Despite a year of negotiations, the BRICS bloc of countries is still bickering over key details of a planned development bank to compete with the World Bank.
At their summit in the South African resort city of Durban, the leaders of the five BRICS members – Brazil, Russia, India, China and South Africa – gave final approval to the new development bank. They agreed that it was "feasible and viable" and should have "substantial and sufficient" capital.
But they were unable to settle the location or structure of the new bank, and they refused to say whether a long-mooted, $50-billion (U.S.) seed-capital plan would be approved.
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While falling short of a detailed accord on the bank, they did reach agreement on a $100-billion currency reserve fund to protect themselves from currency crises.
"The establishment of a self-managed contingent reserve arrangement would have a positive precautionary effect, help BRICS countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability," the leaders said in their final communiqué.
"It would also contribute to strengthening the global financial safety net and complement existing international arrangements as an additional line of defence. We are of the view that the establishment of the CRA [reserve fund] with an initial size of $100-billion is feasible and desirable, subject to internal legal frameworks and appropriate safeguards."
China could provide the bulk of the financing for the foreign-currency pool, Russian Finance Minister Anton Siluanov told Bloomberg News. Negotiators are considering proposals for China to contribute $41-billion; Brazil, Russia and India to provide $18-billion each; and South Africa $5-billion, he said.
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The development bank, meanwhile, has been under discussion by the BRICS countries for the past year, after they proposed it at their summit in New Delhi last year. But there are tensions about key questions such as the location: China, India and South Africa all want to host its headquarters.
India is understood to be worried that China will exercise too much control over the bank, and it wants all BRICS members to contribute an equal $10-billion in seed capital. But South Africa, by far the smallest of the BRICS countries, might be unable to afford the full $10-billion, and India is concerned that China might end up providing a greater share of the funds and winning control of the bank.
The new bank, seen as a competitor to the World Bank, would be focused on infrastructure projects, especially in places such as Africa where they are badly needed. It could allow African countries to avoid the loan conditions that are often imposed by the Western-dominated World Bank.
One of Africa's richest entrepreneurs, South African mining tycoon Patrice Motsepe, said the new bank is "extremely welcome" in Africa. Mr. Motsepe, the head of a new BRICS business council, said the bank would be "a very exciting opportunity."
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Analysts say the new bank will also have a political purpose: to put pressure on the West to allow reforms in the World Bank and the International Monetary Fund, loosening the Western grip on both institutions and allowing countries like China to have greater influence.
Traditionally the two institutions are headed by an American or European. Their new BRICS-led competitor could be useful "leverage" to bring about reforms in the multilateral institutions, according to Catherine Grant-Makokera, an analyst at the South African Institute of International Affairs.
In their final communiqué, the BRICS leaders said they were "concerned with the slow pace of reform" at the IMF. "We call for the reform of International Financial Institutions to make them more representative and to reflect the growing weight of BRICS and other developing countries," they said.