The BRICS grouping of emerging powers has agreed on the establishment of a development bank to fund infrastructure and development projects in member states and developing nations and rival Western-backed institutions.
“Following the report from our Finance Ministers, we are satisfied that the establishment of a New Development Bank is feasible and viable.
“We have agreed to establish the New Development Bank.
The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure”, said Mr Jacob Zuma, president of South Africa, during the closing ceremony of the 5th BRICS Summit in Durban, South Africa.
The 5th BRICS Summit is on the theme BRICS and AFRICA: Partnership for Development, Integration and Industrialisation take place from 26 – 27 March 2013.
Many of the details, such as where it will be located, are yet to be decided, but if it gets off the ground it could send a loud message to the US and Europe that the global power balance is shifting. Each country is expected to invest around 10 billion euros.
“We are grateful to our Finance Ministers and Central Bank Governors for the work undertaken on the New Development Bank and direct them to negotiate and conclude the agreements which will establish the bank”, Mr Zuma says.
As of 2013, the five BRICS countries represent almost 3 billion people, with a combined nominal GDP of US$14.9 trillion and an estimated US$4 trillion in combined foreign reserves.
Oxfam’s BRICS lead Steve Price-Thomas says BRICS leaders are right to take action to reform the international financial architecture.
“But the new BRICS Bank must put reducing poverty and inequality at the heart of its mission: almost half of the world’s poor people live in the BRICS, and all the BRICS apart from Brazil have increasing rates of inequality”.
“BRICS leaders are blazing a trail in reforming the global financial architecture”,Price-Thomas added.
Mr Price-Thomas insists that if the BRICS Bank fights poverty and inequality it could be a big success.
“But if it focuses only on big-ticket schemes that fail to directly benefit poor people it could do more harm than good”.