Brics to put the money where their mouths are

Leaders from the Brics nations are expected to launch a joint development bank to rival western-dominated institutions, at the summit beginning tomorrow.

Brazil, Russia, India, China and host South Africa will meet in Durban to set up an infrastructure-focused lender that would challenge seven decades of dominance by the World Bank.

Xi Jinping, who has underscored the growing importance of the group by making Durban his first summit as China's president, expressed hopes for "positive headway" in establishing the bank.

If the leaders succeed it would be the first time since the inaugural Brics summit four years ago that the group has matched rhetorical demands for a more equitable global order with concrete steps.

Together Brics accounts for 25% of global GDP and 40% of the world's population.

But members say institutions such as the World Bank, the International Monetary Fund and the United Nations Security Council are not changing quickly enough to reflect their new-found clout.

The World Bank has traditionally been led by an American and the IMF by a European, thanks to an unwritten transatlantic carve-up made possible by skewed voting weights. There is no Latin American or African permanent member of the UN Security Council, and India - despite its vast population and nuclear capabilities - remains a non-veto-wielding member.

Details of how the Brics bank would work have yet to be finalised, but diplomats say it could start with $10-billion seed money from each country. That would be dramatically scaled back from initial proposals for a $50-billion buy-in.

The exact role of the bank is also up for debate.

Indian officials have pressed for a Brics-led south-south development bank, recycling budget surpluses into investment in developing countries.

Many developing nations inside and outside Brics will hope that it becomes a way of tapping China's vast financial resources.

China would no doubt like the bank to invest in trade-multiplying projects.

"The bank will help Brics sustain financial risks and provide support for the development of African countries", state media quoted Ma Zhaoxu, a Chinese foreign ministry official, as saying.

Brics expert in Brazil, Oliver Stuenkel, sees the development bank as partially a reaction to the countries' dimmed economic outlooks: "Now Brazil is growing at an anaemic rate, South Africa is not doing so well and Indian growth is stalling, so the Brics need to prove they can survive and prosper in challenging economic times."