Monish Tourangbam
How to align national interests with multilateral goals and objectives, was the big question before the leaders of the BRICS (Brazil, Russia, India, China and South Africa) member countries, convened in the South African port city of Durban for the 5th BRICS Summit. Even as leaders discussed and deliberated over a broad spectrum of issues, world attention was focused on news regarding the BRICS development bank, an idea that originated at the Delhi summit last year, and managed to reach some form of concretisation, though differences still remain in matters of implementation, specifically on the contribution of the seed money for operationalisation.
The new development bank, that has been declared feasible and viable, is geared towards meeting the challenges that developing countries face in infrastructure development due to insufficient long-term financing and foreign direct investment, especially investment in capital stock. The summit declaration stressed that “the initial contribution to the Bank should be substantial and sufficient for the Bank to be effective in financing infrastructure.”
Though, clearance of the concept and feasibility of the project shows a positive momentum, these do not translate to clear-cut steps towards effective implementation. Issues of funding and the location of the bank still need more negotiations that would be carried over to future meetings. The BRICS mechanism garners notice around the world because of its economic heft, but as a matter of fact, it also brings together countries with different levels of economic development and disparate political systems.
The group of five, with increasing economic influence in their respective regions and around the world, definitely want more say on the high table of international financial institutions such as the World Bank and the IMF, governed by western countries. Though the World Bank has welcomed the decision to establish the BRICS development bank and looks forward to working with it in future, many officials have opined that reluctance to reform, among global financial institutions, have only led to such new initiatives by the BRICS member countries to reflect the concerns and needs of the emerging economies and other developing countries.
Having said that, BRICS countries need to create a cohesive working environment and greater habits of cooperation, which is easier said than done. Incidentally, the two primary elements of the group, India and China, share a deep political animosity, and an economic kinship that is highly skewed in favour of the latter. Apart from the intractable border dispute, these two countries have clashing interests in the maritime zone as well, with Chinese interests in the Indian Ocean region seen as a strategic ploy to eat into India’s sphere of influence, and Beijing objecting India’s economic engagements with the Southeast Asian nations in the South China Sea.
Although, China is rightly seen as the big brother in terms of its economic size and influence, the two countries are increasingly competing over resources, and especially so, in the African continent, the focus area of this year’s BRICS summit. Beijing sees with concern New Delhi’s increasing engagement with the United States, and Obama’s new policy of rebalancing or refocusing towards the Asia-Pacific. Likewise, New Delhi is cautious of the increasing closeness between Beijing and Moscow. Just before the BRICS summit, President Xi Jinping made his first official visit to Russia, clearly reflective of the emerging Russo-Chinese combine.
And, concerns regarding an economically sound yet aggressive China are seeping into the negotiations regarding the initial contributions for starting the bank. As BRICS formulate and work on the banking structure, geared towards closing the gap of global financial institutions, apprehensions are being raised that China, being the most formidable member of the group, might use its economic prowess, to aggressively promote its own interests rather than areas of mutual interest.
Notwithstanding the altruistic nature of the newly proposed financial mechanism, countries engaging in rational and pragmatic ventures, would not want the Chinese government running rough shod over the entire framework, and India needs to be extra cautious and should inject the preservation of multi-national interests over national interests in this case.
According to sources, BRICS countries aimed to inject an initial $50 billion into the new infrastructure bank, but there was disagreement over whether each should contribute $10 billion or if contributions should vary by the size of their economies. China was proposing up to $ 100 billion from each country and offered to pay on behalf of those unable to pay beyond a certain amount. Reportedly, Brazil did not take to the proposal at all, while South Africa tried to remain neutral, and India and Russia pressed for more deliberations. It was finally agreed that the concept would be reviewed on the sidelines of the St. Petersburg G20 Summit in September.
Moreover, divergent views existed among the member countries regarding the project’s pace. In this case, India and Russia concurred that the project needed wider deliberations, while China, was seen as keen on pushing its ideas on the location, capitalisation and shareholding pattern, with support from South Africa, and no signs of objection from Brazil.
Besides, the go ahead given to further negotiations over technicalities for establishing the new development bank, the summit in Durban, agreed on the construction of a financial safety net through the creation of a Contingent Reserve Arrangement (CRA) (with an initial size of US$ 100 Billion) amongst BRICS countries, that is expected to have a positive precautionary effect, helping the member countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability. Additionally, it would contribute to strengthening the global financial safety net and complement existing international arrangements as an additional line of defence. According to sources, there was an agreement that China, will contribute $41 billion while it will be 18 per cent for others except South Africa which will contribute $5 billion. The summit also decided to establish a BRICS business council and a BRICS think tank.
At the outset, South African President Jacob Zuma stated: “The BRICS forum offers member States the opportunity of an amplified voice for political, financial, economic and social interests around a common growth and development agenda based on our shared values.” But, undeniably BRICS consists of countries with different economic potentials and divergent political systems, and as such, there is a greater need to clearly spell out the areas of shared interests, wherein competition should give way to cooperation. China, being the largest economy in the group, with huge foreign exchange reserves, could contribute more towards financial initiatives, but others in the group should ensure that, such economic largesse from Beijing does not become an undesirable political whip in the hands of the Chinese. INFA
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