A roadmap for New Development Bank (NDB):
The target of the Bank is to achieve the balance which existed in 1CE among the nations, providing for equitable share of World GDP in purchasing-power parity terms. This parity is exemplified by the histogram presented by Angus Maddison highlighting the impoverishment over the last 2000 years caused by imperialist designs of the Western powers which are now symbolized by the dominance of the US $ as the international currency.
A beginning has to be made to provide an alternative to the IMF_World Bank duo who have dominated international finance and to the marketplace exemplified by financial derivatives used by the markets, wrecking the prospects of developing economies to get out of the poverty-trap.
Japan should choose to get into the New Development Bank to signal the arrival of a global shift in the economic power balance with the announcement of an Indian Ocean Community along the Indian Ocean Rim.![]()
The NDB should start its march with the execution of Trans-Asian Highway and Railway Projects and to promote development projects for sustainable use the Himalayan river waters: Brahmaputra, Mekong, Irrawadi, Salween, Yangtse, Huang-he and to maintain glacial balance of the Himalayan ranges.
Kalyanaraman
![Brics-2]( "Brics-2")
BRICS Development Bank launched, first president to be from India
BRICS group of emerging powers launched a $50 billion development bank on Tuesday.
FORTALEZA, Brazil: The BRICS group of emerging powers launched a $50 billion development bank on Tuesday to be based in Shanghai and a $100 billion crisis contingency fund, according to a joint declaration.
The new development bank's first president will be from India while the board's chairman will be Brazilian, according to the declaration released at a summit in Fortaleza, Brazil.
The bank will have an initial subscribed capital of $50 billion followed by an authorized capital of $100 billion, equally shared among Brazil, Russia, China, India and South Africa. The Contingency Reserve Arrangement will have an initial size of $100 billion and will help countries avoid "short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements."
The bank and fund are seen as counterweights to the Western-dominated World Bank and International Monetary Fund, which BRICS nations say need more reform to give emerging nations more voting rights.
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READ ALSO: Modi to press for equal shareholding in proposed BRICS bank
The new development bank's first president will be from India while the board's chairman will be Brazilian, according to the declaration released at a summit in Fortaleza, Brazil.
The bank will have an initial subscribed capital of $50 billion followed by an authorized capital of $100 billion, equally shared among Brazil, Russia, China, India and South Africa. The Contingency Reserve Arrangement will have an initial size of $100 billion and will help countries avoid "short-term liquidity pressures, promote further BRICS cooperation, strengthen the global financial safety net and complement existing international arrangements."
The bank and fund are seen as counterweights to the Western-dominated World Bank and International Monetary Fund, which BRICS nations say need more reform to give emerging nations more voting rights.
READ ALSO: Modi to press for equal shareholding in proposed BRICS bank
Faced With Western Freeze-Out, BRICS Bank Is a Coup for Russia
Top of the agenda at the sixth summit of the BRICS developing nations beginning Tuesday is the founding of two multilateral financial institutions designed to erode the dominance of the World Bank and International Monetary Fund as arbiters of the global economic system.
For Russia, the creation of a $100 billion BRICS development bank and a reserve currency fund worth another $100 billion is a political coup. Just as the West freezes Russia out of its own economic system as punishment for its politics in Ukraine, Russia is tying itself into the financial superstructure of the next generation of economic heavyweights: India, Brazil, China and South Africa.
The World Bank and the IMF have come under criticism from the rapidly developing BRICS, who together account for 20 percent of global GDP and 40 percent of the world's population. In their view, the two financial institutions are dominated by the rich nations of the G7 and attach stringent conditions to their lending that impinge on the economic sovereignty of its members.
Far from assuaging their complaints, efforts to reform the 70-year-old institutions have stalled. Proposed updates to the IMF that would grant increased influence to developing economies have been languishing in the U.S. Congress since 2010 and were blocked once again in April.
