The BRICS summit in South Africa has ended with the expected announcement of a BRICS development bank – but few details about what it will be like.
Nevertheless, BRICS leaders were upbeat today, with Russian President Vladimir Putin saying the BRICS agenda was expanding.
"The Russian side supports the idea to more effectively use the economic potential of BRICS to grow trade turnover, investments and technological cooperation. The creation of the BRICS development bank could help. In this regard I'd like to say that Russia supports the development of this financial institution but we believe it should work on market principles only," he said.
VoR's Tim Ecott speaks to Ian Ivory, partner at Goltsblat BLP law firm in Moscow (Please, find the audio below).
Both South African President Jacob Zuma and new Chinese President Xi Jinping said the countries’ high growth rates and tiny share of overall global trade showed the potential the BRICS alliance has.
"We meet during a critical time, where stronger South-South trade is more compelling, with most dynamic, emerging economies leading a structural shift in the global economy," said President Zuma.
"In 2011, intra-BRICS trade exceeded 320 billion US dollars, six time that of ten years ago. But that figure only accounts for 0.2 percent of global trade. It shows that the real potential of BRICS cooperation is yet to be realised," said President Xi.
But the lack of demonstrable progress on the creation of a BRICS bank – a project first mooted last year – was frustrating for some.
Erin Conway-Smith is southern Africa correspondent for Globalpost.
“We don’t really know much more than we did coming into this summit,” she said.
“We don’t know where the bank will be based, the initial seed capital is still unclear. This event had a lot of hype but it’s pretty short on specifics."
BRICS business council
However, one initiative that did get off the ground was a BRICS business council, which was suggested by Russia and formally launched by President Zuma during a breakfast meeting today.
The business council aims to promote cooperation in business, technology, the green economy and industrialisation. It will meet twice a year.
Here’s Kirill Dmitriev, head of the Russian Direct Investment Fund, speaking in Durban today.
“Amid really low growth rates of some other states, Russia and other BRICS countries are demonstrating unique results. It is very important to have joint investments and other joint projects to ensure this growth continues,” he said.
Eye-catching contingency fund
Charles Robertson is global chief economist at Renaissance Capital, which focuses on developing world investment.
He says the BRICS development bank, aimed at financing big infrastructure projects, is not the most eye-catching project to emerge from the BRICS summit.
“Surely most projects should be able to access funding from the World Bank or the European Investment Bank or the African Development Bank or wherever. The more interesting one is the contingency fund, this idea of creating a $100 billion foreign exchange reserve contingency fund to help out presumably at first the BRICS countries if they needed this support, but potentially other countries as well,” he said.
“It would be very interesting to see if Egypt for example today would be able to not just rely on the IMF, who will say you need to cut subsidies, you need to adjust your macro policies in the way that we see fit, but instead could go to a BRICS FX contingency reserve fund – it’s going to have to come up with a sexier name – and perhaps get funds from them instead.”
Robertson says a BRICS rescue fund would have different goals from western-backed institutions such as the International Monetary Fund.
“Potentially a BRICS fund might have goals like securing energy supplies, so the money could be lent to Egypt for example in return for BRICS countries getting access to energy rights. That’s the sort of linkage that the IMF and the World Bank don’t do but perhaps a BRICS rescue fund could do.”
For Robertson, the idea of a BRICS rescue fund means the Durban summit can be considered a success.
More power in global finance
But he warned that the real test for the fledgling BRICS alliance – which brings together countries with very different backgrounds – would come when its new institutions face their first challenges.
“When a loan goes badly, who’s going to pay for that and how will these countries manage that set of events? That is actually when life starts to get complicated,” he said.
“At the moment it is relatively easy for the BRICS to get along and to suggest that they should be given more power in the global financial infrastructure.”
Meanwhile, Syrian President Bashar al-Assad today called upon the BRICS countries to help bring about an end to the violence in Syria, where the UN says the death toll has topped 70,000.
According to Syria’s official SANA news agency, President Assad said in a message addressed to President Zuma that the BRICS group “has become a hope for our oppressed peoples that suffer from blatant foreign interference in their affairs against their interests".
UN agencies and NGOs have also been lobbying China and Russia in Durban to back a UN Security Council resolution to allow cross-border aid deliveries without permission of the Assad government.
By Tom Spender
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