Remaining Tough Task for BRICS Development Bank
A new Bank is added to the lexicon of world development finance. Rather than welcoming it, the merchants of poverty eradication propagate its unbecoming. Completely one-sided views have been floating since the announcement of the BRICS New Development Bank adopted in Brazil during the BRICS Sixth Summit. Even after a month-long soccer carnival, it is a shocker to the world. The question remains whether BRIC's New Development Bank (NDB) will be able to deliver as its founding members aspire.
Since 2012, when the NDB was shared in the public domain, opponents, mostly based in the West, have been striking off the idea by clubbing it as destined to fail as member countries have inherent contradictions as a 'splinter group'. Now that it's formally established, the same opponents are chokingly asked, 'What next?'
The NDB is a 'paradigm shift' against the existing handful of 'developmental-knowledge brokers' who claim to eradicate poverty. Underneath, the leaders and large sections of the BRICS population have been carrying a deep aspiration to counter the West's and US axis's monopoly in the global economic structure and development paradigm.
At Fortaleza, the leaders of emerging five (E-5) have engaged in rewriting the world order when BRICS leaders are fed up with US snooping, including the new BJP-led NDA government in India! With its new Prime Minister at the helm of affairs, India is consciously adjusting, reorganising, restructuring, and redeploying its priority from last decade's flip-flop foreign policy. It won't be the traditional Nehruvian legacy that has flourished as a nostalgic hangover among academicians, experts, and think tanks in India. In the beginning, it was neighbourliness (SAARC) to showcase 'India is for South Asia'. Now, it is 'regionally-global' BRICS to assert India's potential on the world stage.
Why NDB?
The NDB is an innovative, reasonably presentable, flexible, need-based approach in the global financial crisis. To establish itself as a potential Southern development financial institution, the NDB needs to liberate itself from a neo-colonial mindset and open arms to other developing countries as equal partners in development. It must adhere to the catchy slogan, 'Sabka Saath Sabka Vikas’ (together with all, development for all). It is an exclusive Bank of BRICS but not for BRICS only.
The rationale of NDB under BRICS cropped up in 2009 by former Prime Minister Manmohan Singh in response to the perpetual inept inertia of reforming the World Bank and IMF governing structure. The US Congress has not bothered to ratify any of the reform proposals submitted during the G-20 meeting. So far, developed countries (US, European countries, and Japan) are making all decisions in IFIs, from restructuring the economy of borrower countries to approving developmental project loans and grants, even direction!
While the reformists, including Civil Society Organisations (CSOs) of trans-North Atlantic, relentlessly cried for overhauling the World Bank/IMF under '50 Years is not Enough' or 'Bretton Woods Project', 'Democratising World Bank', the Siamese twins (World Bank and IMF) are still insular to reform and doing business as usual! A fortnight back, the World Bank diluted one of its draft institutional policies (Safeguard Policy- Environment, Indigenous People and Resettlement) to be relevant in the 'development business'. This is largely due to borrower demands for less stringent policies and procedures to supplement donor countries' business status quo. Often, reformists' demand to change the twin towers of global economic and development structure is misplaced and homegrown.
Similarly, the E-5 feels uneasy witnessing the business of consultants, private companies, and technologies of donor countries, which comes with the IFI projects as riders or conditionality. It is a double whammy for developed countries. The NDB is eyeing taking that space from donor-driven development businesses within respective countries, both near and far.
The US appoints its citizens as President of the World Bank Group. With a tacit understanding (so-called convention), Europe has appointed its citizens as heads of the IMF since 1944. Back home in Asia, Japan appoints the President of ADB. Why must merit be a criterion rather than citizenship for appointing such posts? The common factor is that those with a significant shareholding capacity in these institutions will call the shot. Besides the appointment of BoDs who approve or cancel the development projects, its policies and programs are highly non-representative in these institutions.
Many high-risk projects in India, China, and other developing countries are being dropped or not entertained at conceptual or approval stages by IFIs as non-compliance with established policies angers the leaders and officials in the countries. Since 2004, India and China have been relentlessly suggesting diluting ADB policies to receive quick money for high-risk projects. Lately, a tremendous uneasiness in the political control of these institutions has been evolving among the donor countries, as seen in the Board Meetings/Minutes proceedings.
What NDB Must Begin With
The NDB must emerge as a progressive to anomalies of existing IFIs. Two immediate examples point towards a convincing argument of its rationale. The President of NDB is rotational among BRICS countries and five countries are equal shareholders each amounting $ 10 Billion USD. The NDB has a $ 100 billion USD capital reserve, only USD 55 billion less than the ADB. Many other details remain to be worked out before it starts lending in mid-2016. It is futile or baseless to compare the equal power among members to the 'doomed UN Security Council' as one US treasury member commented in The Hindu. The UNSC is a by-product of Cold War politics, not NDB.
The NDB, as an alternative in the present multiple crises, is complex and challenging. Despite poor track records of domestic policies of respective BRICS countries, it is expected that the NDB will formulate, adhere to and comply with international standards as its institutional policies. The NDB needs to factor in the decision-making process by allowing five countries' appointed representatives to have equal power in approving development projects. Further, in future, any developing country will join NDB and allow the same power as the E-5 despite their lesser shareholding capacity. The background work for increasing the bar of NDB-institutional policies, E-5 must open the feedback channel to gather opinions and experiences from all walks of life, especially vulnerable groups.
As the governing structure is essential, so is the formulation, implementation and evaluation of development projects. The NDB must avoid financing 'high-risk' projects in BRICS or Africa and beyond. Ensuring inclusive, participatory development throughout the development project cycle- from identifying a project to completion- would give NDB an advantage over the World Bank/ADB/EBRD (European Bank for Reconstruction and Development). To ensure the successful implementation of infrastructure projects NDB sets for financing, the Bank must take extra care to listen to project beneficiaries at the beginning. Likewise, NDB should walk ahead regarding greater institutional accountability and transparency than existing IFIs. The NDB must avoid intra-country fissures like the infamous 2009 spat between China and India in ADB on disputed areas.
India got its share to appoint the first president, which Brazil and Russia will follow. This can be considered a token victory for the Prime Minister of India in his first global summit. However, India's demand for host NDB headquarters was not thriving, and it has become China's largest shareholder in the reserve fund. India could have negotiated for Durban. Meanwhile, it should be noted that Delhi has had an international image problem since December 2012!
For NDB, its success remains as a unique platform for discussion, debate, and dialogue on issues close to the three continents—Asia, Africa, and South America—the 'continents of exploitation'. This is actual South-South Cooperation under Southern leadership!