Five emerging world economic powers Brazil, Russia, India, China and South Africa met in Johannesburg for a summit where they plan to announce competition for International Monetary Fund and World Bank, and that is, the creation of a new development bank.
The BRICS group of countries has agreed to form a new development bank to focus more on the development and infrastructure of the emerging and developing economic markets. In order to avoid currency crises, the countries also plan on pooling their foreign reserves. The BRICS development ban will serve as an alternative to the IMF and World Bank.
But there are certain issues that can have a huge impact on the efficiency of the BRICS development bank to serve as a better alternative to the Western institutions. Countries included in the BRICS differ on my grounds. Some of them have widely contradictory political and economic ideologies, for example, India, South Africa and Brazil are strongly democratic countries while China and Russia are autocratic. The BRICS nations do not even invest too much in the member nations and prefer developed economies such as the European Union, the U.S. and Japan.
China and South Africa are in many ways economic competitors in the African continent especially where South Africa faces a tough competition from Chinese companies in manufacturing, cell phone services and mining operations.
World Bank was formally created in 1944 followed by the International Monetary Fund in 1945. To sideline these two institutions with a new development bank created by “emerging” world powers who have an (already) unstable political and economic relationship might turn out to be effective but it would take a lot of time and compromises (or changes) in basic ideologies of the member countries.