Think tanks of five member—Brazil, Russia, India, China and South Africa—BRICS bloc, representing the emerging economies, reached consensus on creating a BRICS development bank to complement existing global financial institutions like World Bank.
Liu Youfa, deputy director of the China Institute of International Studies, said, “At the previous forum before the BRICS summit meeting in March, we were still discussing whether to create this bank, but now we are talking about how to create this bank.
“The consensus was reached between experts from the think tanks from five emerging world economic powers during the two two-day forum held this week at Chongqing city in China, ” Chinese state run Xinhua news agency reported today.
The 2012 BRICS Think-Tanks Forum is a follow up to the understanding reached at the BRICS leaders summit in New Delhi in March this year to consider the possibility of creating a new development bank. It was decided at the summit to convene expert meetings to explore the possibility.
Being the first think-tank forum of its kind, briefed to advise governments of each BRICS country, experts at the event said that their agreement on the necessity and practicality of creating the bank would be presented to officials for further action.
H H S Viswanathan, a fellow of India’s Observer Research Foundation, who took part in the meeting, said no report was worked out at the meeting. But, he said, discussion will surely be included in the
report of the next forum, set to take place in South Africa before the next BRICS summit to be held there in 2013.
India expects to see the bank established as soon as possible, he was quoted by Xinhua as saying.
Although no timetable was set, a road map has become clear after this week’s forum and all five sides are clear what to do next that is to figure out the form of organisation for the bank, equity shares, head office and other issues, he said.
Liu Youfa said think tanks are a preliminary step in government policy-making and the influence of their ideas in part depends on their feasibility and thoroughness. According to Liu, the consensus reached at the forum included the need to build a legal framework, establishment of a theoretical framework and the discussion on technical issues.
The first of the concerns was defining the legal status of the bank, the second was to explain its purpose, and the third was about how the bank should be run, its capitalisation and other specific matters, he said.
Leonid Grigoriev, deputy director of the Russian Energy Agency and professor of the Higher School of Economics, said, “We generally agreed to create this bank. “We scanned all the related issues to be further discussed and formed our opinions on them including issues such as the mode, the capitalisation, the purpose of the bank”, he said.”What we did is groundwork and solving technical issues.
The rest is for political negotiations, but the governments need ideas in making decisions, especially those from other countries,” Grigorieve said. At March’s summit, the BRICS leaders also directed finance ministers to examine the feasibility and viability of the bank, set up a joint working group for further study, and report back to them before the next summit.
Experts at the forum clarified that the study by the working group was not as thorough as their discussion and that finance ministers usually focus on domestic issues. They said a detailed plan that covers the issues mentioned above could be forwarded to the five governments in a year and that, if the plan is adopted, the governments will probably later set up a preparatory committee to kick off the bank’s establishment.
The Delhi Declaration, issued after the BRICS summit, said the new development bank’s aim was “mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.
This, it said, was to supplement the existing efforts of multilateral and regional financial institutions for global growth and development. Since the word BRICS was coined 10 years ago to group five leading emerging economies, its member countries have consistently grown faster than developed nations.
By the end of 2011, the BRICS account for 42 percent of the world’s population, 20 percent of GDP, and 15 percent of international trade. Despite that, experts at the meeting said BRICS countries did not have a corresponding role in global governance, particularly in a world financial system dominated by the United States and Europe.
BRICS and other developing countries have continuously called for reform of the World Bank and the International Monetary Fund (IMF). Oliver Stuenkel, a professor of international relations from Brazil, said at the forum that the United States and Europe remained reluctant to fully include emerging powers into existing financial structures.
He said a BRICS development bank could indeed become an effective tool to serve emerging powers’ needs, while bypassing restrictions and political pressures from U S and Europe-funded banks. Forum delegates generally agreed the BRICS banks should be a supplement to the World Bank and other multilateral or bilateral financial institutions, and its creation was not intended to subvert the current Bretton Woods system, the Xinhua report said.
However, they said the BRICS bank could put pressures on the current system and compete with the World Bank, it said.