DURBAN, South Africa, March 27 (Itar-Tass) – The initial contribution to the BRICS Development Bank should be substantial and sufficient for the Bank to be effective in financing infrastructure, BRICS leaders said in their Declaration adopted at the 5th summit of the grouping in Durban, South Africa, on Wednesday, March 27.
The document says that “developing countries face challenges of infrastructure development due to insufficient long-term financing and foreign direct investment, especially investment in capital stock.”
The BRICS leaders stressed that “this constrains global aggregate demand.”
“BRICS cooperation towards more productive use of global financial resources can make a positive contribution to addressing this problem. In March 2012 we directed our Finance Ministers to examine the feasibility and viability of setting up a New Development Bank for mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, to supplement the existing efforts of multilateral and regional financial institutions for global growth and development,” the Declaration said.
“Following the report from our Finance Ministers, we are satisfied that the establishment of a New Development Bank is feasible and viable. We have agreed to establish the New Development Bank. The initial contribution to the BRICS Development Bank should be substantial and sufficient for the Bank to be effective in financing infrastructure,” it said.
Russian President Vladimir Putin said work on the creation of the Development Bank would continue at the level of experts. “Russia supports the creation of the BRICS Development Bank. We believe that work will continue at the level of experts to work out operating rules for this financial institution,” he said.
Russian Deputy Foreign Minister Sergei Ryabkov, who is the Russian Sherpa in BRICS, said Russia insists that this issue should be given more consideration.
“This is a rather serious issue and it requires further work,” Ryabkov said. “Our understanding is that the work should be continued and that a considerable amount of time will pass before the bank is created.”
Ryabkov stressed that there are no major disagreements on this issue among the summiteers. “There are no disagreements, but there are different approaches to this issue, and no one questions the need to create the Bank,” the diplomat said.
He believes it necessary to work out such issues as the principles of the Bank’s work, its goals and parameters. “Contributions to the Bank’s capital should be substantial and sufficient for implementing projects,” he said.
The creation of the Development Bank was one of the main intrigues at the Durban summit. There were different points of view regarding its initial capital, the location of its headquarters and its niche in the global financial system. The summit host, South Africa, offered to host the Bank’s headquarters.
At the same time, when discussing the size of its initial capital experts named sums as large as 50 billion U.S. dollars. But it is not clear in what proportion it will be divided among the BRICS member states – in equal amounts or depending on the their GDP.
On Tuesday, March 26, BRICS finance ministers failed to come to agreement on key issues regarding the creation of the Bank. Russian Finance Minister Anton Siluanov said the ministers had failed to reach consensus on certain issues such as the size of the Bank’s capital and national contributions, as well as the principles of its management, whether it should be proportional to the contributions or equal.
No decision on where the Bank’s headquarters will be located was made either. “I can only say that Russia does not insist that the Bank should on its territory. We understand that others may naturally be interested as well. Until key issues remain unresolved it would be premature to talk about the location of the headquarters,” the minister said.
“We agreed to continue working. The decision will be made, if at all, at the level of heads of state,” he added.
He believes the main task now is to find resources for the project. Siluanov said suggestions had been made that the Bank’s capital should be 10 billion U.S. dollars. “If we divide this by five, it will be 2 billion per member. That’s a lot of money. It will not be easy for us to discuss this issue in parliament. And not only for us, but for other members as well,” he said.