If the framework agreements due to be signed at the BRICS summit in Fortaleza, Brazil, are ratified at home, the new bank and the reserve fund could ease some problems for the BRICS countries. U.S. tightening of the dollar supply starting last year has caused a wave of crises in developing nations as the cash inflows of the past decade begin to reverse themselves.
Meanwhile, the World Bank estimates the annual need for infrastructure investment in low- and middle-income nations at $1 trillion dollars and rising — far beyond its own capacity. The World Bank reports that it gave out $52.6 billion in 2013, not all of which went to infrastructure projects.
The New Order
Last week, Russian Finance Minister Anton Siluanov shed some light on the mechanics of the fledgling institutions.
The BRICS bank will have starting capital of $50 billion, made up of $10 billion in cash and $40 billion in guarantees, Siluanov told RIA Novosti. Each BRICS country will contribute $2 billion to the starting capital pot. In the longer term, capital will rise to $100 billion.
The bank is to be named the New Development Bank, Siluanov said, signifying that other developing countries are welcome to join, although the BRICS countries' share will not be allowed to fall below 55 percent.
Likely headquartered in Shanghai, the bank is expected to make its first loans in 2016 and will focus on bi- or multilateral development projects involving companies from participant countries. According to a report for the UN released in March by Columbia University economist Stephany Griffith-Jones, the bank could could ramp up lending to $34 billion per year within 20 years.
While the New Development Bank will be based on equal shares, the $100 billion contingency dollar reserve fund, which Siluanov referred to as a "mini-IMF," will factor in China's extra weight. China will contribute $41 billion to the total pool; South Africa will give $5 billion; and Russia, Brazil and India will contribute $18 billion each.
However, a system of multipliers will compensate for the imbalance in contributions — China will be able to use half of what it put in, or $20.5 billion; South Africa will have access to double its contribution, or $10 billion; while Russia, India and Brazil will be able to receive the sum that they committed, Siluanov said.
Each country would hold the amount in their own reserves. In the event of a crisis, the pool would be used to buy up the unlucky country's local currency to staunch the outflow of capital.
The five countries will be able to receive a third of their contributions on request. But, perhaps in an indication that it is not easy to escape the existing international financial system, further aid will depend on the existence of an IMF stabilization program for the country.
The BRICS countries will be represented by their finance ministers or Central Bank chiefs, who are to sit on the governing body of the contingency fund. The fund will be steered by representatives of the participating countries' Central Banks under the supervision of a BRICS nation, selected on the basis of an annually rotating presidency.
Will It Work?
Just before flying to South America, Russian President Vladimir Putin repeated his well-worn line about the emerging multipolar global order, but if the aim of the new institutions is to rival the rich world's international financial infrastructure, the BRICS are an odd group to take on the task.
Lumped together in an acronym by Goldman Sachs economist Jim O'Neill in 2001, 13 years on the BRICS countries are an amorphous bunch with little to bind their aims, said Maxim Osadchy, head of analysis at Moscow-based Corporate Finance Bank. Politically, economically and geographically, the countries have little in common.
Beyond that, there is China's overwhelming economic force within the group. China's economy is bigger than those of all the other BRICS combined. And it is growing faster. At its current rate, China will add a new Russia to its economy within 2 1/2 years. India, with its vast population, is the only other BRIC with the obvious potential to play in the same ballpark.
By virtue of this imbalance, "first fiddle [in the new institutions] will be played by China and India," Osadchy said, and these two will likely gain the most.
But given the incoherence of the group, he added, the bank may well be "stillborn."
Financially, Russia may not even need the new structures. Even amid a series of economic blows this year, including capital outflow resulting from the Ukraine crisis, a global redistribution of capital toward developed markets and the likely reluctance of multilateral lenders to finance new Russian projects, the country is well equipped to defend itself. Russia is sitting on foreign currency reserves worth a whopping $480 billion and is looking forward to a healthy oil revenue-funded budget surplus this year.
As for the infrastructure projects that development banks typically fund, the Russian government already spends billions of dollars on financing infrastructure each year.
