Mr. K V Kamath was named the first head of the BRICS Bank or officially the New Development Bank today, and the news was all over today with much excitement and pride (a little misplaced in my opinion).
First, a little history on the acronym BRICS, and then a little history on the bank itself.
The acronym BRICs was coined at the investment bank Goldman Sachs in 2003, and the governments of the BRIC countries had nothing to do with it. Mr. Jim O’Neil was the person who coined the term, and in fact he coined another term: MINTs (Mexico, Indonesia, Nigeria and Turkey) , which never became as popular as the first one.
Notice the small ‘s’ in MINTs – BRICs also had a small ‘s’ in the beginning, and it is only later that people started associating South Africa with the BRIC acronym, and now that there is a bank with actual capital – it is fair to say that the ‘s’ can be ‘S’.
Now BRICs is BRICS and the governments of these five countries decided to establish a bank with a capital of $50 billion that each country will contribute equally and this bank will invest in infrastructure projects in the respective countries.
The bank will also also provide an alternative to IMF and World Bank when cash is needed by these countries or in fact other countries who can apply to it. This is interesting and slightly different in funding because the fund for this is a $100 billion funded 41% by China, 18% by Russia, India and Brazil, and the final 5% from South Africa.
This is a great step, and I hope that it becomes successful – why is the pride misplaced then? Simply because the first president had to be an Indian; that much was negotiated months ago, as was the fact that Shanghai will be the headquarters, a Brazilian will be the head of the Board of Directors, and a Russian will be the head of Board of Governors. Notice how all of those are rotating positions but the headquarters are not.
Again, I think the bank is a great idea in itself, and if it becomes successful that will be a major win for the countries involved as well as any smaller countries that may get help from it, but I think sometimes we get carried away with symbolism more than substance, and that’s what’s happening today with the appointment of Mr. K V Kamath.