DURBAN – The idea of starting a bank was first mooted by BRICS countries during the New Delhi summit. The bank will cater to the infrastructural needs of the members of the group which accounts for 43% of the world’s population.
The bank and the Contingency Reserve Arrangement (CRA) provide a solid basis for greater cooperation among these countries whose economies are growing faster than the global average, and have the potential to influence decision-making on key international issues. Although the group is still to realize the potential that Jim O’Neil of Goldman Sachs saw when he coined the concept in 2010, the block has gained in profile and aspires to be a rival to established economic groupings.
In his speech at the plenary session of the summit on Wednesday, Prime Minister Manmohan Singh said, “It gives me great satisfaction to note that one of the ideas (the bank) that we discussed at New Delhi, that of instituting a mechanism to recycle surplus savings into infrastructure investments in developing countries, has been given a concrete shape during the Durban summit. Our finance ministers will now work to develop the details.”
Members have agreed to make suitable and sufficient initial contributions. However, finance minister P Chidambaram said the specifics of capital, governance and membership remain to be thrashed out. While China wants the bank to start with an initial corpus of $100 billion, India, according to Chidambaram, feels $50 billion as initial authorized capital will do. Also, there is no agreement on whether the voting rights should be linked to contributions—something which reflects the concern that China, with its huge financial muscle, may acquire the levers in the same way the US and Europe dominate the World Bank and the IMF. China’s offer to make up for any shortfall in contributions from other countries has only strengthened the anxiety. The issue of membership—whether it should be limited to members or others should also be let in—also remains unresolved.
Talking to reporters after the meeting of leaders, Chidambaram said India plans to prepare a complete document before March when the next meeting of BRICS countries is scheduled in Brazil. He expressed the hope that officials from the five members would meet every quarter to take the process forward. “India’s intention is to have the complete documentation ready before the next summit,” Chidambaram said.
