First they embarked on a brick by brick development for themselves. Now they have jointly agreed to fund $4.5 trillion in infrastructure projects for themselves and for the developing world. The BRICS are at it.
Having established themselves as the new face of global economy, Brazil, Russia, India, China and South Africa (BRICS) recently decided to set up their own joint development bank. Preparations for the bank are planned to be completed by 2014 BRICS Summit.
Exact details of the vision, mission, function, and operations of the BRICS Development Bank have not been finalised yet. But development industry watchers say the institution is expected to a hybrid of the children of Bretton Woods, namely the World Bank and the International Monetary Fund.
The move was initially seen as a challenge to mainstream global development lenders such as the World Bank and the Asian Development Bank. However, both these global lenders have in fact welcomed the BRICS proposal.
Leaders from both the World Bank and Asian Development Bank have dismissed the views that BRICS Development Bank will be threat to them. Instead, they have termed BRICS bank as a complimenting factor in the global development lending business.
Still it is not going to be an easy ride for BRICS Development Bank. If formed, the bank will have significant impact on global political economy.
Mulling on this note, Isobel Coleman of Council of Foreign Relations makes an important point. Coleman said that unlike the World Bank, the BRICS Development Bank cannot be expected to promote values like democracy, competitiveness, better governance, transparency, human rights, freedom of speech and related affairs.
This is largely because the BRICS can hardly claim to have a unified political view - Brazil has a democracy, Russia is marked by entrenched oligarchy, while China has a unique state-led capitalist model run by single party.
Then there is a voting problem. If the BRICS bank ends being mainly financed by China - which is what Beijing wants at the moment - then China will have a global institution at its hands just as the US and EU have their grips on the IMF and World Bank.
If these are not enough barriers to materialisation of BRICS bank, here is another major one: The IMF is still tight-lipped about the whole deal. While the ADB and World Bank welcomed the news, all that the IMF could say "we
e following this initiative with great interest".
Recall that the IMF has had a tendency to dominate the market of global lenders of the last resort. This tendency surfaced when the agency joined the US government to shoot down the idea of Asian Monetary Fund in 1997.
In 1997, Japan - along with China - offered $100 billion to help create an Asian Monetary fund. But, according to Nobel laureate Joseph Stiglitz, the US Treasury did everything in its position to squelch the idea and the IMF joined in.
"The reason for IMFs position was clear: While the IMF was a strong advocate of competition in markets, it did not want competition in its own domain and the Asian Monetary Fund would have provided that," Stiglitz wrote in 2002.
Keeping these ideological and historical threads in mind, BRICS are up for a daunting challenge. Winning this battle is crucial for them to prove that they are the new economic masters of the world.