Amid reports that the planned BRICS development bank will pose a threat to all regional development banks, the head of the Asian Development Bank board of governors has stressed the need for another financial institution to fill the fund gap left by existing banks.
During his recent two-day visit to Japan, ADB Chair and Indian Finance Minister P. Chidambaram told reporters in Tokyo that the bank spearheaded by the emerging countries of Brazil, Russia, India, China and South Africa will be a boon to the global development community.
“The BRICS bank will not be a competitor for the World Bank or the ADB,” said Chidambaram. “It will complement the World Bank or the ADB.”
Chidambaram sees the BRICS bank as necessary in supplying funds on top of those provided by financial institutions such as the ADB and the World Bank.
“Why do we need the bank? Because, the funds that are now available through the existing multilateral institutions are insufficient,” he said.
Instead of viewing the planned bank as a competitor, Chidambaram sees it as an opportunity.
“These countries have large savings… So we want to mobilize our savings as well as take capital to other member countries in order to lend more,” he added.
Indu Bhushan, deputy director general of ADB’s strategy and policy department, supports Chidambaran’s views.
“The primary aim of the BRICS Development Bank is to complement the available resources from existing multilateral development banks (MDBs), as the latter cannot fully meet the financing needs of the emerging economies,” said Bhushan in an interview with Devex.
Speaking on behalf of the ADB, Bhushan welcomed the creation of the planned bank, since it is expected to work closely with the existing MDBs.
“With their long experience and skills base, the MDBs can help the Bank become operational and gain momentum,” he said.
Pete Troilo, Devex’s director for global advisory and analysis, agrees with the outlook of ADB’s officials.
“The proposal to establish a BRICS development bank is in line with the idea that today’s fastest emerging economies have lessons and capital to contribute to the developing world,” said Troilo. “These countries are challenging for leadership positions in existing development agencies, forming their own bilateral development agencies, driving south-south cooperation, and now a BRICS development bank proposal – these are all trends indicating that emerging economies want a genuine seat at the global development table.”
Troilo downplayed the reports that the planned institution would unnecessarily increase already tight competition among multilateral development banks.
“The $1 trillion shortfall in infrastructure spending across emerging markets, particularly Africa and Asia, suggests otherwise,” he added. “If structured and capitalized properly, a BRICS development bank could help tackle the financial, political and regulatory risk and uncertainty that has kept the private sector on the sidelines in these regions.”
Johanna Morden is a community development worker by training and a global development journalist by profession. As a Devex staff writer based in Manila, she covers the Asian Development Bank as well as Asia-Pacific's aid community at large. Johanna has written for a variety of international publications, covering social issues, disasters, government, ICT, business and the law.