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.
Officially leaders had been expected to consider the bank’s establishment, but South Africa and others had hoped to formally launch a $50 billion infrastructure fund at the two-day summit.
The mooted bank is seen as a way of gaining influence on the world stage, countering Europe’s dragging economic crisis and addressing the $4.5 trillion in infrastructure spending the BRICS are estimated to need over the next five years.
Instead of a $50 billion fund BRICS leaders agreed only that the initial capital contribution would be “substantial and sufficient for the bank to be effective.”
Key sticking points included how projects would be distributed and where the bank would be based, diplomats said.
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, “we better talk about projects and then we talk about needed amounts of money.”
The group also issued no joint response to a letter from Syrian President Bashar al-Assad’s asking the group to mediate in the country’s two-year-old civil war.
The lacklustre outcome of the summit will fuel suspicions that a grouping as diverse as BRICS will struggle to take concrete action to back up demands for a say in world affairs that reflects their growing clout.
Despite the BRICS’ failure to sign off on a deal, leaders insisted the grouping will be a force for change.
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.
Leaders hailed a slew of accords reached at the summit, including progress toward establishing a $100 billion virtual reserve fund to fight potential liquidity crises.
The “Contingent Reserve Arrangement” would function much like the International Monetary Fund’s credit lines, which act as deterrents against speculation as they are funds which can be drawn upon in 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 discussed 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.”
Glenn Ho of consultancy KPMG said some of the less high profile decisions at the summit could have a real and lasting impact.
“There was good intent and I think that the establishment of a BRICS Business Council will help propel things in between summits.”
Echoing the BRICS’ growing confidence, Brazilian President Dilma 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.”
The next BRICS summit will be in Brazil in 2014, but leaders will meet in Russia on the margins of the G20 in September.