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BRICS scale back plans for development bank

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(GlobalPost/GlobalPost)

Leaders from the BRICS group of emerging powers were to announce a scaled-back plan on Wednesday to establish a development bank seen as a potential rival to Western-backed institutions.

They will also consider a direct appeal from Syria's embattled President Bashar al-Assad to mediate in the conflict there.

Leaders from Brazil, Russia, India, China and hosts South Africa were expected to put flesh on the bones of efforts to gain more global clout by establishing a rival to the World Bank.

"It's done," South African Finance Minister Pravin Gordhan told AFP after talks with his counterparts Tuesday.

"We made very good progress, the leaders will announce the details," he added shortly before a summit in the South African port city of Durban.

Together the BRICS economies account for 25 percent of global output and 40 percent 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 fast enough reflect their new-found clout.

"We are witnessing the dawn of a new era in the global arena which is characterised by the rise of emerging markets and developing economies," President Jacob Zuma said at a dinner to open the summit.

He described BRICS as "a new paradigm for establishing a more equitable global governance model".

BRICS negotiators had been under pressure to come up with an agreement to send a strong message to the United States and Europe that the current balance of power is untenable.

But as leaders opened the summit, it appeared that a wide ranging agreement would have to wait -- and that a push for $50 billion in starting capital for the bank might be scaled back.

The details were "being hammered out", South Africa's Trade Minister Rob Davies admitted.

"There'll obviously be a process to put in place the remainder of the details," he told AFP.

The bank is not likely to be up and running for years.

An Indian diplomat involved in the talks said many of the details were likely to be left for another day, but leaders would announce an outline deal.

The key sticking points were defining the scope of the bank, how projects would be distributed and where it would be based.

Many emerging nations both inside and outside BRICS hope the bank will be a way to tap China's vast financial resources.

The World Bank said Tuesday it was ready to support the new development bank.

But "establishing a development bank is a significant undertaking", it warned.

"We await the details related to the new bank's financing, governance, and location and stand ready to assist this newest player in global development any way we can," it said.

Brazil's central bank chief Alexandre Tombini told AFP progress was also being made on a deal to establish currency swap lines to encourage trade likely to be worth around $100 billion.

Members could also draw on the funds during a liquidity crunch or other crises, he added.

The currency swaps would also open the door for BRICS countries to tap some of China's massive $3.31 trillion foreign reserves, the world's largest.

Securing both deals is meant to counter those critics who have dismissed the BRICS summit as little more than a talking shop.

Chinese President Xi Jinping underscored the growing importance his country attached to the group by making Durban his first summit destination in his new role as head of state.

BRICS leaders will also consider an appeal from Syria's Assad.

Assad's senior advisor Bouthaina Shaaban said the president had appealed to the summit's leaders to intervene "to stop the violence in his country and encourage the opening of a dialogue, which he wishes to start".

Shaaban was speaking after she delivered Assad's message to South Africa's Zuma.

Speaking ahead of the opening of the summit, Russian President Vladimir Putin said the group would try to act in concert.

"We will coordinate our activities to find a peaceful solution for the Syrian crisis," he said.

Russia and China have repeatedly blocked moves at the UN Security Council to impose sanctions against the Assad regime.

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http://www.globalpost.com/dispatch/news/afp/130326/brics-scale-back-plans-development-bank-0