India presses for BRICS
bank By Kester Kenn Klomegah
MOSCOW - India's proposal to set up a bank
of the BRICS nations (Brazil, Russia, India, China
and South Africa) will top the agenda at the
summit of the group in New Delhi on March 28.
India believes a joint bank would be in
line with the growing economic power of the
five-nation group. The bank could firm up
the position of BRICS as a
powerful player in global decision-making.
"The BRICS bank does not need much capital
for a start," Alexander Appokin, senior expert at
the Moscow-based Center for Macroeconomic Analysis
and Forecasting told Inter Press Service (IPS).
"What is more important is that the BRICS
development bank presents a unique opportunity for
indirect investment of central bank foreign
reserves inside the countries."
bank could for example issue convertible debt,
which would arguably be top-rated and can be
bought by central banks of all BRICS countries.
BRICS countries would thus have a vessel for
"China will be
the biggest beneficiary of that," said Appokin.
"Moreover, infrastructure investment mostly needs
not just long-term financing but external
monitoring for more transparency and efficiency
increases. Here, a BRICS development bank could
offer some advice for successful implementation of
structures like a BRICS bank are effective only in
case they are given independence in project
financing decisions from the governments, or at
least room to operate in long- term development
Yuhua Xiao, assistant
professor at the Institute for African Studies in
the Zhejiang Normal University (ZNU) in China said
the idea of setting up a development bank for
financing projects in these countries is a sign of
the growing self-assertiveness and of independence
or interdependence of emerging economies.
"As the emerging powers' approaches to
development may differ from established norms,
such an institutional set-up will test the
possibility of cooperation in a different
framework which might generate new ideas," Yuhua
told IPS in an e-mail.
for a BRICS bank was long overdue, said John
Mashaka, financial analyst at Wells Fargo Capital
Markets. "It is a way the emerging nations are
trying to pull out of the western dominated World
Bank and the International Monetary Fund [IMF].
Basically India, China and perhaps Russia are
trying to show off their economic clout; they are
trying to demonstrate to the west that they can do
without them. Above all they need freedom from
Western financial influence."
the joint bank, besides being a financial
institution for BRICS member countries, can
support infrastructure projects in developing
countries in Africa, Asia and Latin America. But
it has a long way to go, he said.
effectiveness of the bank is yet to be seen; this
plan is not going to be cakewalk. China has
already said it wants permanent presidency. Russia
and India may demand the same. We know that Africa
is a lucrative market for China in terms of
natural resources and as a market for industrial
"Africa being such a strategic
region, China may want the bank to finance many of
its projects in the African region, or simply
cooperate with the African Development Bank."
Mashaka says there are also unanswered
questions about capital structure, such as which
BRICS member state will foot the bigger bill
needed to establish the bank, and the role of
Albert Khamatshin from
the Center for Southern African Studies at the
Russian Academy of Sciences believes South Africa
will benefit most because the primary focus of the
bank will be development projects within BRICS.
Dr Alexandra A Arkhangelskaya, head of the
Center for Information and International Relations
at the Institute for African Studies at the
Russian Academy of Sciences, said a bank like this
could shift the weight of economic power even
though the creation of such an institution would
"It is a good in terms of a
multilateral framework of cooperation,"
Arkhangelskaya said. "But the BRICS states have
differing economic weight, and to find the right
balance to avoid one or some members dominating
can pose a challenge. The threat of
marginalization of members in comparison to China
"BRICS is unity in diversity,
and to take new steps towards mutual cooperation
can be challenging. Therefore, it is interesting
to see the development of this idea and to clearly
understand the mechanism of its implementation."
The bank could greatly benefit countries
outside BRICS if it supports least-developed
countries in ways similar to the IBSA (India,
Brazil, South Africa) Development Fund, which has
a number of successful projects, she said.
Professor Adams B Bodomo from the School
of Humanities at the University of Hong Kong, who
has researched BRICS extensively, said Brazil
proposed that developing countries would be
willing to contribute money to solve the eurozone
problems in return for more power in the IMF. But
he said the "International" Monetary Fund was not
really for developing countries. He called it a
Western Monetary Fund.