BRICS stumble in plan for bank to challenge West

Leaders from the BRICS group of emerging powers on Wednesday failed to launch a much-anticipated new development bank to rival Western-dominated institutions like the World Bank, AFP reports. After holding talks in the port city of Durban, leaders from Brazil, Russia, India, China and hosts South Africa agreed in principle to create a joint infrastructure lender. But they said further talks were necessary to finalise the plan. "We are satisfied that the establishment of a new development bank is feasible," said host President Jacob Zuma, in remarks that hint at little progress beyond an agreement reached in New Delhi a year ago. "We have decided to enter formal negotiations to establish a BRICS-led New Development Bank," he added. Officially leaders had been expected to consider the bank's establishment, but South Africa and others had hoped to formally launch a $50 billion infrastructure fund at the two-day summit. The mooted bank is seen as a way of gaining influence on the world stage, countering Europe's dragging economic crisis and addressing the $4.5 trillion in infrastructure spending the BRICS are estimated to need over the next five years. Instead of a $50 billion fund, BRICS leaders agreed only that the initial capital contribution would be "substantial and sufficient for the bank to be effective." Key sticking points included how projects would be distributed and where the bank would be based, diplomats said. Russian envoy to Africa Mikhail Margelov told AFP his country had pushed for a more incremental approach to establishing the bank. "We believe in a step by step way of doing business," he said. "We better talk about projects and then we talk about needed amounts of money." The outcome of the summit will fuel suspicions that a grouping as diverse as BRICS will struggle to take concrete action to bolster its demands for a say in world affairs that reflects their growing clout. "It's far from clear how or where there will be agreement on this institution at all," said Peter Attard Montalto of Nomura bank. "It may well be five years or so before a development bank is really getting off the ground." Despite the BRICS' failure to sign off on a deal, leaders insisted the grouping would be a force in world politics. Chinese President Xi Jinping, who underscored the growing importance his country attached to the group by making Durban his first summit destination in his new role as head of state, admitted the BRICS countries had a long road ahead. "The potential of BRICS development is infinite," he said. "The real potential of BRICS cooperation is yet to be realised." Together the BRICS economies account for 25 percent of global output and 40 percent of the world's population. Leaders hailed a slew of accords reached at the summit, including progress toward establishing a $100-billion virtual reserve fund to fight potential liquidity crises. The arrangement would function much like the International Monetary Fund's credit lines, which act as deterrents against speculation as they are funds which can be drawn upon in crises. The group also discussed a high-capacity 28,400 kilometre (17,600 mile) fibre-optic cable between the BRICS countries to "remove dependency on developed countries as interconnection points." "We have firmly established BRICS as a credible and constructive grouping in our quest to forge a new paradigm of global relations and cooperation," said Zuma. The group also flexed its muscles on foreign policy. It warned against mooted military action against Iran and called on Syria's leaders to admit humanitarian workers. "We are concerned about threats of military action as well as unilateral sanctions," the leaders said amid US and Israeli warnings that they will not tolerate a nuclear-armed Iran. And in an apparent about-face for Russia and China, the BRICS called for humanitarian workers to be allowed to have unimpeded access to Syria. Syria has so far refused to allow UN and aid groups into opposition areas, a stance Russia in particular has backed as part of its support for President Bashar al-Assad. The move was welcomed by rights groups, who called on the BRICS to press Syria to make good on the demand. "The test of the BRICS' resolve will be whether or not Assad grants immediate permission to the UN to cross Syria's borders," said a group of petitioners, who included Brazil's former president Henrique Cardoso and Nobel laureate Desmond Tutu. According to Glenn Ho, of consultancy KPMG, some of the less high-profile decisions at the summit could have a real and lasting impact. "There was good intent and I think that the establishment of a BRICS Business Council will help propel things in between summits." The next BRICS summit will be in Brazil in 2014, but its leaders will also meet in Russia on the margins of the G20 in September.