Letters: Building on BRICS | Business Standard Opinion

Letters: Building on BRICS | Business Standard Opinion

Submitted version of the letter:

Building on BRICS

This refers to the report “BRICS
leaders create development bank” and related stories (July 16).

Let us first remove the
misconception that this development bank is an alternative which will take over
the role of the Bretton Woods twins, the IMF and the World Bank in the
geographical area covered by BRICS nations. At least initially, the declared
objective of the new development bank is to support members of BRICS group and
other developing countries in meeting long term investment needs in
infrastructure and providing emergency assistance to developing countries in
removing poverty. Viewed from this perspective, the new institution’s
initiatives will only supplement the role being played by IMF and World Bank
and there is enough unattended space for the new bank.

There are limitations in the
‘already impaired’ vision of the rich and poor cannot wait in the sidelines for
their basic needs to be met after all the greed of the rich and the powerful
are satisfied. In his book ‘The end of poverty’ (Penguin, 2005), Jeffrey D
Sachs made the following observation on capital needed to alleviate extreme
poverty:

“At the most basic level, the key
to ending extreme poverty is to enable the poorest of the poor to get their
foot on the ladder of development. The development ladder hovers overhead, and
the poorest of the poor are stuck beneath it. They lack the minimum amount of
capital necessary to get a foothold, and therefore need a boost up to the first
rung. The extreme poor lack six major kinds of capital:

• Human capital: health, nutrition, and skills needed
  for each person to be economically productive
• Business capital: the machinery, facilities,
  motorized transport used in agriculture, industry, and services
• Infrastructure: roads, power, water and sanitation,
  airports and seaports, and telecommunication systems, that are critical
  inputs into business productivity
• Natural capital: arable land, healthy soils,
  biodiversity, and well-functioning ecosystems that provide the
  environmental services needed by human society
• Public institutional capital: the commercial law,
  judicial systems, government services and policing that underpin the
  peaceful and prosperous division of labour
• Knowledge capital: the scientific and technological
  know-how that raises productivity in business output and the promotion of
  physical and natural capital”

The twin objectives of supporting
infrastructure development and creating a Contingency Reserve Fund to assist
needy developing countries accepted by the BRICS leadership while going ahead
with the setting up of a new development bank in themselves carry the theme
which can be developed into a transparent vision statement which could be
supportive of financing and pursuing the above needs. 

Incidentally, a less tech savvy
leader from India would have got entangled in the issue of ‘where the
headquarters should be?’ and missed to clinch a better capital-sharing.

M G Warrier, Mumbai