New Delhi, July 15: Shanghai will host the headquarters of a new bank announced by Brazil, Russia, India, China and South Africa on Tuesday as an alternative to West-dominated global lending institutions, cementing Beijing’s place as first among equals within the grouping that shares common global goals but is also riven by internal differences.
The blueprint of the New Development Bank, as the institution will be called, was unveiled in Brazil’s Fortaleza where Prime Minister Narendra Modi and the Presidents of the other BRICS nations are meeting for their sixth annual summit. The grouping also announced a $100-billion contingency fund that every member of the BRICS can draw from if its economy faces a liquidity crunch.
The BRICS nations hope the New Development Bank will serve as an alternative to the International Monetary Fund and the World Bank, institutions born out of the post World War II Bretton Woods system that remains dominated by western Europe and the US.
It will offer easier loans to developing nations than the IMF and the World Bank, and without the political strings that these institutions are notorious for attaching with every major loan.
But the announcement of the bank’s blueprint today was preceded by two years of hectic negotiations over its corpus, who would contribute how much, and where the institution would be headquartered.
China proposed a corpus of $100 billion for the bank and suggested it could fund the biggest chunk of this amount, while the other BRICS nations could support the institutions with smaller amounts.
Russia and India, alarmed by the proposal and its potential to unequivocally make the bank China-dominated, insisted that the institution could instead start with a corpus of $50 billion. This, they suggested, could be built by equal contributions of $10 billion from each of the five BRICS nations -- none of whom, apart from China, could have promised the $20 billion they would need to put in for equal stakes in a $100-billion corpus.
After months of wrangling, China had agreed to the $50-billion corpus and to equal contributions from the five members.
But the finer administrative structure of the bank threatened to derail its announcement during the current BRICS summit, and negotiators only finalised a plan agreeable to all members early Tuesday morning, officials aware of the talks said.
India had pitched Mumbai for the bank’s headquarters, and South Africa was lobbying for Johannesburg, but ultimately, its superior infrastructure made Shanghai – China’s recommendation -- a city the others couldn’t compete with.
China’s concession on the funding structure of the bank corpus also made it incumbent on the other nations to demonstrate indulgence towards a nation that, after all, boasts an economy larger than the other four members combined.
India was selected as the nation that will get to pick the first President of the bank -- effectively the titular head of the bank. Russia will get to pick the first chairman of the board of governors, and Brazil the first chairman of the board of directors. South Africa will host a regional centre of the bank.
Modi earlier on Tuesday proposed that Brazil, Russia, India, China and South Africa set up a joint university and encourage their schools to teach one another’s languages, to foster better cultural understanding these nations.
India, officials said, would be willing to host the BRICS university. India already hosts a South Asian University and the new Nalanda University -- both the combined efforts of multiple nations.
It is, however, unclear which languages the schools will teach. While Russia and Brazil are relatively homogenous linguistically, and most Chinese speak either Mandarin or Cantonese, India and South Africa boast multiple official languages.