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Ties with other emerging economies crucial(2)

2014-07-14 10:16 China Daily Web Editor: Wang Fan

The CRA and NDB cannot replace the existing institutional infrastructure, and they should not aim to. BRICS' new financial institutions can maximize their impact and most powerfully create change by engaging actively with the established global economic infrastructure. The BRICS institutions are already different in important ways, with the NDB, for example, having a democratic structure that differentiates it from the weighted voting in the Bretton Woods institutions. Just as Chinese development spending in Africa challenged the traditional model of extensive conditionality, so can the NDB challenge older models of assistance, while still working with established institutions.

For the BRICS institutions to play this role of norms setter, they will need to engage where the World Bank and IMF do - in regions such as Africa, Latin America and Southeast Asia. But debate still continues as to whether the NDB should focus its activities among BRICS members or out in the broader developing world. There certainly are a lot of opportunities in BRICS, and a BRICS bank operating in the five countries would still be an achievement. But it would undermine the group's influence in the rest of the developing world, and limit the group's attempts to act as an alternative center of influence in international development funding.

The Fortaleza summit will offer insights into BRICS' relations with both the developed and developing worlds, but it is the group's relationship with other major emerging countries that is most important. BRICS cannot legitimately claim to speak for emerging economies in a world in which the likes of Indonesia, Turkey and Nigeria remain on the outside.

The BRICS group is too important to ignore, but currently too small to decisively speak for tomorrow's great powers. The structure of the development bank should provide insights into the long-term future of the group's membership. Rhetoric around the bank has shifted from talk of a "BRICS Development Bank" to a "New Development Bank", and the funding model chosen - of a flat $10 billion contribution by each member country - seems intended to allow other countries to buy into the bank without complex quota renegotiations.

How easy the process of joining the NDB, and which countries would be eligible to join, should act as a bellwether for whether the BRICS members intend to stand alone in their efforts, or seek a new world order that is inclusive and cooperative.

About the authors: Elizabeth Sidiropoulos is chief executive, South African Institute of International Affairs, South Africa, and Chris Wood is a researcher with economic diplomacy program, South African Institute of International Affairs.

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