How the Muslim world can learn from the BRICS
By: Mansoor Jafar
The news of five countries of the world creating an international bank created quite a stir among Western media outlets lately since the primary aim of the bank is to curb the growing global hegemony of the IMF and World Bank which are seen to cause compounding economic problems for the poor countries.
The bank is the brainchild of the association of BRICS nations (Brazil, Russia, India, China and South Africa). BRICS countries are the emerging economies of the world and this initiative aims to compete with the IMF and World Bank with an objective to provide protection against global liquidity pressures, including currency issues where members’ national currencies are being adversely affected by global financial pressures.
Creating a stir
The news of BRICS bank created a bigger stir in South Asia with the decision that its first president will be from India. The reports of India heading an economic bloc flexing muscles against the IMF and World Bank are quite depressing for the arch rival Pakistan. Islamabad has been wary of the new regime in Delhi led Prime Minister Narendra Modi, who was accused of masterminding the anti-Muslim riots in Ahmadabad during his stint as the chief minister of Gujarat state.
The news of BRICS bank created a stir in South Asia with the decision that its first president will be from India
But the recent policies of Modi’s government spell disaster for Pakistan despite him being portrayed as a businessman and capitalist friendly during his election campaign. Already threatened by belligerent forces on the western borders and a sinister terror campaign by Taliban militants on the internal front, Islamabad could be fearful of Delhi’s designs of becoming a global producer of arms and ammunition.
The Modi government recently invited top world arms producers to invest in setting up weapons and ammunitions factories in India, sending war signals to arch rival Islamabad against which it had fought four wars.
What does this mean for the bank?
Now called The New Development Bank (NDB), the bank’s headquarters will be in Shanghai, China while a regional headquarters will be in South Africa. Former Indian Prime Minister Dr. Manmohan Singh, himself an economic expert, is among those who played key role in the creation of the NDB.
The NDB was initially considered an “impractical idea” but in my view is the first major achievement of BRICS countries since they got together in 2009. The NDB is an example of how international control is skittering away from those nations hitherto running the global financial order, those which failed to adapt to a changing world by leaving the troubled economies in the lurch.
The NDB reflects the growing influence of BRICS, which represents 42 percent of the world’s population and roughly 20 percent of the world’s economy based on GDP. The NDB announced setting up a disaster control fund and it will also provide assistance to other countries suffering from the economic volatility in the wake of the United States’ exit from its expansionary monetary policy.
For observers, the biggest achievement of the NDB is that it will be governed through a “one country, one vote” model, allaying fears of its turning into a Chinese bank. The bank will have a starting capital of $50 billion, which will be increased to $100 billion afterwards. China will contribute $41 billion, Brazil, Russia and India would give $18 billion each, and South Africa will contribute $5 billion. It is scheduled to start lending in 2016 and to be open to membership by other countries.
The success story of these BRICS countries and their economic planning to curb the supremacy of the IMF and World Bank is enviably commendable. The members of this new economic bloc have different history, geography, culture, religions and national interests but their collective initiative has jolted the global economic order and should have, in my view, rung alarm bells in the U.N. and EU also.
This initiative comes in stark contrast to what the Muslim countries should have been doing as one Ummah and a formidable economic and political bloc with huge material and human resources at their disposal. I wonder if the creation of NDB has made any news at all in the Muslim world, especially the Arab countries which enjoy an immense wealth of natural resources. The mineral wealth of Arab world combined with the human resources of other Muslim countries could have resulted in much bigger initiatives than the NDB in the past.
Only last year, the Gulf Cooperation Council (GCC) countries lost such an initiative when they dropped the idea of introducing a common currency because of failing to overcome some differences. Though the proposed common currency by Saudi Arabia, Kuwait, Bahrain and Qatar was to be pegged to the dollar, it would have been a big boost to their economies since their oil exports to the EU were substantial.
Amazingly, the UAE and Oman refrained from backing the idea of common currency. Though experts had termed the idea as “not really beneficial” if the proposed common currency was pegged to dollar instead of being part of the global basket of currencies, political analysts believed it would have been the start of a much bigger and formidably strong Muslim economic bloc.
If Pakistani Prime Minister Nawaz Sharif could make the country a nuclear power, detonating a nuclear device in response to Indian nuclear threats, I wonder if he could produce the equally impressive feat of making the country an economic power by allying with other Muslim countries into a BRICS like economic bloc. No doubt Muslim countries have enough wealth to at least set up a genuine Islamic Development Bank to begin with. Such a bank can successfully compete with the IMF, World Bank and NDB.
Mansoor Jafar is Editor of Al Arabiya Urdu based in Islamabad. He can be reached via Twitter: @mansoorjafar