Durban, South Africa: BRICS emerging powers on Tuesday sought a deal on setting up a development bank that would rival Western-backed institutions, trying to iron out significant differences ahead of a leaders’ summit in Durban.
The grouping of Brazil, Russia, India, China and hosts South Africa are racing to flesh out proposals for an infrastructure-focused lender that would challenge seven decades of dominance by the World Bank.
Just hours before leaders kick off the summit at 11 pm, finance ministers were still working to agree key elements of the plan.
Disputes remain over what the bank will do, with each side trying to mould the institution to their foreign or domestic policy goals and with each looking for assurances of an equitable return on their initial investment of around $10 billion.
Failure to secure a deal would be a major embarrassment for many of the participants and would play into the hands of those who argue the BRICS have little to bind them together.
Xi Jinping, who has underscored the growing importance of the group by making Durban his first summit as China’s president, earlier expressed hopes for “positive headway” in establishing the bank.
In a keynote speech in Tanzania on Monday Xi vowed Beijing’s “sincere friendship” with the continent, and a relationship that respects Africa’s “dignity and independence.”
Meanwhile host President Jacob Zuma has lauded the summit as a means of addressing his country’s chronic economic problems including high unemployment.
“BRICS provides an opportunity for South Africa to promote its competitiveness” Zuma said in a speech on the eve of the summit.
“It is an opportunity to move further in our drive to promote economic growth and confront the challenge of poverty, inequality and unemployment that afflicts our country.”
A failure to take concrete steps would raise questions about whether the BRICS grouping can survive.
“Ironically it may be the cleavages within the BRICS grouping that more accurately hint at the future of the global order: tensions between China and Brazil on trade, India on security, and Russia on status highlight the difficulty Beijing will have in staking its claim to global leadership,” said Daniel Twining of the German Marshall Fund.
But if the leaders succeed it would be the first time since the inaugural BRICS summit four years ago that the group matches rhetorical demands for a more equitable global order with concrete steps.
That would send a loud message to the United States and European nations that the current global balance of power is unworkable.
Together the BRICS account for 25% of global GDP and 40% of the world’s population.
But members say institutions like the World Bank, the International Monetary Fund and the United Nations Security Council are not changing fast enough reflect their new-found clout.
Diplomats say it could start with $10 billion seed money from each country, but the exact role of the bank is up for debate.
Indian officials have pressed for a BRICS-led South-South development bank, recycling budget surpluses into investment in developing countries.
Many developing nations inside and outside BRICS will hope that is a way of tapping China’s vast financial resources.
Meanwhile China would no doubt like the bank to invest in trade-multiplying projects.
Aside from the development bank, the group will also try to establish a foreign exchange reserve pool worth as much as $240 billion to be drawn on in financial crises.
China has the world’s largest foreign exchange reserves, worth $3.31 trillion at the end of 2012, and establishing currency swap lines could help other BRICS tap that massive resource.
Later on Tuesday Brazil is to sign a bilateral accord with China to promote trade in their national currencies.
BRICS leaders will also establish business and think tank councils.
With Syria’s two-year long civil war escalating through the suspected use of chemical weapons, BRICS leaders will also have to weigh a call from President Bashar al-Assad to intervene.