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2014-07-15
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BRICS set to launch development bank

Global Times (2014-07-15 P02)
By Jiang Jie

Leaders of the five major emerging economies, known as BRICS, are expected to inaugurate a development bank and a currency reserve fund at their annual meeting, marking the first concrete step to expand the group's influence.

The group, comprising Brazil, Russia, India, China and South Africa, will kick off the two-day sixth BRICS Summit in the Brazilian resort city of Fortaleza Tuesday.

After two years of negotiations, the establishment of a development bank, which is seen as an alternative to the Western-dominated World Bank, will top this year's agenda.

According to Reuters, the BRICS nations will pool an initial $50 billion into the bank, with each country contributing an equal amount. BRICS leaders will decide on Tuesday which country will hold the first five-year presidency of the bank and whether it will be headquartered in Shanghai or New Delhi.

A previous scheme had China contribute the lion's share of funding, but this was reportedly rejected by the other parties.

Zhang Jiazhe, a research fellow with the Shanghai Academy of Social Sciences, told the Global Times that developed countries do not want to see China play a dominant role or lead a new organization to counter existing financial institutions.

"Except China, the other players in BRICS have almost equal economic weight. Some of them, especially India, keep a wary eye on China," Zhang said, elaborating on the rationale for equal monetary contributions.

According to Reuters, the bank will be called the New Development Bank (NDB), not the BRICS bank, which leaves the door open for other emerging nations such as Turkey, Mexico, Indonesia and Nigeria to join as partners at a later date.

Many of the bank's rules of operations, such as future investment in private projects, will be decided after its formal creation. The NDB is expected to make its first loan in 2016, said the Reuters report.

Jiang Shixue, an expert in Latin American studies at the Chinese Academy of Social Sciences, told the Global Times that the NDB would mark a new form of South-South cooperation.

"Against the backdrop of scant progress in reforming the international financial system, the bank will definitely elevate the status of emerging economies in the international arena," he said.

BRICS nations will also set up a $100 billion contingency reserve pool, which could start operating as early as 2015 to help any of its members if they are hit by a sudden exodus of foreign capital.

The BRICS group is at the forefront of a growing chorus of emerging and developed nations that complain the International Monetary Fund and World Bank impose belt-tightening policies on them in exchange for loans while giving them little say in deciding the terms.

Zhang said the BRICS' coordinated stance at G20 meetings is an indication that emerging economies are expanding their influence from economic and financial affairs to the political and security arenas.

Separately, Chinese President Xi Jinping, while en route to Brazil, met Greek leaders on Sunday during a stopover on the southeastern Greek island of Rhodes.

Xi told Greek Prime Minister Antonis Samaras that China supports Chinese companies in their management of the Piraeus port project and participation in a technical overhaul of Greek railways.

"Greece welcomes Chinese companies to expand investment in Greek ports, railways, and airports, making the country a gateway to the EU market," Samaras said.

Agencies contributed to this story

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