But access to funding alone may not be the point: If the New Development Bank is able to match the efficiency of the World Bank and the IMF, it could be a more effective financier of infrastructure projects than the Russian government, which is often accused of wasteful spending, said Alexander Morozov, chief economist for Russia at HSBC.
According to Morozov, excessive Chinese sway over the institutions is precluded by the equality written into the agreements: It is "far from domination," he said. Indeed, Russia stands to gain from roaring Chinese growth, as it generates demand for new infrastructure between the two countries.
No Polarization
Russia's recent experience over Ukraine has shown that the West is ready to eject politically unruly countries from its economic system. If they are able to successfully establish themselves, the BRICS's inauguration of multilateral financial institutions rooted outside the reach of Western oversight could provide insulation from Western economic clout to countries like Russia and China, whose growth threatens to put it at odds with Japan, a U.S. ally and G7 member.
However, there is no reason to think that the BRICS newbies must clash with their older cousins provided the desire to cooperate is there, Morozov said.
"The more good development banks, the better," he concluded.
See also:
Contact the author at p.hobson@imedia.ru
Anti-Dollar Alliance Prepares Launch Of BRICS Bank
Three months ago we discussed in detail the growing anti-dollar hegemony alliances that were building across the BRICS countries (Brazil, Russia, India, China and South Africa). Their efforts at the time, to create a structure that would serve as an alternative to the IMF and the World Bank (which are dominated by the U.S. and the EU), appear to be nearing completion. As AP reports, Brazil's President Dilma Rousseff and Russia's Vladimir Putin have discussed the creation of a development bank to promote growth across the BRICS and hope to produce an agreement on the proposed institution at this week's BRICS Summit.
Brazil's President Dilma Rousseff and Russia's Vladimir Putin have discussed the creation of a development bank to promote growth in Brazil, India, China, Russia and South Africa.Rousseff received Putin in the presidential palace in Brasilia on Monday, a day before leaders of the five emerging BRICS nations meet in the northeastern city of Fortaleza.Rousseff told reporters the bank would top the summit's agenda,adding she hoped the event would produce an agreement on the proposed institution.She said the five countries "are among the largest in the world and cannot content themselves in the middle of the 21st century with any kind of dependency."Brazil and Russia also signed bilateral accords on air defense, gas and education
The leaders who will be present (not so many big fans of the US there)...
They seem serious:
- *BRICS DEVELOPMENT BANK KEY TO FOSTER GROWTH IN GROUP: BORGES
- *BRICS BANK AT 1ST TO FINANCE EXCLUSIVELY INFRASTRUCTURE:BORGES
- *RUSSIA'S PUTIN SAYS COOPERATION WITH CHINA IS GROWING
- *PUTIN SAYS RUSSIA TO PROMOTE CURRENCY SWAP WITH CHINA: XINHUA
As we concluded previously, as RBTH reports, it seems the BRICS are not slowing down efforts to create their own IMF-alternative...
The BRICS countries (Brazil, Russia, India, China and South Africa) have made significant progress in setting up structures that would serve as an alternative to the International Monetary Fund and the World Bank, which are dominated by the U.S. and the EU. A currency reserve pool, as a replacement for the IMF, and a BRICS development bank, as a replacement for the World Bank, will begin operating as soon as in 2015, Russian Ambassador at Large Vadim Lukov has said.Brazil has already drafted a charter for the BRICS Development Bank, while Russia is drawing up intergovernmental agreements on setting the bank up, he added.In addition, the BRICS countries have already agreed on the amount of authorized capital for the new institutions: $100 billion each. "Talks are under way on the distribution of the initial capital of $50 billion between the partners and on the location for the headquarters of the bank. Each of the BRICS countries has expressed a considerable interest in having the headquarters on its territory," Lukov said.It is expected that contributions to the currency reserve pool will be as follows: China, $41 billion; Brazil, India, and Russia, $18 billion each; and South Africa, $5 billion. The amount of the contributions reflects the size of the countries' economies....The creation of the BRICS Development Bank has a political significance too, since it allows its member states to promote their interests abroad. "It is a political move that can highlight the strengthening positions of countries whose opinion is frequently ignored by their developed American and European colleagues. The stronger this union and its positions on the world arena are, the easier it will be for its members to protect their own interests," points out Natalya Samoilova, head of research at the investment company Golden Hills-Kapital AM.
