Durban summit to clear BRICS Bank

The BRICS grouping of Brazil,Russia,India,China and South Africa is all set to endorse the creation of a BRICS Bank at this years summit in Durban

The BRICS grouping of Brazil,Russia,India,China and South Africa is all set to endorse the creation of a BRICS Bank at this years summit in Durban next week with the finance ministers of these countries expected to iron out any remaining differences on Tuesday.

Ambitious as the idea may be,the effort is to move on it incrementally. As a result,much of the details will be left out to be dealt with later.

At this stage,sources said,the finance ministers are likely to only accept the recommendations of the expert committee and give the green signal for the modalities to be worked out. This will be approved at the summit,which will be attended by Prime Minister Manmohan Singh on March 27.

The plan includes having a joint foreign exchange reserve and a BRICS-led infrastructure development bank with sizeable funds. In fact,sources said,China is keen that over 100 billion should be the contingency reserve of the bank. However,other countries,including India,are not keen to spell out any such specific detail in the final announcement or could suggest a lower capital structure of around 50 billion.

Given the financial health of the BRICS countries,sources said,there is a fear that the bank could end up China-dominated venture because it is unlikely that all member countries could pledge large amounts. At the Sanya Summit,when the idea was first discussed,the Chinese side had seemed to suggest that it could provide bulk of the funding.

Broadly,there remain differing approaches on national contributions to the bank,which then ties up to the issue of voting values of member countries.

While the expert committee set up to examine this idea is learnt to have concluded that the plan is feasible,political issues do remain on the table. The projection of the bank as an alternative to the US-dominated Bretton Woods institutions like the International Momentary Fund and the World Bank is one aspect on which all five members have more nuanced positions,which are playing out in on going negotiations ahead of the summit.

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On the face of it,however,the idea finds resonance because it aims to provide emerging economies with a fund reserve which can be accessed during times of economic crisis while also financing high-value infrastructure projects like rails and ports. This is one area where funding from the World Bank and IMF has shrunk in size.

Among other outcomes from the summit are the setting up of a BRICS Business Council and a consortium of BRICS think tanks. The summit will also witness a BRICS-Africa dialogue forum,which will have heads of countries now leading the various regional groupings in Africa. As a reach out,a BRICS agreement to finance infrastructure in Africa is expected.