The New Development Bank: A Building Block of an Alternative World Order?

The BRICS countries – Brazil, Russia, India, China, and South Africa – agreed to base the New Development Bank in Shanghai during the 6th BRICS summit. This New Development Bank is being portrayed by the media as a building block of an alternative world order. Aimed at infrastructure financing, the bank’s initial $50 million capital budget will be shared evenly among the five countries. Meanwhile, a contingent reserve arrangement (CRA) is being set up as a rainy day fund. China will contribute $40 billion to the CRA, followed by Brazil, India, and Russia each with $18 billion and South Africa’s $5 billion – proportional to the size of the member countries’ economies. India will hold the presidency in the first rotation, Brazil and Russia will take the roles of inaugural Chairman of the Board of Directors and the inaugural Chairman of the Board of Governors respectively, and a regional headquarters will be set up in South Africa.

Recently, Dr. Ravni Thakur, a senior research fellow at the independent non-partisan think tank Delhi Policy Group published an issue brief in which she argues that Russia’s massive oil reserves can help augment the needs of China and India. India can leverage its IT and service sector, Brazil its agriculture, and South Africa its minerals. In spite of real traction and common economic interests, Dr. Thakur argues against the likelihood of the new institution supplanting Western hegemony as lack of agreement might inhibit meaningful strategic and security cooperation.

In Dr. Thakur’s view, with Russia and China as permanent members of the Security Council and Non-Proliferation of Nuclear Weapons (NPT) recognized nuclear powers, the BRICS nations are actually divided into two groups. For geo-political reasons, India, Brazil, and South Africa (IBSA) share more common interests with one another than with China and Russia.

Additionally, as Russia’s isolation deepens in the face of Western sanctions, each country’s bilateral and global ties will cast uncertainty over BRICS’ maneuverability as a whole. IBSA will have to tread carefully when weighing in on the disagreements between Russia and the West over Ukraine and between Beijing and Washington regarding China’s assertiveness in the South and East China Seas.

Another concern lies in China’s relation with India. China’s position on reforms within the UN Security Council and ambiguity on India’s engagement with the international nuclear regimes will cast doubt for India regarding how far India can work together within a strategic framework with China. Meanwhile, India’s increasing partnerships with Japan also intensified the wrestling between these two parties.

Given these concerns, the cold war ideological construct of BRICS challenging Western hegemony is probably untenable. Even though China and Russia represent a challenge to the West in certain arenas, IBSA are far less likely to join them. Still hungry for Western investment, IBSA might not want to be seen as a rigid economic block. For example, India is trying to rejuvenate its relationship with the United States and cannot risk the consequences of an anti-West posture.

Finally, the role and intentions of China draw tremendous attention. China’s attitude toward genuine multi-polarity and polycentric power is still ambiguous. Dr. Thakur highlights Alistair Ian Johnston’s analysis of Chinese historical statecraft and the notion that “multi-polarity is both unstable and morally illegitimate in a system that includes Chinese civilization—the natural and inevitable state of which is to exist as the moral and political hub of the world.”

Despite all these uncertainties, the public and media within the BRICS countries are reportedly optimistic about the future partnership. Brazil and South Africa are proud to spur economic growth in Latin America and Africa. Both China and India are proponents and beneficiaries of the “Rise of Asia” and have a strong presence in Africa. Considering that the BRICS were first lumped together by a New York hedge fund manager, the New Development Bank represents an intriguing deepening of ties within a developing bloc that will be closely monitored around the world.

Article Source: Dr. Ravni Thakur, “Institutionalizing BRICS: The New Development Bank and Its Implications,” Delhi Policy Group, August 2014.

Feature Photo:cc/(Blog do Planalto)