NEW YORK - A British economic expert says that a new development bank that BRICS grouping of emerging powers have decided to establish can rival the International Monetary Fund (IMF) and the World Bank if it can reconcile its competing agendas.

Leaders of the BRICS nations - Brazil, Russia, India, China and South Africa - made the decision to create the new bank at their meeting in Durban earlier this week. 

But the BRICS nations were unable to settle the location or structure of the bank, which will initially focussed on infrastructure and the development projects, and they also refused to say whether a long-mooted, $50-billion (US) seed-capital plan would be approved.

The group makes up 40 per cent of the world’s population and 17 per cent of world trade.

Professor Geoffrey Wood, who teaches at Warwick Business School, said he can see the bank becoming a big attraction for the emerging markets.

“The track record of the IMF and World Bank austerity policies are very mixed, and there is little doubt that many nations would welcome an alternative to these bodies,” said the Warwick Business School Professor.

Prof Wood said, “This is likely to make the BRICS development bank hugely influential if, indeed.

But, in the short term, this is contingent on the extent to which it reconciles the competing agendas of the BRICS countries.

"Most people assume that the current economic crisis has led to a great strengthening of the power of the World Bank and the IMF, and that this power is largely uncontested.

What is interesting however, are the limits of the power of these bodies.

“The aftermath of the Asian financial crisis saw a number of countries in Asia - and Russia as well - stockpiling foreign exchange reserves precisely so they did not have to make recourse to the IMF or World Bank again.

“The proposed BRICS development bank represents an important new development, that, potentially further circumscribes the influence of these bodies.

“In theory, the BRICS bank could erode the role and status of the IMF and the World Bank.

However, the details of how the BRICS bank is governed and how it will operate remain unclear. What is even unclear is the amount of initial capitalisation; very different sums of money are being bandied about.

It will certainly be some years before the bank is operational, but in the long term it could have a significant impact.”

"The bank would have access to a huge and growing market, though the power struggle between the nations involved could lead to difficulties.

"China holds vast foreign exchange reserves and is likely to be, in some manner or other, the dominant player in the BRICS bank.

"As the weakest BRICS member, South Africa has perhaps most to gain from establishing the bank, although all may gain from the international clout the new body may confer.

“South Africa is the smallest BRICS member and has become increasingly reliant on minerals exports, which provide volatile revenue streams and, ultimately are a depleting resource.”

“South Africa could be faced by a balance of payments crisis in the future, and the BRICS bank could potentially be a lifeline for it,” he said.