Rising powers mull bank for developing nations

Rising powers mull BRICS-backed bank to rival IMF, World Bank in emerging markets

Associated Press
Rising powers mull bank for developing nations
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Chinese President Hu Jintao, left, waves as Indian minister of state for Information Technology, Jyotiraditya Scindia, right, receives him at the airport in New Delhi, India, Wednesday, March 28, 2012. Hu visited New Delhi to attend BRICS summit. (AP Photo/Saurabh Das)

NEW DELHI (AP) -- Developing nations again seem unlikely to propel one of their own citizens to the World Bank presidency. It may not matter. A group of rising powers is mulling its own alternative to Western-dominated lending institutions.

The proposal for a new development bank is one of many to be discussed by the five fast-growing nations known as BRICS when they meet for their fourth summit Thursday in New Delhi.

Brazil, Russia, India, China and South Africa account for 45 percent of the world's population and a quarter of the economy at $13.5 trillion.

Increasingly crucial for world growth as flagging Western economies skimp on imports and aid, the BRICS have long argued for more influence in and reform of Western institutions. Such organizations for decades have dominated global aid and trade policy but made patchy progress in meeting goals like eradicating poverty.

President Barack Obama's decision last week to continue the tradition of nominating an American as World Bank chief — over candidates from other nations as the BRICS had wanted — may add to momentum for an entirely new alternative.

A new international lender could rival the World Bank and Asian Development Bank, which focus on lending to poor nations to help speed their development and reduce poverty. It's unclear if it could also participate in bailing out countries in crisis — a function that's largely the domain of the International Monetary Fund.

"If they can pool their resources and coordinate their aid strategies, then they will be far more powerful," said Sreeram Chaulia, world politics analyst at Jindal School of International Affairs just outside Delhi. "By floating a bank, they are strategizing and clearly playing for the long run."

But experts cautioned that a lack of unity in foreign policy could undermine their goal. They failed to unite behind a single World Bank candidate, which might have helped their cause.

"They have to get their act together politically," Chaulia said. "It is much more challenging to form a collective security agenda."

What the five BRICS nations have in common, however, is a focus on eradicating poverty, securing food and energy supplies, developing infrastructure and gaining new technologies. They may also talk about a common position on climate change.

India is home to a third of the world's poor, while Johannesburg is seen as a door to Africa's largely untapped market of 1 billion people. All of the BRICS want to bolster high-tech sectors and affordable health care.

China, which is seeking to advance the use of its renminbi currency worldwide, believes the bank could offer developing nations more say in how funds are invested in emerging economies, and "downgrade the risk of ups and downs in other international currencies," Chinese Foreign Ministry official Li Kexin said, according to The Hindu newspaper.

They are also likely to agree to local currency trades, further boosting and insulating their currencies from fluctuations in the West. With $280 billion in combined trade in 2011, there is potential for much more.

But cooperation also poses challenges between five nations that are vastly different in size and foreign policy approaches, with economies also seeing signs of flux. China has reduced its annual growth target to 7.5 percent after three decades of economic growth at 10 percent or higher. India is in danger of slowing to a stagnating 6 percent rate, where it would be unable to create jobs.

It is also not clear how the BRICS would manage a multilateral bank. China, with bulging foreign currency reserves of $3.2 trillion, might want to permanently lead the bank, which India and Russia would not likely accept.

Unlike the U.S. and European countries that underpin the IMF and World Bank, the BRICS include diverse political systems, from authoritarian Russia and China to the South African, Indian and Brazilian democracies.

Rarely do they show a common stance on global issues, whether it be Iran sanctions or calls for Syria's government to end violence against democracy protesters. Such differences would complicate investment decisions that carry foreign policy consequences. China tends to bypass organizations and give directly to governments, favoring those that support its line against freedom for Tibet.

Authorities in India are bracing for more anti-China protests during President Hu Jintao's visit, after a Tibetan exile lit himself on fire and ran shouting through a New Delhi demonstration Monday. There have been 30 such self immolations in the past year in ethnic Tibetan areas of China.

India says the BRICS "present an opportunity as new growth poles in a multi-polar world."

Ultimately, they cannot follow Western growth trajectories that benefited from decades of colonialism and industrialization now deemed problematic if climate chaos is to be avoided. Given the lack of political unity, the BRICS may be banking on economic leadership being enough to secure global power status.

"One's global identity, one's footprint in the world, is set by the power of its example," said economist Rajiv Kumar, head of the Federation of Indian Chambers of Commerce and Industry, in an interview. "If we can pull off our economic success, then our reputation is assured."

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