At the recently concluded G20 Leaders’ Summit in Australia, the BRICS – Brazil, Russia, India, China and South Africa – countries announced that an interim board of directors has been constituted to establish the National Development Bank (NDB) – an IMF-like institution specifically designed to support the five economies.
Also, the BRICS leaders urged their finance ministers to appoint an NDB president and vice-president well before the next BRICS summit scheduled to hold in Russia next year.
Set up to counter the dominance of the United States exerted via the World Bank and the International Monetary Fund (IMF), the core objective of the NDB is to foster greater financial and development cooperation among the five emerging markets, four of which account for 41 percent of the world’s population. The bloc also contributes 25 percent of global GDP and covers more than a quarter of the world’s land area.
Headquartered in Shanghai, China, the bank will also accept membership from the United Nations (UN). While the bank’s authorized capital has been set at $100 billion, each BRICS country is expected to contribute $2 billion to the bank’s finance base over the next seven years.
With this new economic alliance in motion already, cooperation among the BRICS is at an all-time high. A statement issued by the South African Department of International Relations and Cooperation (DIRCO) says the signing of the agreements establishing the NDB and the accompanying Contingent Reserve Arrangement (CRA) has brought cooperation to a fundamentally new level.
“The Leaders asked their Finance Ministers and Central Bank Governors to ensure that, by the next BRICS Summit, the CRA Working Group concludes the procedural rules and operational guidelines of the Governing Council and the Standing Committee of the CRA. They also asked their Central Bank Governors to ensure that the Inter-Central Bank Agreement foreseen in the CRA be concluded by the Summit in Russia,” the statement read.
With the NDB establishment underway, developing economies stand ready to contribute even more to remedying the international financial crisis of six years ago, whose effects are still felt by member countries. In recent times, such economies have participated in global economics by sustaining high growth rates in spite of adverse circumstances stemming from the crisis, as well as the effects of monetary policies from advanced economies.
As the NDB picks up more steam, could such an economic posture threaten and reduce the dominance exerted by the U.S and the advanced world?
By Emmnauel Iruobe