Round The World
New Delhi, 30
March 2013
BRICS Summit
MUTUAL INTERESTS
IMPERATIVE
By Monish Tourangbam
Associate Fellow,
Observer Research Foundation, New
Delhi
How to align national interests with
multilateral goals and objectives, was the big question before the leaders of
the BRICS (Brazil, Russia, India, China and South Africa) member countries,
convened in the South African port city of Durban for the 5th BRICS
Summit. Even as leaders discussed and deliberated over a broad spectrum of
issues, world attention
was focused on news regarding the BRICS development bank, an idea that
originated at the Delhi
summit last year, and managed to reach some form of concretisation, though
differences still remain in matters of implementation, specifically on the contribution
of the seed money for operationalisation.
The new development bank, that has been declared feasible and viable,
is geared towards meeting the challenges that developing countries face in infrastructure
development due to insufficient long-term financing and foreign direct
investment, especially investment in capital stock. The summit declaration
stressed that “the initial contribution to the Bank should be substantial and
sufficient for the Bank to be effective in financing infrastructure.”
Though, clearance
of the concept and feasibility of the project shows a positive momentum, these
do not translate to clear-cut steps towards effective implementation. Issues of
funding and the location of the bank still need more negotiations that would be
carried over to future meetings. The BRICS mechanism garners notice around the
world because of its economic heft, but as a matter of fact, it also brings
together countries with different levels of economic development and disparate
political systems.
The group of five, with
increasing economic influence in their respective regions and around the world,
definitely want more say on the high table of international financial
institutions such as the World Bank and the IMF, governed by western countries.
Though the World Bank has welcomed the decision to establish the BRICS
development bank and looks forward to working with it in future, many officials
have opined that reluctance to reform, among global financial institutions,
have only led to such new initiatives by the BRICS member countries to reflect
the concerns and needs of the emerging economies and other developing
countries.
Having said that,
BRICS countries need to create a cohesive working environment and greater
habits of cooperation, which is easier said than done. Incidentally, the two
primary elements of the group, India
and China,
share a deep political animosity, and an economic kinship that is highly skewed
in favour of the latter. Apart from the intractable border dispute, these two
countries have clashing interests in the maritime zone as well, with Chinese
interests in the Indian Ocean region seen as a strategic ploy to eat into India’s sphere of influence, and Beijing objecting India’s
economic engagements with the Southeast Asian nations in the South
China Sea.
Although, China is
rightly seen as the big brother in terms of its economic size and influence,
the two countries are increasingly competing over resources, and especially so,
in the African continent, the focus area of this year’s BRICS summit. Beijing sees with concern New Delhi’s
increasing engagement with the United
States, and Obama’s new policy of
rebalancing or refocusing towards the Asia-Pacific. Likewise, New
Delhi is cautious of the increasing closeness between Beijing and Moscow.
Just before the BRICS summit, President Xi Jinping made his first official
visit to Russia,
clearly reflective of the emerging Russo-Chinese combine.
And, concerns
regarding an economically sound yet aggressive China are seeping into the
negotiations regarding the initial contributions for starting the bank. As
BRICS formulate and work on the banking structure, geared towards closing the
gap of global financial institutions, apprehensions are being raised that
China, being the most formidable member of the group, might use its economic
prowess, to aggressively promote its own interests rather than areas of mutual
interest.
Notwithstanding the
altruistic nature of the newly proposed financial mechanism, countries engaging
in rational and pragmatic ventures, would not want the Chinese government
running rough shod over the entire framework, and India needs to be extra
cautious and should inject the preservation of multi-national interests over
national interests in this case.
According to
sources, BRICS
countries aimed to inject an initial $50 billion into the new infrastructure
bank, but there was disagreement over whether each should contribute $10
billion or if contributions should vary by the size of their economies. China was
proposing up to $ 100 billion from each country and offered to pay on behalf of
those unable to pay beyond a certain amount. Reportedly, Brazil did not take to the proposal at all, while South Africa tried to remain neutral, and India and Russia pressed for more
deliberations. It was finally agreed that the concept would be reviewed on the
sidelines of the St. Petersburg G20 Summit in September.
Moreover, divergent views existed among
the member countries regarding the project’s pace. In this case, India and Russia
concurred that the project needed wider deliberations, while China, was seen as keen on pushing its ideas on
the location, capitalisation and shareholding pattern, with support from South Africa, and no signs of objection from Brazil.
Besides, the go ahead given to
further negotiations over technicalities for establishing the new development
bank, the summit in Durban, agreed on the construction of a financial safety net through the creation of a
Contingent Reserve Arrangement (CRA) (with an initial size of US$ 100 Billion)
amongst BRICS countries, that is expected to have a positive precautionary
effect, helping the member countries forestall short-term liquidity pressures,
provide mutual support and further strengthen financial stability.
Additionally, it would contribute to strengthening the global financial safety
net and complement existing international arrangements as an additional line of
defence. According to sources, there was an agreement that China, will contribute $41 billion while it will
be 18 per cent for others except South Africa which will contribute
$5 billion. The summit also decided to establish a BRICS business council and a
BRICS think tank.
At the outset, South
African President Jacob Zuma stated: “The BRICS forum offers member States the
opportunity of an amplified voice for political, financial, economic and social
interests around a common growth and development agenda based on our shared
values.” But, undeniably BRICS consists of countries with different economic
potentials and divergent political systems, and as such, there is a greater
need to clearly spell out the areas of shared interests, wherein competition
should give way to cooperation. China,
being the largest economy in the group, with huge foreign exchange reserves,
could contribute more towards financial initiatives, but others in the group
should ensure that, such economic largesse from Beijing does not become an undesirable
political whip in the hands of the Chinese. ----INFA
(Copyright, India News and Feature Alliance)
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