Opinion Claiming the future

The BRICS bank is a commendable exercise in negotiation, for all its potential stumbling blocks

July 18, 2014 12:24 AM IST First published on: Jul 18, 2014 at 12:24 AM IST

On Tuesday, when leaders of the BRICS nations announced the launch of a development bank and a contingency reserve arrangement (CRA) in their first concrete step since getting together in 2009, they addressed a long-pending criticism that the grouping had failed to move beyond a fancy 2001 acronym. The sceptics felt that aping institutions such as the International Monetary Fund and the World Bank would be bound to fail, particularly since the countries had little in common, came from four different geographies and actually compete for investments and a place at the global high table.

But equal shareholding rights for all five countries in the New Development Bank lends robustness to its governance structure. After all, the raison d’etre for the bank was the failure of the Bretton Woods institutions — the IMF and the World Bank — to wake up to the new global economic reality. Understandably, every country wanted to take home something and there were hectic negotiations. But a consensus on the four tricky issues of bank headquarters, presidency, shareholding and name, all open for discussion, was reached. China ceded to India on presidency, India on the location. Perhaps all realised that it was imperative to move on.

Looking at the BRICS differently, it is, as Prime Minister Narendra Modi said, the first time countries have come together based on their future potential, and not on existing prosperity or shared identities. They are a powerful group, and together they can influence views and create an impact. The bank and the CRA mark the BRICS’s first major agreement, which makes it imperative for the developed world to urgently address governance issues in not just the IMF and the World Bank, but also at the UN. The biggest stumbling block for the venture, though, will come from within; whether it will be democratic enough for the members to talk to each other as equals. Right now, it doesn’t seem so. China and Russia hold their own, and will continue to do so. There is some unease, but then the world is changing fast.