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  • Aug 28, 2014
  • Updated: 7:20am
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BRICS

BRICS group of nations sets up development bank to rival IMF, World Bank

Emerging powers agree details of US$50 billion lender to rival the IMF

PUBLISHED : Wednesday, 16 July, 2014, 9:36am
UPDATED : Wednesday, 16 July, 2014, 10:10pm

Leaders of the five BRICS nations agreed on the structure of a US$50 billion development bank by granting China its headquarters and India its first rotating presidency.

Brazil, Russia and South Africa were also granted posts or units in the new bank.

The leaders of Brazil, Russia, India, China and South Africa also formalised the creation of a US$100 billion currency exchange reserve, which member states can tap in case of balance of payment crises, according to a statement issued at a summit in Fortaleza, Brazil. Both initiatives, which require legislative approval, are designed to provide an alternative to financing from the International Monetary Fund and the World Bank, where BRICS countries have been seeking more say.

"The BRICS are gaining political weight and demonstrating their role in the international arena," Brazilian President Dilma Rousseff said after a signing ceremony.

Until the eve of the summit, India and South Africa had vied with China to host the headquarters of the bank, dubbed the New Development Bank.

The administration of Indian Prime Minister Narendra Modi gave in after it was reminded that his country's previous administration had agreed to Shanghai as the bank's headquarters, according to an Indian official.

Russian Finance Minister Anton Siluanov said the BRICS nations decided in favour of Shanghai because the city offers better infrastructure, opportunities to capture private funding and is home to more investors than the competitors.

Chinese media yesterday hailed the creation of the development bank, and blamed Western countries and multilateral agencies for flaws in the global financial system.

"The plans of the emerging-market bloc of BRICS to establish a development bank usher in a long-awaited and helpful alternative to the Western-dominated institutes in global finance," Xinhua said in an editorial.

An opinion piece in the Global Times newspaper, known for its nationalistic editorial stance, said competition from the BRICS bank could prompt the World Bank and the International Monetary Fund (IMF) to carry out much-needed internal reforms.

"BRICS countries have to blaze a new trail to reduce losses as well as safeguard interests," wrote Liu Zongyi, a research fellow at the government-linked Shanghai Institute for International Studies. "Loans from the World Bank are not able to meet the demands of the developing nations ...

"The IMF also failed to play an active role in stabilising the turbulent emerging financial markets during the global financial crisis."

For President Xi Jinping , the meetings represent a new push by Beijing to gain influence in a region traditionally seen as a US backyard.

Agence France-Presse, Bloomberg

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This article is now closed to comments

M Miyagi
The Chinese haters and the Western "experts' have been predicting that BRICS will unravel as a non-player. Now with the establishment of the BRICS bank looks like their prediction is wrong again. The US kicking out Russia from the useless G8 or G7 is doing BRICS a big favour. Chinese capital, Russian energy plus Indian and Chinese human resources added together with Brazilian and South African resources will turn BRICS from being a loser to being a winner. In any case it is a better way of using Chinese capital than for China to buy US treasuries. This is exactly what is needed to jump start the BRICS economies while showing a middle finger to the warmongers in Capitol Hill.
chaz_hen
Only question is, looking at this ensemble: who can steal the most and the fastest?
shuike
All thief thinks alike.
I Gandhi
BRICS with the establishment of a USD 100 Billion development bank to be located in Shanghai is finally coming together as a group making themselves into a credible alternative to the double standards Western dominated neo-colonialist institutions like the IMF, ADB and World Bank. Russian President Vladimir Putin, Indian Prime Minister Narendra Modi, Brazilian President Dilma Rousseff, Chinese President Xi Jinping and South African President Jacob Zuma all deserves praise for their statesmanship and vision.
jiawang@adb.org
China is very clever.
The BRiCS Bank is located in Shanghai and Chinese staff will man the offices.
The Chinese language will be the working language at the bank.
China will have ultimate power.
Good move, China.
shuike
In your haste to lambast China you failed to read the article properly. It clearly mentions "India its first rotating presidency & ....Brazil, Russia and South Africa were also granted posts or units in the new bank.". So it's not an all Chinese affair.
jiawang@adb.org
You obviously do not understand how a "multinational" organization is run.
What language will the bank staff use - Russian, Chinese, Portuguese, English - in its daily operation? If it's Chinese, this will give China ultimate clout.
Do you really believe the operating language will change each time the President or Chairman of the Board is rotated? Don't be so provincial.
norodnik
"The leaders of Brazil, Russia, India, China and South Africa also formalised the creation of a US$100 billion currency exchange reserve"....why are they using USD instead of CNY or even the Euro for that matter? Over to you, 50 cents...
53c6cd36-ebe8-4fdf-bd65-08ed0a3209ca
****www.prurgent.com/2013-09-19/pressrelease317253.htm
gunzy
This bank should have been setup in HK. It's what HK was built for, we could have made it successful and accountable(kinda).

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