27 March 2013
The leaders of Brazil, Russia, India, China and South Africa have agreed to establish a BRICS development bank to help finance infrastructure programmes and sustainable development in the BRICS and other developing countries, South Africa President Jacob Zuma said at the conclusion of the 5th BRICS summit in Durban on Wednesday.
“We have agreed to establish the new development bank. The initial capital contribution to the bank should be substantial and sufficient for the bank to be effective in financing infrastructure,” Zuma said.
Issues still to be ironed out
While certain issues still needed to be ironed out, such as the bank’s location, initial start-up funds and voting rights, Zuma said that following the report from their finance ministers, the bloc was satisfied that the establishment of the bank – the grouping’s first formal institution – was feasible and viable.
South African Finance Minister Pravin Gordhan was optimistic on Tuesday night when he told the media that the talks for the bank were on track, while urging reporters to wait for the leaders’ formal announcement.
Ahead of the summit, officials had said the BRICS countries were considering injecting an initial US$50-billion into the bank, with each nation contributing $10-billion.
The idea of a BRICS Development Bank was first proposed at the 4th BRICS summit in New Delhi, India last year.
While Russia was cautiously optimistic about the idea this week, Russian President Vladimir Putin on Wednesday signalled his country’s support for the institution. Putin further proposed the establishment of a permanent secretariat to lead the group’s day-to-day operations.
BRICS contingency reserve
The BRICS leaders have also endorsed the idea of creating a financial safety net in the form of a contingent reserve arrangement (CRA) among BRICS countries.
Zuma, who has assumed the BRICS chairmanship for the next year, told reporters that the bloc’s leaders had concluded that the establishment of a self-managed contingent reserve arrangement would have a positive precautionary effect.
It would help BRICS countries forestall short-term liquidity pressures, provide mutual support and further strengthen financial stability. “It would also contribute to strengthening the global financial safety net and complement existing international arrangements as an additional line of defence.
“We are of the view that the establishment of the CRA, with an initial size of US$100-billion is feasible and desirable, subject to internal legal frameworks and appropriate safeguards,” Zuma said. “We direct our finance ministers and central bank governors to continue working towards its establishment.”
The summit commended the launch of the BRICS Think Tanks Council to assist member countries with innovation, as well as the hosting of the 5th BRICS Academic Forum.
Tackling skills shortages, unemployment
In a speech delivered earlier to the summit plenary, Zuma emphasised the importance of promoting a knowledge economy among BRICS members.
“In South Africa, we need to upgrade the skills of at least 3.2-million youths who are neither in employment, education nor training, so as to ensure that they are employable and can be absorbed into productive labour market economy.”
He said South Africa was working on overhauling its post-school education and training system, as well as its skills development environment, in order to address this challenge.
“Our government has classified education as an apex priority and thus, naturally has a bigger share of our national budget. We are keen to learn from the experiences of other BRICS countries on how they are dealing with similar challenges.”