OPINION: The New Development Bank (NDB) was always intended to offer an alternative to the Western-led development banks, specifically the World Bank and the International Monetary Fund (IMF), writes Shannon Ebrahim.
The first expansion of the BRICS bank to now include the UAE, Bangladesh and Uruguay sets the bank on a growth trajectory that will give the Developing World more choices in terms of financing.
The New Development Bank (NDB) was always intended to offer an alternative to the Western-led development banks, specifically the World Bank and the International Monetary Fund (IMF). The objective was to mobilise resources for infrastructure and sustainable development projects for emerging economies and developing countries. The NDB’s strategy is to be positioned as the premier development institution for emerging economies.
For decades, Developing Countries were getting increasingly frustrated with the conditionalities imposed on them by the Western international financial institutions, which were viewed as dictating access to development aid, monitoring the world’s economies, and promoting free-market policies.
At the 6th Summit of the BRICS bloc of countries (Brazil, Russia, India, China and South Africa) in July 2014, the bloc agreed to create a “BRICS Bank” as an alternative to the unchallenged dominance of the World Bank and the IMF. BRICS member states saw the establishment of their bank as providing them leverage to urge reform of the IMF as well as impact broader global economic issues and the leadership of international organisations such the World Trade Organization.
At the time, Brazilian President Dilma Rousseff said BRICS did not want to distance themselves from the IMF, but wanted to see the institution democratised and be made as representative as possible. China’s focus had been on the creation of an alternative to the Western-dominated institutes in global finance.
To date, the NDB has provided financing to its five member states, and has an authorised capital of $100 billion (about R1.4 trillion), which is open for subscription by members of the UN. Since its founding in 2015, the NDB has signed onto more than 80 projects worth $30bn. The projects cover sector of transport, water and sanitation, clean energy, digital infrastructure, social infrastructure and urban development.
There has been growing interest from other countries who are keen to join the NDB and take advantage of its financing opportunities. The NDB has been considering further expansion of its membership, and expressed an interest in big and active borrowers from the IMF or the World Bank, which have substantial infrastructure deficits in areas such as 5G wireless telecommunications.
The ruler of Dubai, Sheikh Mohammed bin Rashid, said the UAE had been looking to grow its economic partnerships with various institutions, and had decided to join the European Bank for Reconstruction and Development and the NDB. The UAE’s membership of these banks will provide UAE companies with alternative access to capital where commercial bank support is not forthcoming. Where this will be particularly useful is for companies involved in broader development projects where the risk profiles may be more challenging than usual.
The UAE leadership is keen to support development projects across the world, especially in emerging economies. Joining the NDB enhances the role of the UAE economy on the global stage in terms of supporting infrastructure projects and sustainable development.
The expansion is also advantageous for the NDB, which aims to increase the complexity and outreach of its operations, as well as strengthen the bank's role as a platform for international co-operation, where member countries work constructively on issues of shared interest. The Middle East is seen by the bank as one of the most promising regions for its expansion.
Uruguay has seen membership in the NDB as a great opportunity to harness co-operation with the BRICS member countries, with a view to achieve stronger international integration in trade and cross-border investment flows. For Prime Minister Sheikh Hasina of Bangladesh, joining the NDB has paved the way for a new partnership in meeting the country’s development vision.
Another strong candidate for inclusion in the expanded NDB is Egypt, which has made huge strides since it secured an IMF bailout five years ago. The expansion of the NDB comes at an opportune time when sources of development financing and assistance have been drying up due to the Covid-19 pandemic. If financing from other institutions for infrastructure and development projects continues to decrease, poorer countries in Africa and Latin America will need institutions like the NDB, and are likely to push for membership.
The NDB is small compared to institutions like the Asian Development Bank which has 68 members, including China and the US, and which had a budget of $31.5bn last year alone. But the existence of the NDB cannot be understated given the need, now more than ever before, for development finance.
* Shannon Ebrahim is Independent Media Group Foreign Editor.