Feasibility and Acceptability of BRICS Development Bank
The acceptance of the feasibility of the BRICS Development Bank at the recently concluded Fifth BRICS Summit at Durban has sent a shivering effect on a certain section who criticise the very idea. A close observation of such concerted criticism can be grouped as who believes in 'status quo' since 1944- the establishment of the Siamese twins as International Bank for Reconstruction and Development (IBRD/World Bank) and International Monetary Fund (IMF) followed by regional institutions like Asian Development Bank (ADB), European Bank for Reconstruction and Development (EBRD), African Development Bank (AfDB) and Inter-American Development Bank (IDB). Ideally, the BRICS Development Bank (BDB) is a 'paradigm shift' against existing handful of 'developmental-knowledge brokers', claim to eradicate poverty.
Post 9/11, bloc building is the only means to achieve and secure the desired economic goals of ambitious countries while consistently advocating for a multipolar world. To maintain and sustain the so-called economic growth, emerging economies are bound to form blocs to protect their interests irrespective of the likeness of Neo-liberal mandarins. Thus, BRICS,-Brazil, Russia, India, China and South Africa-each placed in as regional power centres, has emerged potentially challenging the ongoing world (dis)order.
The rationale behind BDB is that existing international financial institutions (IFIs) are insular to reform. Developed countries (donors) holding all decisions from restructuring the economy of borrower countries to approving developmental loans and grants disagree that IFIs could not be reformed. Many Civil Society Organisations (CSOs) based in these countries and their counterparts in developing countries are also trying hard to reform the IFIs. However, nobody has the authority to know how the IFIs function other than Indian Prime Minister Dr Manmohan Singh, who had numerous impressive assignments ranging from governor to alternate governor in IMF, IBRD, and ADB since the 1970s. During the BRICS Summit in 2009, India proposed the establishment of BDB.
The inability to reform existing developmental financial architecture is not the only rationale behind establishing BDB. Internationally, the growing economic strength of India and China has not translated into actual decision-making power in IFIs. India, China and somewhat Russia feel uneasy witnessing business of consultants, private companies and technologies of donor countries side by side with developmental projects inside and outside of respective countries. With a structured development project cycle of investment, procurement and implementation, it is clear that the World Bank and ADB facilitate, create and establish markets for the donor countries. Therefore, BDB would also aim to facilitate such business and finding market for the BRICS exclusively.
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 of the latter, angers the leaders and officials in the countries. This shouldn't imply that IFIs are immune to executing dirty development projects across the world. Notwithstanding the internationally accepted policies adhered by IFIs as mandatory (Environment, Involuntary Resettlement, Indigenous People, Human Rights, Information Disclosure, Public Consultations, Gender Empowerment and so on), India and China as well as other BRICS countries could not stand at par with IFIs. As a result, many infrastructure projects are being dropped, delayed or financed from unaccountable and non-transparent offshore funds. Could World Bank or ADB have financed the infamous Three Gorges Dam on the Yangtze River in China?
Since 2004, India and China have relentlessly suggested diluting ADB policies to receive quick money for high-risk projects. ADB has somehow tuned to their demands by creating innovative project processing facilities.
The infrastructure needs of the BRICS countries amount to $4.5 trillion over the next five years only, not to mention other developing countries. The BDB will be an immediate finance window without attaching any stringent policies to comply with or conditions to be followed.
As of now, major donor countries led by US and EU have established their area of influence through their financial arms- DFID, USAID, JICA, GTZ, SDC, EU and so on-along with IFIs 3 Ps (projects, programs and policies). Comparing to these bilateral agencies, China, India and Russia have increased their outward development assistances in Africa, Asia and South America. For example, in the last 20 years, all donor agencies, including IFIs, have spent approximately $ 395 million in the energy sector of Kyrgyzstan. Last year, China declared to support a massive $ 595 million to lay transmission lines through the Chinese EXIM Bank. Similarly, Russia extended support amounting $ 790 million to build series of hydropower in Kyrgyzstan. The BDB will be expected to channel such funds within BRICS and beyond.
