BRICS leaders (from left), Russia's Vladimir Putin, India's Narendra Modi, Brazil's Dilma Rousseff, China's Xi Jinping and South Africa's Jacob Zuma pose during the sixth BRICS summit in Fortaleza, Brazil, on Tuesday. Photo: Xinhua

BRICS nations have taken concrete steps toward a more equitable world order after sanctioning the establishment of a Shanghai-based development bank and a $100 billion contingency fund.

At the conclusion of the sixth BRICS summit in the Brazilian resort city of Fortaleza on Tuesday, Brazil, Russia, India, China and South Africa announced the establishment of the New Development Bank (NDB) in a joint declaration.

The bank, regarded as an alternative to the World Bank, will have an initial authorized capital reserve fund of $100 billion, with the subscribed capital of $50 billion equally shared among its five founding members.

Lending is scheduled to commence in 2016, and it will be open to membership by other countries, with the condition that the capital share of BRICS nations cannot drop below 55 percent, Reuters reported.

A balanced arrangement for the NDB came following tough 11th-hour negotiations.

Shanghai beat out New Delhi, Johannesburg and Moscow to host the bank headquarters.

The bank's first president will be from India, while the first chairs of the Board of Governors and the Board of Directors will be from Russia and Brazil respectively. The NDB will also establish a regional center in South Africa.

"Picking Shanghai as the NDB's headquarters is in line with China's rising status in the world. It will make Shanghai the economic capital of the developing world and is conducive to China's plan of building the city into an international financial center," Zhao Changhui, chief country risk analyst with the Export-Import Bank of China, told the Global Times.

Zhao noted that China would be in a good position to shape the NDB's culture and its development path.

The summit also approved the Contingent Reserve Arrangement (CRA), which mirrors the International Monetary Fund (IMF), with an initial fund of $100 billion to help member countries cushion balance-of-payment difficulties.

China will contribute $41 billion to the fund. Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.

Brazilian President Dilma Rousseff left open the possibility of using the fund to help non-BRICS nations, saying the group would be willing to "examine" any request from Argentina, which is in danger of defaulting on its debt.

Hu Zhiyong, a research fellow with the Institute of International Relations at the Shanghai Academy of Social Sciences, said the NDB and CRA mark the BRICS countries' joint efforts to challenge the US dollar's supremacy and Washington's global leadership.

In the Fortaleza Declaration, the BRICS voiced frustration toward the overdue reform of IMF voting rights, which was endorsed by IMF members but has been stymied by the US Congress for several years.

"We remain disappointed and seriously concerned with the current non-implementation of the 2010 International Monetary Fund reforms, which negatively impacts on the IMF's legitimacy, credibility and effectiveness," it said.

Since the US is not going to hand over voting rights to developing countries, Zhao said the NDB and CRA can be used as leverage to reshape global order.

The Western-dominated World Bank and IMF have long been criticized for the rigid political conditions associated with their loans, while the NDB and CRA are expected to take a more flexible stance.

"When [the World Bank and IMF] are no longer the only service providers, they will lose their dominance," Zhao said, adding that "time is on our side" as the capacity of BRICS financial institutions develops.

In addition to economic cooperation, BRICS leaders also touched upon a wide range of political and security issues, including the Ukraine crisis, Syrian war, Afghanistan and Iraq.

Chinese President Xi Jinping told the meeting that BRICS countries "should both be the anchor that helps stabilize the global economy and the shield that protects the peace of the international community."

The declaration voiced deep concern over the Ukraine situation and called for a comprehensive dialogue, without any mention of Russia's annexation of Crimea.

This was viewed as a victory for Russian President Vladimir Putin, whose country is facing Western threats of further sanctions.

According to Hu, with Russia's seat on the G8 suspended, Putin will rely more on BRICS as a multilateral platform to address world issues.

However, despite the reinforced coordination on political and security issues, BRICS' power in such areas still remains in question.

Fan Yongming, director of the Center for BRICS Studies at Fudan University in Shanghai, told the Global Times that BRICS countries have taken the initial step toward a major role in a multipolar world, but it is "very difficult to alter the inequitable world in the short-term."

"In the coming decade, BRICS aren't likely to surpass the G7. And they won't be able to challenge US political dominance," Hu said.

The BRICS leaders met with Latin American heads in Brasilia on Wednesday, "bringing together nations seeking alternatives to US influence in the region," reported AFP.

Agencies contributed to this story

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