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BRICS leaders agree on bank for development
Aggregated Source: Shanghai Daily: Business

Leaders of the five BRICS nations fueling global economic growth have agreed to create a development bank to help fund their US$4.5 trillion infrastructure plans - a direct challenge to the World Bank that they accuse of Western bias.

But the countries were unable to agree on some basic issues, with Pravin Gordhan, South Africa's foreign minister, telling reporters yesterday that there were "different views" about how much capital such a bank would need.

He said US$50 billion had been mentioned, an amount conference officials said would be seed capital shared equally between Brazil, Russia, India, China and South Africa.

The development bank would be the first institution of the informal BRICS forum which was started in 2009 amid the economic meltdown to chart a new and more equitable world economic order. South Africa joined two years ago.

"Russia supports the creation of this financial institution," President Vladimir Putin said yesterday, but cautioned: "We believe that, if it is created, then it must work on market principles only and support the businesses of all our countries."

South African President Jacob Zuma, whose country is lobbying to be home to the BRICS development bank, said the formal negotiations to establish the institution were "based on our own considerable infrastructure needs, which amount to about US$4.5 trillion over the next five years."

The bank will also cooperate with other emerging market countries and developing economies, he said.

The leaders hailed a slew of accords reached at their summit, including progress toward establishing a US$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.

The group also discussed a high-capacity 28,400 kilometer fibre-optic cable between the BRICS countries to "remove dependency on developed countries as interconnection points."

The group also flexed its muscles on foreign policy, warning against mooted military action in Iran and calling on Syria's leaders to admit humanitarian workers.

"We are concerned about threats of military action as well as unilateral sanctions," the leaders said amid US and Israeli warnings they will not tolerate a nuclear-armed Iran.

The summit, BRICS' first in South Africa in the coastal resort of Durban, has been dedicated to supporting development in Africa - Zuma invited 15 other African leaders to the meeting.

China's President Xi Jinping, in a keynote speech before the BRICS summit, said China would "intensify, not weaken" its relationship with Africa.

He said China will "support Africa's efforts for stronger growth" and would continue to make its own and international development priorities as it works to achieve a "grand goal" of doubling gross domestic product and the per capita income of its 3 billion population by 2020.

The next BRICS summit will be in Brazil in 2014, but the leaders will meet in Russia on the margins of the G20 in September.

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