One of the main outcomes of the recent BRICS Summit held at Durban was the agreement amongst member states about the dire need for a BRICS development bank. All members described the initiative as feasible and viable. Commenting on BRICS, the Chinese President, Xi Jinping stated that the “potential of BRICS development is infinite”.
It was also decided to create a $100 billion fund to combat global currency crises. While this fund is yet to be finalised, it has been proposed that China would contribute $41 billion; Brazil, Russia and India would provide $18 billion each; and South Africa $5 billion.
In addition to brainstorming on the above issues, there were also some important bilateral discussions between leaders of member states. The Indian Prime Minister Dr Manmohan Singh met Xi Jinping for the first time.
While there is no doubt, that member states of BRICS did make some progress in building consensus for the creation of a development bank, and other important issues, the organisation has the onerous task of dealing with a number of challenges.
Firstly, there is no clarity on modalities of the bank with there being no consensus on how much each country should pool into the bank, the location of the bank and of course, who should staff it. The Russian finance minister, Anton Siluanov very aptly stated that “There is positive moment, but no decision on the creation”.
While India is of the view that all members should contribute a minimum amount of 10 billion dollars to the proposed bank, members such as South Africa are not in a position to do so.
To what degree?
Secondly, while so far, BRICS has taken a stand on geo-political issues such as Iran and Syria, the core agenda has been economic, and for this reason it has been able to steer clear of differences. A few days before the Durban summit however, Russian President Vladimir Putin spoke about the need for BRICS to involve itself more in geopolitical issues.
The question here is that to what degree should the organisation get involved in global disputes, and will India, an important member with strong ties with Washington, support the organisation’s stand on geo-political issues, if the main motive is mere Anti-Americanism?
It should also not be forgotten, that while there is a considerable improvement in ties between China and India, both are competing for influence in regions especially Africa and Central Asia.
Thirdly, there is already an apprehension amongst member states that BRICS countries, especially China, are likely to use the organisation for increasing its foot print in Africa, and are indulging in
colonialism of a new kind.
Figures clearly reiterate China’s increasing strangle hold over the latter. BRICS-Africa trade is likely to surpass $500 billion by 2015, with China taking a huge chunk of the pie — 60 per cent — according to Standard Bank. While it remains to be seen as to how even the distribution of economic benefits of BRICS will be, genuine apprehensions do need to be allayed, and can not be wished away.
On the eve of the summit for example, South African businessmen urged their country’s President, Jacob Zuma not to enter into any trade deals with China, and other countries since the South African market will be flooded with cheap imports to the detriment of the local economy.
It would also be pertinent to mention here that only recently, Lamido Sanusi, president of Nigeria’s central bank, in an interview to the Financial Times expressed the view that China was contributing to Africa’s “de-industrialization and underdevelopment.”
India which is catching up with China in Africa –though rather slowly – could benefit from this growing apprehension all over Africa with regard to excessive Chinese domination. India is in fact making genuine efforts to drive home the point that it’s forays into Africa would be mutually beneficial then the dragon’s. This was quite evident in Dr Singh’s speech during the summit though he also made it a point to state that India would like to employ local labour.
In addition to China reaping inordinate economic benefits, there is also a worry that the former may not dominate the organisation even though other countries like India, have been playing a proactive role and at the forefront in the organisation.
Were a development bank to come up and be located in China, this would be the first financial organisation outside China where it would actually be in the driving seat and remain virtually unchallenged.
India too realizes this aspect, and perhaps it is for the same reason that New Delhi was opposed to the idea of the bank being located in China. New Delhi is also vary of China pooling in on behalf of other members, since it would leverage this and wield disproportionate influence in the organisation.
In conclusion, it is time for BRICS to define itself and develop some clarity, beyond looking itself as the developing world alternative to Bretton Woods organisations. This especially, since there is a great
disparity between its members with China way ahead of other economies.
It is also imperative to take into account the varied geo-political interests, political structures and climate in each of the member countries. It would indeed be ironical, if an organisation created with the objective of taking on western hegemony ends up creating a new hegemony.
–Tridivesh Singh Maini is an Independent Foreign Policy Analyst