The BRICS’ New Development Bank: Shifting from Material Leverage to Innovative Capacity
| DOI | http://doi.org/10.1111/1758-5899.12458 |
| Date | 01 September 2017 |
| Published date | 01 September 2017 |
The BRICS’New Development Bank: Shifting
from Material Leverage to Innovative Capacity
Andrew F. Cooper
University of Waterloo
Abstract
This article argues that the BRICS’New Development Bank (NDB) deserves more attention not because it is equivalent to the
Asian Infrastructure Investment Bank (AIIB) but because of its differences. Unlike the AIIB the NDB does not possess impressive
material capacity or overt connections to a wider state-led geo-political strategy. What distinguishes the NDB is its creative
design with four significant elements of novelty. Unlike other multilateral financial institutions, including the AIIB, the NDB is
committed to a principle of equality across its core membership. Product innovation is advanced by its promotion of sustain-
able development with an exclusive focus on niche clean renewable energy projects. The expressed aim of the NDB with
regard to resources is to use green bonds denominated in BRICS’national currencies. And the focus on delivery centers on
the need for speed. Although each of these elements face severe tests, the ability of the NDB to navigate around serious
internal tensions through improvisation and trade-offs points to an original emerging pattern of collective policy making and
global governance.
Policy Implications
•The principle of equality as pursued by the NDB merits closer attention, especially when the differences in the material
capability of the BRICS members are considered. The principle should be beneficial in leveraging organizational differentia-
tion as well as facilitating collective action, but it also opens up the possibility of internal rifts.
•An exploration of the potential value added offered by the NDB bending the traditional model of development in terms
of product innovation towards niche clean energy projects.
•The unequal weight and influence of China over the rest of the membership comes to the fore in the area of bond issu-
ance in national currencies of the BRICS members and in the relationship of the BRICS with credit rating agencies.
•An appreciation of the incentives on the part of the NDB to provide a dynamic of speed as a means of compensating for
the slow launch of the NDB in comparison to the AIIB.
The New Development Bank (NDB) has not received the
attention it deserves. The launch of the NDB has been over-
shadowed by the China-backed Asian Infrastructure Invest-
ment Bank (AIIB). While the AIIB is consistent with a model
of structural-driven change in global politics, the NDB neces-
sitates a more nuanced analysis around collective agency.
With 26.06 per cent of voting rights and a 30.34 per cent or
US$29.78 billion stake of the US$100 billion capital base
(AIIB, 2015), China possesses a de facto veto in the AIIB. In
sharp contrast the initial subscribed capital of US$50 billion
in the NDB is equally shared among its five members, China
along with India, Brazil, Russia and South Africa (New Devel-
opment Bank, 2014). While the NDB has so far restrained
from expanding beyond the BRICS, the AIIB opened up to
57 founding members thereby driving a wedge between
those countries willing to follow Beijing’s lead and those
(notably the United States and Japan) resistant in doing so.
Although the extent of the global reach of the NDB is still
very much in doubt, the AIIB is tied more explicitly to the
‘One Belt One Road’(OBOR) or ‘The Belt and Road Initiative’
(BRI) designed to advance infrastructural development both
on the westward land route from China through Central
Asia and on the southerly maritime routes from China
through Southeast Asia and to South Asia, Africa, and Eur-
ope (Callahan, 2016; Chin, 2016; EU, 2015).
If the image of AIIB is one of the assertion of power asso-
ciated with the on-going rise of a single actor as a regional
and global power (Dollar, 2015; Smith, 2015; Whyte, 2015)
the NDB is seen by many observers as burdened by the fra-
gility of the BRICS’shared identification. Originally created
by Jim O’Neill and Goldman Sachs in 2001 to highlight the
parallel trajectories (and investment opportunities) of the
four original big and fast growing BRIC entities, the concept
took on institutional life with the creation first of BRIC as an
official summit process in 2009 and subsequently (with the
addition of South Africa) BRICS in 2011. Notwithstanding this
progress, however, pervasive skepticism remains about how
this transition from artificial acronym into diplomatic club
plays out in terms of operational effectiveness. Although
proving resilient to the immediate shocks set off by the
Global Policy (2017) 8:3 doi: 10.1111/1758-5899.12458 ©2017 University of Durham and John Wiley & Sons, Ltd.
Global Policy Volume 8 . Issue 3 . September 2017 275
Research Article
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