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BRICS fail to make progress on new bank to challenge West

Leaders from the BRICS group of emerging powers on Wednesday failed to launch a much-anticipated new development bank to rival Western-dominated institutions like the World Bank.

After holding talks in the port city of Durban, leaders from Brazil, Russia, India, China and hosts South Africa agreed in principle to create a joint infrastructure lender but said further talks were necessary to finalise the plan.

“We are satisfied that the establishment of a new development bank is feasible,” said host President Jacob Zuma, in remarks that hint at little progress beyond an agreement reached in New Delhi a year ago.

“We have decided to enter formal negotiations to establish a BRICS-led new development bank,” he added.

The lacklustre outcome of the summit is likely to do little to counter allegations that the BRICS, whose gatherings are sometimes dismissed as talking shops, are struggling to take concrete action.

The mooted development bank is seen as a way of gaining influence on the world stage, countering Europe’s dragging economic crisis and addressing the estimated $4.5 trillion in infrastructure spending the BRICS are estimated to need over the next five years.

The BRICS had hoped to formally launch a $50 billion infrastructure fund at the two-day summit, but negotiators stumbled over the scope of the institution.

Key sticking points included how much cash would be injected, how projects would be distributed and where the bank would be based, diplomats said.

It is unclear how much seed money each of the countries will now put into the bank, with Zuma only saying the BRICS had agreed that “the initial capital contribution should be substantial and sufficient for the bank to be effective.”

Russian envoy to Africa Mikhail Margelov told AFP his country had pushed for an incremental approach to establishing the bank.

“We believe in a step by step way of doing business,” he said, “I think we better talk about projects and then we talk about needed amounts of money.”

Chinese President Xi Jinping, who underscored the growing importance his country attached to the group by making Durban his first summit destination in his new role as head of state, admitted the BRICS countries had a long road ahead.

“The potential of BRICS development is infinite,” he said, adding “the real potential of BRICS cooperation is yet to be realised.”

Together the BRICS economies account for 25 percent of global output and 40 percent of the world’s population.

Members believe global institutions such as the World Bank, the International Monetary Fund and the United Nations Security Council are not changing fast enough reflect their new-found clout.

Echoing the BRICS’ growing confidence Rousseff said the summit came “at a point in time that is marked by deep economic changes, sweeping changes, which have made our BRICS nations key stakeholders and players.”

But if BRICS countries are allies, they are also rivals in world trade.

Addressing concerns that trade with China was seen as too much of a one-way street, Xi insisted China was “committed to making our economy more open.”

Despite the BRICS’ failure to sign off on a deal, leaders insisted the grouping could be a force for change.

They lauded a slew of accords reached at the summit, including progress toward establishing a $100 billion currency swap line to ease potential liquidity crises.

“We have firmly established BRICS as a credible and constructive grouping in our quest to forge a new paradigm of global relations and cooperation,” said Zuma.

The group also agreed to build a high-capacity 28,400 kilometre (17,600 mile) fibre-optic cable between the BRICS countries to “remove dependency on developed countries as interconnection points.”