Ministers urged to back BRICS bank
Asian policymakers should throw their weight behind a BRICS development bank to help mobilize much-needed capital for the developing world, experts have urged
A BRICS development bank that would help stimulate much-needed investment across Asia and other regions of the South is an idea whose time has come, according to the head of the G24 group of nations.
Amar Bhattacharya, director of the G24, said ministers should use this weeks ADB meetings to throw their weight behind the idea.
The leaders of the five BRICS nations Brazil, Russia, India, China and South Africa agreed at a recent summit to commission a major investigation into establishing a development bank.
Bhattacharya said the bank would help stimulate investment in infrastructure across Asia and the rest of the developing and emerging world.
His comments came as ADB president Haruhiko Kuroda yesterday welcomed the idea of another development bank. We welcome another development bank, he told reporters in Manila. The needs are so huge, he added, citing the fact that Asia alone will require $8 trillion in financing for domestic and cross-border infrastructure over the next 20 years, in addition to the vast demands for health and education spending.
Bhattacharya said financing by official lenders had been quite paltry, amounting to $75-100 billion a year against his estimate of an annual need of as much as $1trillion although he praised the ADB for ratchetting up financing recently.
In the coming couple of decades developing countries will need to make a large step increase in infrastructure spending to meet their development aspirations and to deal with climate change, he told Emerging Markets.
I hope that issue will get a lot of attention [at the meetings] as this is not just good for the developing world but good for the global economy at this juncture. We see this as an idea whose time has very much come.
The G24 coordinates the position of developing countries on monetary and development issues and includes three BRICS members, India, Brazil and South Africa, in its grouping.
The BRICS New Delhi summit tasked their finance ministers to examine the feasibility and viability of such an initiative and set up a joint working group for further study and to report back by the next summit in 2013.
The announcement triggered speculation that the BRICS had pushed the idea because of a growing frustration at the slow pace of reform of the multilateral Bretton Woods institutions, the World Bank and IMF.
Last month a majority of wealthy countries backed Jim Yong Kim to take over as World Bank president after Robert Zoellick leaves, continuing a trend that the Bank is run by a US citizen.
If there is no progress in reform of the Bretton Woods institutions governance you could imagine the BRICS bank become a reality, Nicolas Véron, a senior fellow at Bruegel, a Brussels-based thinktank, told Emerging Markets.
But Kuroda said World Bank would remain the most important among the development banks and that the existing architecture could cope with the creation of new development banks.
Battacharya said he saw a BRICS bank as a complementary and supplementary financing mechanism. We do not see it as a threat to the existing institutions, he said.
The motivation behind it is to take the growing pool of savings that is available in the south and use it for development purposes particularly for infrastructure.