Goldman Sachs coined the acronym ‘BRICS’ for Brazil, Russia, India, China and South Africa. They ‘predicted’ some years ago that these countries would be the growth engine. They just re-stated what everybody else knew already.
Now there is a talk of ‘BRICS Bank’. No, not the brick and mortar bank. But a bank exclusively for the BRICS countries in the lines of IMF and World Bank. Fed up with IMF and World Bank, there was an Asian Development Bank as well that came into being. But there is, as usual, the Western intervention and is pretty much useless for Asia.
India and China are spearheading the BRICS bank to help finance the BRICSs’ development needs. Noble thoughts, no doubt. With IMF and World Bank being the hand maiden of western vested interests (‘Refer Confessions of an economic hit man’ – John Perkins ) a non-Western world bank is welcome. But what are the pitfalls ?
Let us say, China wants money to help finance a port expansion in Sri Lanka, would India approve that from the BRICS bank ? Likewise, if India wants to builds a bridge in Arunachal Pradesh, would China approve of the loan ? What happens if ONGC ( the Oil and Natural Gas Company of India ) wants to explore oil in South China sea and China wants to explore the Indian ocean area for some resources ? Would they mutually approve the loans ?
China has often blocked loans to India from ADB for the latters’ projects in Aurnachal Pradesh. Now ADB has stopped loaning to India for Arunachal projects. That is the reality.
Let us look at the funding for this bank. BRICS needs $100 Bn. Divided by 5 and you get $20 Bn from each country. With a budget deficit that India has, how could it fund the bank ? 20 Bn is not huge for a trillion dollar economy. But when you need to repay your loans from Japan and other countries, how do you fund an external bank ? Is that the right way to go ?
So, what can a BRICS bank achieve other than make a face at IMF and World Bank ?
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