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The BRICS and the International Development System

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The BRICS and the International Development System ISSUE 55 • MARCH 2014 The BRICS and the International Development BRIEFING System: Challenge and Convergence? The sustained growth of rising powers, including the grouping known as the BRICS (Brazil, Russia, India, China and South Africa) is reshaping global governance arrangements. Annual BRICS summits and inter-ministerial meetings seek to reform existing international financial and economic institutions and promote a multipolar system of global order. The BRICS are Policy also gaining prominence amongst ‘emerging donors’, building on a tradition of South-South development cooperation, which has grown outside the framework of the OECD Development Assistance Committee. As Southern donors become major players, and with the potentially significant role of a new BRICS Development Bank, what might a polycentric international development system look like and what are the policy implications? Two traditions of development adopt the Western model. BRIC foreign “China’s growth assistance began to take root after the ministers first began to meet on the challenged end of the Second World War and the sidelines of the UN General Assembly emergence of ‘the Third World’ from in 2006, building on an established many of the a frequently painful decolonisation series of RIC meetings (Russia, India, fundamental process. One was centred around the China). Leader meetings followed and principles of OECD led by its Development the first full BRIC Summit was the DAC Assistance Committee, the organised by Russia in 2009. Soon International Finance Institutions and a after, South Africa was invited to join development host of accompanying processes and the BRIC to make the BRICS in 2010. model.” stakeholders – sometimes described as ‘the aid industry’. The other What is the significance of the was centred around the non- BRICS Summits for a transitioning Alignment Movement and South- global economic governance? South Cooperation principles initially The BRICS Summit is most accurately formulated at the Bandung Conference viewed as a group of non-G7 in 1955. These two approaches countries providing themselves with a remained a broadly parallel set of forum where they do not have to processes and relationships until two contend for air-time and agenda- important developments: the end of setting with Western powers and the Cold War and the rapid economic intellectual frameworks, and which growth of East Asian economies. provides the possibility to have an China’s growth in particular challenged impact –symbolically, rhetorically and many of the fundamental principles of programmatically – on the world scene. DAC-informed development, but it The eThekwini Leader’s Declaration, was not the only country which did not from the 5th BRICS Summit held in www.ids.ac.uk Durban in March 2013, sets out the objective of governance challenges. The way in which they ‘progressively developing the BRICS into a full- respond to and manage these challenges fledged mechanism of current and long-term affects their reputation and soft power, both coordination on a wide range of key issues of individually and collectively. the world economy and politics’. The BRICS Summits are the only global process Within the framework of the Summit process with an explicit objective to constitute a new led by heads of state, the BRICS have also from global order in line with the massive change in 2011 created a series of regular inter-ministerial economic weight that is coming in the next meetings in key areas of concern: health, decade. The stated objective of the BRICS is to finance, agriculture, education and ensure that this coming world order is inclusive urbanisation. The BRICS Summits are emerging and just, in line with historic South-South as a knowledge-exchange process among principles for a post-colonial world order, and countries still classed as developing, but with the United Nations as the centre of looking to a future world order in which they systemic legitimacy. have major roles and responsibilities. Yet while the BRICS Summits look to project Alongside their deepening collaboration, the the voice of the global South, there are BRICS are all also fully committed to the G20 divergent interests and priorities among the Leaders process, itself a manifestation of the BRICS, for example, on reform of the UN evolving global governance system. Along with Security Council. There are even some ongoing a wide range of developing countries, all of disputes on territorial boundaries, for example, the BRICS also engage in substantive between China and India. Difficult frontlines engagement and joint work within the OECD with the international economic system also and participate in OECD annual ministerial occur in the areas of currency management and meetings. Hence, the BRICS Summit process trade. Here the BRICS Summit process will be could be said to be nested within a larger tested as its members confront their process of systemic change in global differentiated interests in and responsibilities for governance. Even if the pace and nature of any the functioning of the global system. such change cannot at this point be foreseen, ultimately this process will produce convergence The BRICS Bank: a new contender in “The stated between the BRICS and DAC models, albeit development finance? objective of the with challenge and contestation. The official announcement at the 2013 BRICS Summit in Durban of the formation of a joint BRICS is to The G20 and the BRICS are both self-selected development bank was a significant milestone ensure that the groupings of countries with divergent with regard to the future of development coming world interests and governance systems. Values and cooperation. There is little question that the order is inclusive reputation are critical to credibility in both project has a signalling as much as a practical role, these arenas. It is on this level that failure to challenging the pre-eminent position of the and just, in line generate a strong recovery from financial World Bank as the reference point for leadership, with historic crisis sparked by difficulties and dysfunctions governance and practice of development and South-South in Western governance systems has opened multilateral development finance. principles for a the way for the BRICS to come forward as global leaders. Yet, as we see, the BRICS also In a global macroeconomic context of a major post-colonial face their own range of economic and shortfall in investment spending, there is a huge world order.” IDS POLICY BRIEFING THE BRICS AND THE INTERNATIONAL DEVELOPMENT SYSTEM: CHALLENGE AND CONVERGENCE? ISSUE 55 • MARCH 2014 www.ids.ac.uk unrealised demand for new and renewed concessional disbursements of the World “The existence of infrastructure. Altering the state of long-term Bank and the regional development banks the national expectations of investment in developed and (Asia, Latin America, Africa and Europe) were developing countries would do much to fix the US$20bn in 2012; their concessional development lagging recovery from the financial crisis, as well disbursements were a further US$39bn. banks and the as provide the scope to speed up green Interbank economic transformations around the world. BRICS members also have national development Cooperation The urgent need to scale up long-term finance banks which engage in financing projects in is common ground across the G20, where developing countries. The BRICS Interbank Mechanism tackling the policy and market failures that stand Cooperation Mechanism meets annually and provides a pool in the way of generating long-term funding for organises operational cooperation among these of experience infrastructure is a declared priority for the member banks. The total development financing and capacity on Australian G20 Presidency in 2014. capacity of the BRICS therefore goes well beyond the New Development Bank. In which the New The G20 work shows the need for both a addition, at the 2013 Durban Summit, the Development supply of bankable projects and a stream of Interbank Cooperation Mechanism concluded Bank can draw.” long-term finance as interdependent elements two co-financing agreements: a BRICS of a scaled up infrastructure investment system Multilateral Infrastructure Financing that will yield long-term income streams for Agreement for Africa and a BRICS Multilateral savers such as pensions funds and sovereign Co-operation and Co-Financing Agreement wealth funds. In principle, the World Bank and for Sustainable Development. the regional development banks could be quickly mobilised to effect such a major This range of activity and planned expansion scale-up in developing countries, but the implies building impressive capacity in political consensus to do so would be extremely operational areas. These include professional difficult to organise. staffing and research, effective business models for project preparation and evaluation The BRICS have been able to generate a functions, and risk management, along with consensus on a New Development Bank skilful political entrepreneurship for putting around an Indian initiative launched at the together complex interregional projects. The New Delhi BRICS Summit in 2012. The existence of the national development banks announced aim is to have the whole and the Interbank Cooperation Mechanism institutional design ready for agreement at provides a pool of experience and capacity on the Brazil BRICS Summit in July 2014. The which the New Development Bank can draw. choice of a co-op model of equal shares
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