… amount needed annually for infrastructure, development among emerging states
When leaders of the BRICS nations met in Russia seven years ago, they had one goal in mind – to step up efforts to close the gap between rich and poor nations of the world.
The leaders were under no illusion about the scale of the task at hand, the structural difficulties presented by the world economic order as it currently stands, and the massive financial resources needed to turn the tide.
There were various other impediments that stood in the way of progress such as a world economic situation currently characterised by low growth, low trade flows, and low investment, combined with high equity prices and high debt levels.
What more, ongoing uncertainties in the euro area, potential spillovers from geopolitical conflicts, terrorism, and persistent vulnerabilities in emerging economies all add to the mix of risk factors that lead to a weaker than expected expansion of the global economy. Despite all these challenges, the leaders of the BRICS countries realised that the performances of developing countries have profound implications both regionally and globally.
It is on that score that in the first BRICS summit held in Russia in 2009, significant progress was achieved by the five countries on practical steps to showcase their political commitment to reshape the global development landscape dominated by the traditional international financial institutions (IFIs), in particular the Bretton Woods Institutions (World Bank and the International Monetary Fund). They were determined to promote a more horizontal world order, traditionally dominated by Europe and the United States. They committed to build channels for South-South cooperation through the exchange of knowledge, ideas, and new approaches for social and economic development, boost trade and increase investments in infrastructure in their countries and in other emerging economies and growth poles in the global south.
That is when they agreed to establish a new multilateral development bank, the BRICS Bank (now called the New Development Bank-NDB) and a Contingency Reserve Agreement emerged from the Sixth BRICS Heads of State Summit held in Fortaleza, Brazil in 2014. The initial capital for the NDB was US$50 billion and US$100 billion for the Contingency Reserve Agreement. Each country started with the same share of US$10billion while members are allowed to subscribe additional shares The NDB headquarters are in Shanghai China and the first regional office is in Johannesburg, South Africa.
The NDB is expected to bring an innovative approach to lending with new operational procedures, fund long-term investment in infrastructure and more sustainable development. “The estimated unmet needs in the emerging and developing countries, the field of infrastructure and more environmentally sustainable forms of development are around US$1 trillion annually. There is a clear case for such institution to be a complement to the existing finance institution in the public and private sector to support the future growth of the developing and emerging economies,” it is stated in the Declaration establishing the bank. The NDB is also placed in the context of South-South cooperation and the needs of financial architecture that responds to some of the existing gaps in the financial architecture of Southern countries.