BRICS gains currency in Brazil

Jul 21 2014, 02:58 IST
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SummaryThe New Development Bank and Contingent Reserve Arrangement make a strong statement about the BRICS’s role in the management of the global economy

the functioning of the bank in its formative years, since it would be appointing the first President of the NDB. Russia and Brazil will be appointing the first Chair of the Board of Governors and the Board of Directors.

The NDB would provide funding for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries. The founding members have appropriately pointed out that the Bank would complement the operations of existing multilateral and regional financial institutions.

At present, all the members of the group are engaged in development partnership projects in several parts of the world and, in several countries, more than one BRICS member is present. Whether the Bank provides the basis for the BRICS countries to undertake joint projects in partner countries, is something that would be watched with some interest.

The CRA is a very timely initiative by the BRICS to devise their own “banker of last resort”. IMF was the only agency that provided this facility, until ASEAN+3 (ASEAN together with Japan, China and the Republic of Korea) formed the Chiang Mai Initiative Multilateralism (CMIM) in 2010. CMIM began with commitment funds of $120 billion, which was increased to $240 billion in 2012. The stabilisation-fund of the BRICS looks similar to CMIM in terms its initial size. It would have an initial pool of $100 billion, with China contributing $41 billion. India, Brazil and Russia are having equal contribution of $18 billion, and South Africa contributing the remaining $5 billion. As regards accessing the resources, South Africa can draw twice its contribution, while China can draw one-half of its $41 billion contribution. India, Brazil and Russia can draw an amount equivalent to their share.

Having put themselves under the limelight, the BRICS would now have to development the operational principles for the NDB, in particular. In the past, the BRICS members have been critical of the operations of the donor community, especially the members of the Development Assistance Committee of the Organization of Economic Cooperation and Development, for the donor-driven agenda they have followed. India has always insisted that the financial support that it provides to other developing countries has its basis in development partnership rather than development assistance, the latter being driven by the asymmetrical donor-recipient relationship. As the first President of the NDB, India is favourably placed to have the development partnership philosophy written into the statute of the new institution. This

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