory:
The major project of the BRICS grouping is the proposed BRICS Development Bank (BDB). If it materialises, the new organisation is likely to be used for increased state-driven infrastructure spend around prioritised regional corridors in Africa. The South African Government seeks to draw in its BRICS partners into its foreign policy design for the region. In the same way as China and Brazil’s development banks have served as tools of foreign commercial policy, so will South Africa’s, albeit with a regional focus. Will it be a potential game changer in developmental finance in Africa’s economies? This may be premature but the new institution will undoubtedly be giving the World Bank something to think about. It is a pity, however, that the BRICS do not place much priority on discussing intra-BRICS trade liberalization. This would undoubtedly give the stalled Doha Round some impetus in the face of rising protectionism. As the BRICS becomes more increasingly institutionalised, it will begin to challenge the economic architecture set out by the Bretton Woods institutions – regarded by many policy-makers within the BRICS as obsolete and biased toward the developing world. The underlying motivation within the BRICS is to assert their own collective, but hard to define, interests against established Western ones.

John Mare, an independent consultant on public affairs, SA Director for the UK-based Business Council for Africa (BCA) and a Special Adviser in Fipra International:
Any new developmental financial institution would be welcomed but to be meaningful it should have a clear mandate and should coordinate not duplicate or inadvertently undermine other institutions or processes. Meaningfully targeted support which benefits the country concerned, and if possible its broader context, is especially relevant for Africa. Improved infrastructure is hopefully one of the targets for BRICS’ support and is critically important for African growth and stronger regionally-integrated economies, relevant on a national and intraregional basis as well as regards international relations. While sub-Saharan Africa should be a key focus for any BRICS bank, inter alia given that South Africa’s position in the group is supposedly as a bridgehead between the BRIC countries and Africa, the needs of other developing economies could also benefit – and it is hoped that the BRICS bank will not focus on the BRICS themselves to the exclusion of others. Similarly, one hopes that a BRICS bank utilises and helps build local inputs rather than only those from the BRICS.

Sandile Zungu, Member of the BRICS Business Council:
The BRICS Development Bank should make a huge difference in a world of development funding which is dominated by austerity-inspired conditionalities. Africa, in particular, will welcome the new BRICS Bank, because infrastructure rollout should happen despite the political risks that have tended to deter the IMF and The World Bank.

Peter Draper, Founder and Director of Tutwa Consulting.
In line with its foreign policy thrust on the Africa Agenda, South Africa will, no doubt, lobby for recognition of Africa as an important geography to benefit from infrastructure development funds to be made available via the BRICS Development Bank. This will be critical for South Africa, which has played the role of champion to the Programme for Infrastructure Development in Africa (PIDA), and chair of the north–south corridor connecting South Africa to the Democratic Republic of the Congo and Tanzania. This will be more so since it lost the bid to play host to the BRICS Development Bank.

Elizabeth Sidiropoulos from the SAIIA:
The Bank’s establishment will add to the growing pool of new or emerging development finance institutions, such as the Asian Infrastructure Investment Bank and the Asia-Africa Development Fund, the geopolitical dimensions of which should not be underestimated. China is playing a leading role in all of these. In size (USD 50 billion) the BRICS Bank will be some way behind the leading regional development banks, such as the Asian Development Bank (with $136 billion) and African Development Bank (with $98 billion). The World Bank is still well ahead, with $223.2 billion in subscribed capital. However, the Bank can play an important role in augmenting existing finance mechanisms, given the gap between development financing resources and developmental needs in both emerging and other developing economies.

The new BRICS Development Bank should, over time, make a difference to the developing world, notably to African countries. But maybe its true significance is that it give a new institutional underpin to the BRICS club, in a way that the BRICS Business Council has to date seemingly failed to offer. However, given the track records of nepotism and corruption within the BRICS nations, it is vital that the highest standards of governance and scrutiny are implemented from Day 1. One has to worry about these things at any gathering at which Zuma and Putin are present.

Tweet of the Day:
Denis Leary (@denisleary): Fat guy who fell asleep during Boston/Yankees game sues ESPN for calling him Fat Guy Who Fell Asleep During Boston/Yankees Game. USA! USA!

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