Mark Rakhmangulov, Deputy Director of the Global Governance Research Centre at the International Organizations Research Institute with the Higher School of Economics (HSE) in Moscow, gives his breakdown on the BRICS Development Bank project.
By Yekaterina Kudashkina, At the last summit the BRICS leaders decided to create their own development bank which will be called BRICS Development Bank. And they said that the bank will be used to finance sustainable development projects in BRICS countries and beyond, in other developing countries. Some experts say that this bank can be seen as a substitute of the World Bank which has the same responsibilities of financing development projects in developing countries. But I think that it can’t be seen as a substitute of the WB and the BRICS leaders say that they want to have their own instrument of development projects’ financing which will rather complement WB activities. Unfortunately the process of the BRICS Development Bank creation was held behind the closed doors and we know a few information on this process. But we heard that the BRICS countries have different views on this bank creation. For example we can expect that the Chinese Government, which international reserves are the biggest among the BRICS countries and biggest among other countries in the world, the Chinese Government with these huge international reserves can use the BRICS Development Bank to finance development projects in other countries through its loans denominated in the Chinese currency and other BRICS countries can be afraid of this Chinese intervention. As they understand they will be more dependent on the Chinese currency and on the Chinese Government. That’s why I think this process is being developed slowly. But I think that we will be no more happy in the next BRICS summit in South Africa in March 2013 when the finance ministers of BRICS countries will report to the leaders and the leaders will decide whether to create this bank or not and decide on the procedures of this bank creation. Does it also need to be a bank of the last resort? No, I don’t think so because the problem of the banks of the last resort is very important and the international community doesn’t have a decision to this problem yet. For example some countries call the IMF as the credit facility of the last resort as it has the biggest finance resources. As I understand the resources of this BRICS Development Bank will be used to finance small and medium projects contributing to sustainable development of communities in each country. It won’t be used as a firewall facility or anti-crisis facility. It will be more like the WB rather than the IMF. But if we look at the conditions which the IMF is putting forward to those who are taking its money, it looks like the approach is – shall we say – a little bit heavy handed, because the IMF puts forward conditions which might be quite unacceptable for some governments. Do you think that another approach could be worked out to be applied in similar situations but by other international organizations? You are absolutely right. But I need to point out that during the crisis the IMF has eased its requirements to give credits to countries. It created several instruments including for example the special credit facility. And depending on a country’s status and a country’s economic situation some requirements from the IMF can be eased. But you are right that some developing countries including BRICS countries want to see other requirements from the IMF and international organizations and this is one of the questions on the agenda of the annual meetings of the IMF and the WB. And I think that some BRICS leaders or leaders of other emerging economies will try to propose other requirements. Source: Voice of Russia
