Tired of the World Bank? Enter BRICS Dev't Bank

You hoped that the IMF and the World Bank would reflect more of the changes in the world economy by giving more input and leadership to major emerging economies. But, as the IMF succession process proved and the current World Bank "search" (stitch-up is the more accurate term) is proving, Western dominance is still on the cards at these institutions. What can I say? Some people resist change. There has been much lip service from them about including new voices, but at the end of the day, nothing's really changed.

So, if you're tired of poor countries lending to rich countries for things other than what institutions like the IMF were designed for, what we may have here is a "league of their very own" solution. You can be sure that LDC observers with any awareness are unhappy about the IMF currently lending a majority of its funds to Europe. As it so happens, something on the agenda of the ongoing BRICS meetings in New Delhi concerns the creation of a development bank by developing nations for developing nations. (Note that it's the BRICS summit not just the BRICs summit after the inclusion of South Africa in 2010 in addition to Brazil, Russia, India and China.) From the Indo-Asian News Service:

A BRICs development bank will be very useful, particularly to Africa, but a major challenge that may come on its way is aligning the interest of the member countries, said experts. "Within the BRICS group, governments are seeking tangible areas of collaboration, clearly one is [a] development bank. The point of BRICS bank is a very noble venture," said Martyn Davies, CEO of the market research firm Frontier Advisory. "It will be very beneficial, particularly to the sub-Saharan Africa," Davies said at a seminar organised by his company in partnership with Johannesburg Stock Exchange.

The matter is on the agenda of the BRICS' -- Brazil, Russia, India, China and South Africa -- two-day summit in Delhi starting Wednesday. Davies said the main challenges in setting up a BRICS bank will be risk management and aligning the respective interest of the member countries. "Cash is not a problem," he added. State Bank of India's (SBI) Africa head Mathai Vaidyan said the idea is good, but it will be very difficult to arrive at a consensus.

It's a continuation of dicussions by various industry representatives about how investment among LDCs can be enhanced:

Tuesday's seminar themed "The Commercial Strategies of Emerging Markets and New Emerging Multinationals in Africa" was attended by senior bankers and business representatives from the BRICS nations.The meeting shared the experiences and challenges faced by companies from BRICS countries, as well as ideas on how the emerging markets can boost investment in Africa. "I think the challenge is the creation of efficient bureaucracy through which capital will be deployed into infrastructure development, particularly in Africa," Davies told Xinhua. The Africa head of a Brazilian company added: "If it matches the interests of all members, let's go for it."

There is a massive literature on Western nations using Bretton Woods institutions for their own objectives rather than development per se. Given that Western nations helped set them up, regional development banks alike the Asian Development Bank, Inter-American Development Bank and African Development Bank are not entirely free from this criticism either. So, why not an LDC development lender? Certainly these countries do not lack for investible funds at this point in time given that most are running sizable external surpluses.

That said, the political obstacles are formidable in terms of siting, coordination and supervision and so forth were they to push through with the BRICS Development Bank [BDB--you heard it here first; Jim O'Neill, eat your heart out!--or probably not]. Who's to say that these countries will by themselves be free from the bickering at the IMF and World Bank which is driving them to set up shop elsewhere?

I must also note that such plans are hardly unique. Witness the still missing in action Banco del Sur. Ah well, I suppose it's a start. May it lead to something concrete and useful--something noticeably lacking in the history of South-South cooperation.

UPDATE: Also see an earlier al-Jazeera article on the purported BRICS Development Bank.