In close vicinity, the World Bank has withdrawn from Bangladesh's massive $ 1.5 billion Padma River Barrage project due to corruption. In Nepal, the World Bank dropped the Arun series of hydropower structures. In Pakistan, the $11.9 billion Diamer-Bhasha dam project is finding difficulties in receiving funds from WB and ADB. The Jetigede dam project in Indonesia was rejected by the World Bank but picked up by China. Many hydropower structures in the Mekong River, Amazon River, Indus River, Eastern Himalaya River, and Syr Darya River await funds. For these cash-crunch countries, the BDB will be another financial mechanism. Do remember that Russia supports the most controversial Kudankulam Nuclear Power Plant in Tamil Nadu (India).
For a decade or so, India, China and Russia are being able to fund various development projects in Africa, Asia and South America. Through BDB, they will formalise such financial support and get international acknowledgement as a multilateral fund. Through the IBSA (India-Brazil-South Africa) Trust Fund, India has supported Mekong, Africa and South American countries since 2004. Islamic Development Bank (IDB) has extended financial support to predominantly Muslim countries. Eurasia Development Bank (EDB) has been set to develop Eurasia. The Bank of the South (BancoSur), with an initial capital of US$20 billion, is to counter World Bank and IMF in South America.
With the establishment of BDB, the Manila-based ADB will be hit hard. World Bank and IMF have welcomed the initiative. At best, BDB will be a co-financer of high-risk projects for the World Bank, EBRD and ADB in the coming years, as the Islamic Development Bank has been doing. Officially, the ADB has not issued any statement. Note that India and China are the third and fourth largest shareholders and the two largest borrowers of the Bank (annually, $ 4.5 billion on average out of ADB's $ 22 billion annual lending). Mostly, the infrastructure portfolio accounts for 32 per cent of total ADB yearly lending. As a regional IFI, ADB's operations in Asia will be rivalled by BDB, even if they seem complementary and supplementary. The ADB's balancing act between India and China has seen many ups and downs. Even appointing Vice President from India and China into its five collegium of VPs, ADB has failed to tame Asian giants. Under the Accountability Mechanism of ADB, the Bank's mission to Beijing has already irked the Chinese government's sovereignty issue. The forthcoming Annual Governor's Meeting of ADB in Noida (May 2-5) will be interesting to garner support for BDB by the Indian Finance Minister and Chairman of Governors of ADB -PC Chidambaram.
Manmohan's India needs economic growth rather than environmental preservation. While Putin's Russia is reluctant to care about the environment, Communist China greedily exploits natural resources to feed its gigantic economy. Dilma Rousseff's Brazil - home to the largest rain forest- has witnessed Earth Summit (1992) and Rio+ 20 (2012), as well, as Juma's South Africa hosted WSSD (Rio+10). BRICS countries are distinctly diverse in their economies and approaches to sustainable development. But finding unity in BRICS, like the famous Indian ethos 'Unity in Diversity', has more bumpy roads ahead.
However, the track record of environmental, human rights and livelihood violations by India, China and Russia speaks volumes when it comes to development projects. In India, POSCO, Kudankulam nuclear plant, Sardar Sarovar Dam, Vedanta, Teesta Hydel, Tata in Singur, and Kalinga Nagar, to name a few, have highlighted the gross violation of the environment, social and economic rights of people. Not to mention the sporadic land grabbing by Indian companies in Africa (Ethiopia) and South America. Unless the procedural flaws in governance can't be addressed within and beyond and Indian Inc. is not accountable to its citizens, the BDB seems unacceptable. India first put its house in order through demonstrations. The same applies to China, Russia, Brazil and South Africa.
BDB can draw lessons from the last 60 years of grave mistakes made by IFIs. There will be inherent friction in finalising the place of headquarters, subscribing capital, amount of funds, and so on, as normal procedures in public and private banks. Manila was not the first choice for ADB. Likes of Indonesia, Chile, Vietnam, and Egypt would gladly join to satisfy their infrastructure needs. Notwithstanding premature criticism hurled at the BRICS or BDB, the success remains a unique platform of discussion, debate and dialogue on issues close to the continents of exploitation: South America, Asia, and Africa.