• Tue
  • Dec 23, 2014
  • Updated: 12:28pm
My Take
PUBLISHED : Thursday, 17 July, 2014, 4:45am
UPDATED : Thursday, 17 July, 2014, 4:45am

Do we need a BRICS development bank?

Does the world need another development bank?

Brazil, Russia, India, China and South Africa have signed an agreement to create the Shanghai-based BRICS development bank. The aim is to create an alternative to the Western-dominated International Monetary Fund and World Bank. Along with the new bank, the five nations have created a US$100 billion contingency reserve arrangement, which will be co-managed by their central banks.

But we already have the China Development Bank (CDB), which has been active in lending across the African continent, and the Brazilian Development Bank. There are also the Latin American Reserve Fund and the Inter-American Development Bank. Closer to South Africa, there is the African Development Bank, which has close ties with the CDB through the China-Africa Development Fund. In Asia, we have the Asian Development Bank. And then, there are the lesser known ones like the Caribbean Development Bank and the Islamic Development Bank.

The world clearly does not lack non-Western or regional development banks and the funds that come with them. The field is seriously crowded. There is bound to be duplication of effort and resources, leading to waste. The BRICS summit in Brazil said the bank would help "emerging and developing nations mobilise resources for infrastructure and sustainable development projects", presumably to bypass the need to appeal for help from the dreaded IMF and World Bank.

This seems an expensive way for Xi Jinping , Vladimir Putin, Narendra Modi, Dilma Rousseff and Jacob Zuma to thumb their noses at Western financial institutions. Otherwise, they and their countries have little in common. Will it make loans without too many draconian conditions, as the IMF and World Bank have done amid much criticism? If so, how does the new bank expect to be repaid? There are always dangers, not least to reputation, by lending with few strings attached, as China has learned over the years.

Still, the BRICS bank may be good news for Argentina, which is facing default after losing a court case in the US to hold-out creditor hedge funds stemming from an earlier debt restructuring.


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I Gandhi
The BRICS development bank is exactly what BRICS needs. Not only will it institutionalise BRICS it have a bigger purpose of expanding BRICS influence into being a credible and positive alternative to Western imperialism and neo-colonialism. Within the next decade it will outstrip the G7. President Putin will be laughing at the US for killing off the useless G7.
I think Alex misses the whole point behind in setting up the new BRICS development plan. It is politic first, econcmy second and finance third. BRICS countries have shared their experience and development while World Bank and IMF have different agenda. China development bank is different as it is a China-only bank. BRICS development bank set up can also help to further faciliate inter-BRICS co-operation which can help create a multi-polar world.
How About
The issue with the dollar i.e. petro-dollar as the default reserved currency of the world is that US will go on irresponsibly squandering away their grandchildren's fortune, today. The trouble is that after the GFC not much has changed and not lot of questions, the right questions have been asked, let alone any talks of re-structuring. Coupled with the QEs, 60T debt and the manipulation of global equities, this is the sum of all fears i.e. everyone's retirement nest-tanks all rolled into one mega time-bomb.
Tick tock...
"In Asia, we have the Asian Development Bank"
Yes, but US and Japan, being the largest shareholders have extensive influence over lending policies and staffing. Since it's inception in 1966, only Japanese were elected as presidents.
IMO, the possibility of delinking from the US dollar is a game changer and may make the transactions more efficient in currency exchange terms between countries.
You know the Ruskies are p issed off whenever sanctions were brought up in connection with Crimea, Putin & Co long realized they couldn't keep all the gazprom money in dollars (to a lesser extent euro), so BRICs Bank must be the way to go.
But of course and it's only the very first move away to delink from the reserved dollar, Mr. Lo, you might want to ask Jake to check it out here www.internationalman.com/articles/checkers-versus-chess.


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