BRICS development bank faces fund-raising challenge

However not everyone is optimistic about the bank, as investment among member states is low, and raising seed money for the bank is difficult. It's a challenge, but it's also filled with promises if achievable.

Strengthening commercial ties.

The BRICS group of Brazil, Russia, India, China, and South Africa has announced the foundation of a BRICS development bank during a summit in South Africa.

Jacob Zuma, South African President, said, "Announcing the establishment of the development bank."

The initial idea of this bank was put forth in the New Delhi summit a year ago.

It aims to help allocate resources among the BRICS countries and promote their infrastructure and sustainable development.

Tang Bo, Beijing, said, "Despite the call to strengthen commercial ties between BRICS countries, an UN report says investment among members remains marginal. Most of their trade and investment is still centered on developed economies."

The report shows that as of 2011, more than 40 percent of total foreign direct investment of BRICS countries flew to developed ones about 29 percent to Asia 15.5 percent to Latin America and the Caribbean, and 4.3 percent to Africa. Only 2.5 percent was invested among BRICS countries.

Moreover, the initial fund for the development bank is estimated to be 50 billion U.S. dollars with each member injecting 10 billion dollars.

Xu Sitao, Chief Representative, The Economist Group, said, "The most difficult part is to find seed money for the bank. China is capital-rich, but it is going through an economic transition where can we get enough seed money for the bank."

But the expert adds that a BRICS development bank serves as an alternative to the International Monetary Fund and the World Bank.

Xu Sitao said, "The WB and IMF have done a lot, and we should give them credits, but their certain polices have been regarded as controversial. So it is not a bad idea to create another platform so that we can have more efficiency and equity in such a multi polarized world."

While the details of the BRICS development bank are yet unknown, and there are no indications that the bank will support other developing countries, it is obvious that this influential group of emerging economies is using its collective weight to improve economic conditions in emerging markets and spur greater cooperation.

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