Sanya consensus, Delhi Declaration, BRICs forms alternative to World Bank
Experts from five emerging world economic powers have told how a two-day think tanks forum this week reached consensus on creating a BRICS development bank designed to complement existing global financial institutions such as the World Bank.
Liu Youfa, deputy director of the China Institute of International Studies, said, "At the previous forum before the BRICS summit meeting in March, we were still discussing whether to create this bank, but now we are talking about how to create this bank."
The 2012 BRICS Think-Tanks Forum, held in southwest China's Chongqing Municipality on Wednesday and Thursday, was part of efforts by the five countries — Brazil, Russia, India, China and South Africa — to create a BRICS development bank. Its establishment joined the official agenda when BRICS leaders agreed at the organization's summit in India's New Delhi in March to consider the possibility of creating a new development bank. They decided to convene expert meetings on the matter.
Being the first think-tank forum of its kind, briefed to advise governments of each BRICS country, experts at the event said in follow-up interviews that their agreement on the necessity and practicality of creating the bank would be presented to officials, who would advance the governments' decision making.
Ideas that carry weight
Liu Youfa said think tanks are a preliminary step in government policy-making and the influence of their ideas in part depends on their feasibility and thoroughness.
According to Liu, the consensus from the forum has three main aspects: the need to build a legal framework, the need to establish a theoretical framework and the need to further discuss technical issues. The first of these concerns defining the legal status of the bank, the second was to explain its purpose, and the third was about how the bank should be run and capitalized and other specific matters.
Leonid Grigoriev, deputy director of the Russian Energy Agency and professor of the Higher School of Economics, said, "We generally agreed to create this bank. We scanned all the related issues to be further discussed and formed our opinions on them, issues such as the mode, the capitalization, the purpose of the bank.
"What we did is groundwork and solving technical issues. The rest is for political negotiations, but the governments need ideas in making decisions, especially those from other countries."
Such think-tank forums are usually held right before BRICS leader meetings, as they were before the summit in New Delhi this year and the one in Sanya, China, last year. Interviewed experts said much of the content of the reports formed at the two forums eventually appeared on the summit declarations.
According to H.H.S. Viswanathan, a distinguished fellow of India's Observer Research Foundation, this week's event did not produce a report, but its discussion will surely be included in the report of the next forum, set to take place in South Africa before the next summit there in 2013.
Viswanathan told Xinhua that India expects to see the bank established as soon as possible. Although no timetable was set, a road map has become clear after this week's forum and all five sides are clear what to do next: figuring out the bank's form of organization, equity shares, head office and other issues.
At March's summit, the BRICS leaders also directed finance ministers to examine the feasibility and viability of the bank, set up a joint working group for further study, and report back to them before the next summit.
Experts at the forum clarified that the study by the working group was not as thorough as their discussion and that finance ministers usually focus on domestic issues.
The experts said in interviews that they believe a detailed plan that covers the issues mentioned above could be forwarded to the five governments in a year and that, if the plan is adopted, the governments will probably later set up a preparatory committee to kick off the bank's establishment.
Alternative to world bank
The Delhi Declaration, issued after the BRICS summit, said the new development bank's aim was "mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development."
When explaining why the BRICS countries need a development of their own, many experts found fault with the existing global financial institutions, in particular the World Bank, for not providing adequate capital for much-needed large infrastructure projects in BRICS and other developing countries.
Yaroslav Lisovolik, member of the Management Board of Deutsche Bank Russia, said the bulk of world savings and financial resources was concentrated in the developing world, but the pattern of the past decade had seen developing countries channelling a significant part of their reserves into the developed world.
For the BRICS, the creation of a development bank may support the institutional base of BRICS integration. For other developing nations, the bank could address one of the greatest reserves for growth in the world economy — the development of infrastructure, Lisovolik said.
Since the word BRICS was coined 10 years ago to group five leading emerging economies, its member countries have consistently grown faster than developed nations. By the end of 2011, the BRICS account for 42 percent of the world's population, 20 percent of GDP, and 15 percent of international trade.
Despite that, experts at the meeting said BRICS countries did not have a corresponding role in global governance, particularly in a world financial system dominated by the United States and Europe.
BRICS and other developing countries have continuously called for reform of the World Bank and the International Monetary Fund (IMF). The Delhi Declaration said, "We welcome candidatures from the developing world for the position of the President of the World Bank. We reiterate that the Heads of the IMF and the World Bank be selected through an open and merit-based process."
"Furthermore, the new World Bank leadership must commit to transform the Bank into a multilateral institution that truly reflects the vision of all its members, including the governance structure that reflects current economic and political reality."
The developing world's reform efforts have not made much progress yet. Most noticeably, in 2011, developing countries failed to agree to a powerful alternative to Christine Lagarde, who eventually won the nomination to IMF chief.
Oliver Stuenkel, a professor of international relations from Brazil, said at the forum that the United States and Europe remained reluctant to fully include emerging powers into existing financial structures, and a BRICS development bank could indeed become an effective tool to serve emerging powers' needs, while bypassing restrictions and political pressures from US- and Europe-funded banks.
Forum delegates generally agreed the BRICS banks should be a supplement to the World Bank and other multilateral or bilateral financial institutions, and its creation was not intended to subvert the current Bretton Woods system. However, they said the BRICS bank could put pressures on the current system and compete with the World Bank.
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