Perhaps the following sums it all up perfectly...
Economists warn the IMF's legitimacy is at stake, and they say U.S. standing abroad is being eroded.
"Eroded" indeed...
* * *
If the current trend continues, soon the dollar will be abandoned by most of the significant global economies and it will be kicked out of the global trade finance. Washington's bullying will make even former American allies choose the anti-dollar alliance instead of the existing dollar-based monetary system. The point of no return for the dollar may be much closer than it is generally thought. In fact, the greenback may have already past its point of no return on its way to irrelevance.
Modi to press for equal shareholding in proposed BRICS bank
India will press for equal shareholding for its five member countries in the proposed $50 billion BRICS Development Bank so that no shareholder dominates.
FORTALEZA, Brazil: Prime Minister Narendra Modi will launch his first multilateral engagement in this seaside city of Brazil, meeting Russian President Vladimir Putin and Chinese President Xi Jinping ahead of Tuesday's BRICS Summit at which India will press for equal shareholding for its five member countries in the proposed $50 billion BRICS Development Bank so that no shareholder dominates.
As the football World Cup fever recedes in this soccer crazy nation, Modi will join Putin, Xi, South African President Jacob Zuma and the host President Dilma Rousseff in deliberations over the proposed bank, international financial architecture and other issues at Fortaleza, one of the host cities of the World Cup which ended yesterday with Germany emerging the world champions.
India is keen on the issue of equal share holding since it does not want a repeat of the distortions that have crept into Bretton Woods institutions like International Monetary Fund, World Bank and the Asian Development Bank in which rich countries like the US and Japan have a strangle hold.
Modi will also discuss the possible outcomes of the two-day summit on other issues like reforms of the Un security council and international financial architecture.
Sources said India's primary goal is equal shareholding for all the members — Brazil, Russia, India, China and South Africa.
The BRICS Development bank, an idea which was conceived in Delhi in 2012 and approved in Durban last year, is to be set up with an initial corpus of $50 billion, with scope for expansion up to $100 billion when new members are added.
For the initial $50 billion, India wants equal contribution by all the five members of $10 billion. This is because India doesn't want the development bank to fall into the ownership pattern of IMF and World Bank, with a distorted share holding.
The other priority for India are about the presidency of the bank and the name to be given for it. Apparently, India would like it to be called the New Development Bank, an expression used by Modi in his departure statement yesterday.
As the football World Cup fever recedes in this soccer crazy nation, Modi will join Putin, Xi, South African President Jacob Zuma and the host President Dilma Rousseff in deliberations over the proposed bank, international financial architecture and other issues at Fortaleza, one of the host cities of the World Cup which ended yesterday with Germany emerging the world champions.
India is keen on the issue of equal share holding since it does not want a repeat of the distortions that have crept into Bretton Woods institutions like International Monetary Fund, World Bank and the Asian Development Bank in which rich countries like the US and Japan have a strangle hold.
Modi will also discuss the possible outcomes of the two-day summit on other issues like reforms of the Un security council and international financial architecture.
Sources said India's primary goal is equal shareholding for all the members — Brazil, Russia, India, China and South Africa.
The BRICS Development bank, an idea which was conceived in Delhi in 2012 and approved in Durban last year, is to be set up with an initial corpus of $50 billion, with scope for expansion up to $100 billion when new members are added.
For the initial $50 billion, India wants equal contribution by all the five members of $10 billion. This is because India doesn't want the development bank to fall into the ownership pattern of IMF and World Bank, with a distorted share holding.
The other priority for India are about the presidency of the bank and the name to be given for it. Apparently, India would like it to be called the New Development Bank, an expression used by Modi in his departure statement yesterday.