For more than a decade, BRICS nations have been dismissed but for a group of countries, united just by an acronym. This time, however, the world and particularly the West’s vision is a-fixed upon them. With an intent of de facto clashing swords with the IMF and the World Bank, the NDB has a lot of promise. The question, however, remains – will it make this staring West segue into a deep frown or not?

BRICS, the group of five nations, has decided to initiate a multilateral development bank called the New Development Bank (NDB), to finance infrastructure and “sustainable development” projects. They intend to start first in the BRICS nations itself, and subsequently to help other developing economies with the same. The NDB will operate with a $100 billion subscribed capital raised equally by the member countries. Along with this, a $100 billion Contingent Reserve Arrangement (CRA), will be created, be used for providing help in the form of additional liquidity to the member nations in case of balance of payment problems.

Consider this: As of 2014, the BRICS countries represent almost 3 billion people which is 40% of the world population, hold almost 20% of world GDP – with a meagre 11% voting strength in the IMF. Paradoxically, the top shareholders holding nearly 40% of the total voting power at these institutions constitute only 10% of the world’s population. Even Belgium has more voting power than Brazil! Moreover, this distribution of voting strength is largely static. This shows how decisions that relate to the economics and financial policies of the world are not made based on what most people want but on what the richest people want. This gets accentuated when we realise that for a very long time, the US and the other Western States, have abused their position in the service of their own national interests. The World Bank has always been running its ‘structural adjustment programmes.’ They coerce economies to open up and adopt privatisation, which not-so-covertly helps the cause of the West.

Now, developing nations hope that NDB will eventually challenge the IMF-World Bank hegemony over matters like funding for basic services, emergency assistance, funding to conflict-affected states and policy lending. BRICS is a group of the emerging and fastest-growing economies of the world, set to gain a say in global finance and economics and not simply follow the “rules of the developed world”. Additionally, they all want to reduce their dependence on the US dollar as a whole.

From the perspective of the BRICS nations, the CRA seems to be a welcome initiative. The World Bank’s own estimates point to a $1 trillion infrastructure investment “gap” in developing countries. Existing multilateral development banks are able to fill approximately only 40% of that gap. Considering the importance of sound infrastructure in the economic growth of developing countries, the NDB can potentially be a cherished boon for the developing world. The NDB targets ‘projects’ to augment growth in the developing world whereas the World Bank and IMF target ‘policies’ of the borrowers to act in accordance to their goals, which are set by the developed world. As against the policy of ‘the bigger the economy, more the votes’ NDB will work on decisions as enacted with equal say by the member nations i.e. one-nation, one-vote.

NDB certainly has the potential to be of great benefit to the founding and member countries but believing that it will compete with the World Bank-IMF supremacy in the near future, would be far-fetched. A capital of $100 Billion is too paltry to make any big dent in the existing banking and financial systems of the world. Also, there are concerns over the sustainability of NDB considering various issues. First, the five nations’ economies are very different from each other. Second, the ulterior motive that China is suspected to have in terms of domination and taking over the USA. Last, the internal divisions within the BRICS delayed the creation of the bank for years and disputed over the location of the headquarters and citizenry of the prospective President.

In the past, The Bank Of South was started with the same objectives as NDB, showed as much promise as the NDB but today only exists as a legal entity mostly because of foggy plans and disparities between the members. On the other hand, Corporación Andina de Fomento or CAF based in Latin America has expended the need of the IMF-World Bank in the counties of that continent.

The World Bank has ‘welcomed’ it, the world has put its heads together to discuss it, the NDB may or may not become what it is hoped to be, but the future of global economics is certainly going to be dynamic and even more curious.