August 2015        

International Development Bank set up by BRICS states

The “BRICS” countries (Brazil, Russia, India, China and South Africa) stepped onto the stage of global finance last month with the launch of the New Development Bank in Shanghai. The six BRICS countries had agreed to set up the bank at the group’s sixth summit meeting in Brazil in July 2014.
     The Chinese minister of finance, Lou Jiwei, the mayor of Shanghai, Yang Xiong, and the president of the new bank, Kundapur Vaman Kamath, attended the opening ceremony. “Our objective is not to challenge the existing system as it is, but to improve and complement the system in our own way,” said Kamath. Lou said that the NDB would serve as an alternative to the existing international financial system and would concentrate its efforts on innovation and governance.
     However, the bank creates an alternative to the larger, Western-controlled Bretton Woods institutions—the International Monetary Fund and the World Bank—founded near the end of the Second World War.
     The NDB, launched with an initial capital of $50 billion (£32 billion), will invest in development and infrastructure projects. It aims to increase its worth to $100 billion (£64 billion).
     Final details were agreed at a joint meeting of BRICS and the Shanghai Co-operation Organisation in Ufa, capital city of the Russian republic of Bashkortostan, earlier this month. On the sidelines of that meeting the five developing countries also agreed to set up a $100 billion (£64 billion) reserve currency pool to help members if they suffer a liquidity crisis. China has contributed $41 billion (£26 billion) to this fund, Brazil, India and Russia $18 billion (£12 billion) each, and South Africa $5 billion (£3 billion). A Chinese economist, Li Daxiao, said: “It can help avoid another crisis through establishing a fund pool within the BRICS which can help cushion instability in the currency market.”
     Unlike the World Bank, whose members’ voting power is based on the size of their investment—and is therefore dominated by the United States—each of the NDB’s members will have an equal say in its running.
     Earlier this month the president of Venezuela, Nicolás Maduro, proposed that the anti-imperialist ALBA bloc of Latin American and Caribbean countries should join the NBD “in order to build new financial realities.”

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