The BRICS Coming of Age and the New Development Bank
| Author | Julien Marcel Demeulemeester,Sergio Gusmão Suchodolski |
| Date | 01 November 2018 |
| DOI | http://doi.org/10.1111/1758-5899.12600 |
| Published date | 01 November 2018 |
The BRICS Coming of Age and the New
Development Bank
Sergio Gusm~
ao Suchodolski and Julien Marcel Demeulemeester
New Development Bank
Abstract
The robust economic growth of developing countries revived discussions about the need for a global financial architecture
that is more representative of today’s economic and political realities. The world is now markedly different from the moment
the Bretton Woods institutions were created. The BRICS now account for a substantive share of global GDP, however, this was
not reflected in equivalent voting power in existing multilateral institutions. As a response, they created institutions like the
New Development Bank (NDB) and the Contingent Reserve Agreement (CRA), symbolizing a shift of economic and political
power towards emerging countries. Against this backdrop, this paper explores the growing importance of BRICS countries as
contributors to the global economy and to global governance. Using NDB as a case-study, the paper explores the origins of
the Bank and attempts to answer why a new institution was needed, elaborating on five practical examples in which NDB
could contribute with innovations to the modus operandi of multilateral development banking. The authors argue that out of
all multilateral development banks created in the past decades, the NDB has the largest potential to catalyze changes in the
Bretton Woods institutions and to grow as an alternative to them.
The robust economic growth of developing countries and
the financial crisis of 2008 revived discussions about the
need for a global financial architecture that is more repre-
sentative of today’s economic and political realities. Existing
multilateral institutions have proved not prepared for the
new challenges of the 21st century, both by failing to deli-
ver upon the expectations of some of their shareholders
and by failing to adapt themselves to these new realities. So
far, the reform initiatives unleashed in the aftermath of the
crisis have been of limited practical impact.
The G20 emerged as the main forum for negotiating eco-
nomic and financial cooperationamong major countries. It was
clearly a step-forward from the G7 in terms of representative-
ness of developing countries, however, still far from universally
representative. Overall, the group has fallen short in delivering
many of its core commitments, particularly in enhancing the
voices and representation of emerging countries in global insti-
tutions. The re-allocation of quotas and redistribution of voting
power in the IMF had only a marginaleffect.
The limited success of such initiatives has prompted
developing countries to start acting on their own, based on
the belief that governance structures created over 70 years
ago are no longer representative of today’s realities. Spear-
headed by the BRICS, institutions like the New Development
Bank (NDB) and the Contingent Reserve Agreement (CRA)
symbolize a shift of economic and political power towards
emerging countries. In fact, according to IMF’s GDP data
measured in PPP terms, the BRICS now have a larger share
of the world economy than the G7, the countries that domi-
nated global economy and politics for the last century.
Against this backdrop, this paper will briefly explore the
growing importance of BRICS countries as contributors to
the global economy and to global governance. It will then
focus on the NDB, by exploring its origins and suggesting
that it was born as a giant start-up within the community of
multilateral development banks (MDBs). In the following sec-
tions, the paper will attempt to answer why a new institu-
tion was needed and highlight what is new about the NDB.
The last section will finalize the paper by exploring the way
forward.
BRICS and global governance
As many other initiatives in the world of politics, the BRICS
had an unconventional origin. In 2001, an economist from
Goldman Sachs coined the term BRIC to label some of the
world’s fastest growing emerging countries –Brazil, Russia,
India and China. His report envisaged that these countries
would become a much larger force in the global economy
and that the global policy making forums should be
adjusted to incorporate BRICs representatives (O’Neill, 2001).
The term gained popularity among media and academia,
and the idea ended up being embraced by the leaderships
of each country. The initiative reportedly started from the
Russian side: in 2006, Russian President Vladimir Putin pro-
posed the four countries to meet at the ministerial level (De
Robertis, 2016). The group was then formalized and its rep-
resentatives started meeting on the margins of multilateral
events, such as the United Nations General Assembly and
the G8 Summit. The first BRICS Summit took place in 2009
©2018 University of Durham and John Wiley & Sons, Ltd. Global Policy (2018) 9:4 doi: 10.1111/1758-5899.12600
Global Policy Volume 9 . Issue 4 . November 2018
578
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