The BRICS‐led Development Bank: Purpose and Politics beyond the G20
| Date | 01 September 2014 |
| DOI | http://doi.org/10.1111/1758-5899.12167 |
| Author | Gregory T. Chin |
| Published date | 01 September 2014 |
The BRICS-led Development Bank: Purpose
and Politics beyond the G20
Gregory T. Chin
York University, Canada
Abstract
This article examines why the BRICS Development Bank is being created and the role it will play in the global economy
and world development. After describing some of the critical needs that are driving the formation of this new multilat-
eral development bank, I discuss how the creation of the BRICS bank is linked to failures among traditional funders to
deliver on their commitments, especially in terms of infrastructure investment. This article also outlines the national
interests that each BRICS country has in the BRICS bank, and the main challenges that the BRICS countries are facing in
transforming this idea into reality.
Policy Implications
•Strategic assessment of the potential for a BRICS bank would benefit from a comprehensive perspective that can
decipher how the lack of ‘sameness’in the national interests and diplomatic styles of the BRICS countries can have
dual effects for collective action –sometimes obstructing, and sometimes providing the bases for, coherent inter-
vention.
•Each of the BRICS countries has its own national development bank, and the existing multilateral development
banks are now looking to return to infrastructure. The specific value added by a joint BRICS development bank
needs to be identified and articulated.
•The unequal weight and influence of the BRICS countries is generating political tensions in the negotiations around
the BRICS bank. The mitigation of these constraints depends on a proactive response, including innovative gover-
nance, and power-sharing and benefit-sharing arrangements.
In India in March 2012, the leaders of the so-called BRICS
countries (Brazil, Russia, India, China and South Africa) con-
sidered a proposal to establish a new joint development
bank for ‘mobilizing resources for infrastructure and sus-
tainable development projects in BRICS and other emerg-
ing economies and developing countries’,to‘supplement’
the existing efforts of multilateral and regional financial
institutions for international development (Ministry of
External Affairs, India, 2012). At their next summit in South
Africa in March 2013, the BRICS countries announced that
‘we have agreed to establish the New Development Bank.
The initial contribution to the Bank should be substantial
and sufficient for the Bank to be effective in financing
infrastructure’(Republic of South Africa, 2013). By August
2013, the governments agreed that the BRICS-led Devel-
opment Bank (BDB) would start with an initial subscribed
capital of $50 billion, with the respective governments
each contributing US$10 billion. A month later, it was
reported that the BRICS leaders had made progress in
negotiating the bank’s capital structure, membership,
shareholding and governance (Kelly and Soto, 2013).
Why is the BDB being created? What role will it play in
the global economy and in world development? After
describing some of the critical needs that are driving the
formation of this new multilateral development bank, this
article discusses how the creation of the BDB is linked to
failures among traditional funders to deliver on their
commitments in terms of infrastructure investment. This
article also outlines the national interests that each BRICS
country has in the BDB, and the main challenges that
the BRICS countries are facing in transforming this idea
into reality.
Purpose
Scepticism on the BRICS countries abounds. Recently the
progenitor of the term ‘BRICs’, Jim O’Neill (formerly of
Goldman Sachs), wrote that the ‘vagueness’of the details
about the BRICS bank’s headquarters and funding
arrangements, coming out of the Durban summit, sug-
gests that the bank’s‘true purpose hasn’t been worked
out’(O’Neill, 2013). Further, he writes, ‘one of the main
©2014 University of Durham and John Wiley & Sons, Ltd. Global Policy (2014) 5:3 doi: 10.1111/1758-5899.12167
Global Policy Volume 5 . Issue 3 . September 2014
366
Special Section Article
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