"Move Over, IMF: BRICS Bank Aims to Rewrite the Rules of Development," Ana Swanson and Shrey Verma (South Asia)
Indian to head new development bank
Leaders of the BRICS nations launched on Tuesday a development bank with an initial capital of $50 billion and a $100 billion currency reserve pool at the Brazilian resort city of Fortaleza at the sixth annual BRICS summit (Livemint, Economic Times, NDTV). The economies of BRICS -- a grouping acronym of the five emerging economies of Brazil, Russia, India, China, and South Africa -- together represent a fifth of the global economy and 40 percent of the world population.
The summit declaration said the bank will assist emerging and developing nations mobilize resources for sustainable development and infrastructure projects. The declaration said further the bank's headquarters will be in Shanghai, the first president will be Indian, and the first Board of Directors will be from Brazil. The first chairperson of the Board of Governors will be from Russia and an Africa Regional Center will be based in South Africa. China is expected to make the largest contribution with $41 billion, followed by $18 billion each from Brazil, India, and Russia, and $5 billion from South Africa.
Negotiations continued until the last hour over who would host the bank and shareholding. China argued that the economic strength of a member nation should be the criteria for contribution to the bank, whereas India stated that each member have an equal share. For two years, through intense negotiations, India and Brazil fought China's attempts to get a bigger share as the lender compared to the other member nations.
The bank will be called the New Development Bank, a name suggested by Prime Minister Narendra Modi. "The agreement towards setting up the BRICS New Development Bank is a significant step," Modi said. "I am happy the initiative announced in 2012 in Delhi has become a reality." Chinese President Xi Jinping said: "We need to work to improve economic governance at a global level, increase the representations and voice of developing countries."
This is the first concrete step of the BRICS toward reshaping the Western-dominated international 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," China's official news agency Xinhua said in an editorial (Livemint).