MILESTONES | BRICS
The BRICS (Brazil, Russia, India, China and South Africa) now have something more in common than rapidly developing economies that have recently stalled. In July they gave life to the New Development Bank (NDB), the first multilateral institution controlled by developing countries.
The NDB, which will be based in Shanghai, is a slap in the face to the World Bank and the International Monetary Fund, which provide loans to developing countries, often with strict conditions attached.
The New Development Bank will start with initial subscribed capital of $50 billion and initial authorized capital of $100 billion. On paper, says Vikram Nehru, a senior associate in the Asia program at the Carnegie Endowment for International Peace in Washington, the NDB has huge financial leverage and could soon reach yearly loans of $34 billion.
The real challenge for the new institution, he says, concerns how decisions are made. “The BRICS are a very disparate group of countries,” says Nehru, who served for nearly 30 years at the World Bank. “It will be interesting to see how these five countries are able to pull together and make decisions.”
When it comes to the balance of power within the NDB, China is by far the richest country of the five and will supply the largest amount—$41 billion—to the bank’s contingency reserve pool, a $100 billion fund also approved by the BRICS to help countries avert short-term liquidity pressures. India, Brazil and Russia will contribute $18 billion each, and South Africa will put in $5 billion. However, a recent BRICS summit meeting in Brazil saw NDB member countries agree on a proposal that the initial subscribed capital should be equally shared among members to prevent domination by any one country. The summit also declared that the first president of the NDB will be Indian, and the first Board of Directors will be from Brazil. The first chairperson of the Board of Governors will be from Russia.