After much debate, Brazil, Russia, India, China and South Africa — often referred to as BRICS — finally announced last week the establishment of a “new development bank” that hopes to rival the strength and influence of the World Bank.
Meeting in its sixth summit in Fortaleza, Brazil, the bloc’s decision to give birth to the new financial institution not only signals a shake up in the international development scene, but also underlines the growing prominence of new and emerging donors. There’s already a lot of buzz in India about the creation of a South Asian Development Bank. More details are coming out on China’s planned Asian Infrastructure Investment Bank as well, which is reportedly causing quite a stir at the Asian Development Bank, currently the region’s sole multilateral development institution.
The New Development Bank, experts consulted by Devex argue, could be an additional source of financing as well as knowledge. It will have a $50 billion initial subscribed capital — $10 billion from each BRICS nation — with an authorized capital of up to $100 billion. It will be based in Shanghai, China, despite Johannesburg’s offer to host the bank to compensate for a part of their share. The inaugural five-year leadership will be given to India, followed by Russia and Brazil. South Africa, meanwhile, will set up the bank’s first regional office.
The basic structure of the bank will be centered on the five members of the bloc, with equal voting rights, at least initially. It was agreed that no one member can increase share holdings without the approval of the other four and, to prevent unequal operations, the cap for additional shares will be $7 billion.