New BRICS development bank will help the global economy to grow
The West-centric world order drove the fastest-developing countries, Brazil, Russia, India, China and South Africa, to set up their own organisation under the banner of their acronym, BRICS. The institution they opened in Shanghai on Tuesday, the New Development Bank, plainly states on its website that it provides "an alternative to the US-dominated World Bank and International Monetary Fund". But the reality, backed by the assertions of officials from both sides, is that it is about supplementing rather than supplanting. By keeping true to that objective, member nations will benefit, but by extension, so, too, will the global economy.
Financing infrastructure projects in member countries will be the bank's initial aim when it begins operations either at the end of this year or early in 2016. While BRICS countries were driving world growth when the organisation was established in 2009, the flat global economy and Western sanctions against Russia have caused a considerable slowdown, necessitating a developmental kick-start. There is even greater impetus given the IMF's downgrading of international growth this year to 3.3 per cent and with the US tipped to raise interest rates in coming months, which may prompt an outflow of capital from developing and emerging economies.
Healthy BRICS economies are important for global development and vice versa. The nations have 40 per cent of the world's population, account for about 20 per cent of GDP and contribute almost half the growth. Such significance is why officials have welcomed the bank in terms of supporting the work of other financial institutions, including the Asian Infrastructure Investment Bank, also being pushed by China.
But there is another goal: Finance Minister Lou Jiwei said it would help "explore innovations in governance models", while bank president Kundapur Vaman Kamath said it would "improve and complement the system in our own way". The new bank is a major achievement for BRICS, but could also help shore up and even grow the global economy.