NDB Bank: A step towards the concept of Planetary Rent!
The launch of the BRICS Development Bank suggests that BRICS countries have no intention of disappearing into economic and policy oblivion.
The establishment of a $100 billion dollar liquidity reserve and a $50 billion New Development Bank (NBD) in Shanghai marks the start of a new financial system. As each country acts to maximize its own utility, the emerging economies of the BRICS nations will create a paralleling international financial system ultimately challenging the hegemony of the current western-dominated system.
Recent dollar-less BRICS energy deals, currency swaps and foreign direct investment indicate that trend is taking place.
The bank is backed by Brazil, Russia, India, China and South Africa - collectively known as Brics countries.
The NDB will lend money to developing countries to help finance infrastructure projects.
The bank is seen as an alternative to the World Bank and the International Monetary Fund, although the group says it is not a rival.
"Our objective is not to challenge the existing system as it is but to improve and complement the system in our own way", NDB President Kundapur Vaman Kamath said.
The Brics nations have criticised the World Bank and the IMF for not giving developing nations enough voting rights.
The bank is expected to issue its first loans early next year.
China is biggest contributor in NDB.
The opening comes two weeks after the last to last Brics summit in the Russian city Ufa, where the final details were discussed.
At the time, Russian Foreign Minister Sergei Lavrov said that the five countries "illustrate a new polycentric system of international relations".
The bank started out with a capital of $50bn (£32bn) though the amount is to be doubled in the coming years.
The biggest contributor will be the world's second largest economy China, which also led the establishment of another new international bank, the Beijing-based Asian Infrastructure Development Bank.
The NDB is to be headed by a rotating leadership with the first president, Mr Kamath, coming from India.
It was first proposed in 2012 but protracted negotiations over headquarters, management and funding have long delayed the actual launch.
The New Development Bank (NDB), formerly known as the Brics Development Bank, committed $1.5 billion (R19.86bn) towards South Africa’s development projects as it launched its regional office in Sandton, Johannesburg.
The African Regional Centre was expected to be the face of the two-year old bank on the continent and it was identifying infrastructure projects for the country.
Speaking on the sidelines of the launch, Malusi Gigaba said the promised $1.5bn would go a long way towards assisting the government to reinforce and strengthen the balance sheets of state-owned enterprises.
Although the World Bank and the IMF are twin intergovernmental pillars supporting the structure of the world's economic and financial order, the developing countries are still dissatisfied with them. The establishment of the BRICS bank reflects the founding members’ dissatisfaction with the current multilateral financial institutions.
These are basically the global order led by the West( due to the quota system and decision making), so their interests doesn't commensurate with their expanding economies. IMF has become a tool of western countries, particularly the United States, to ensure their economic hegemony over developing nations.
NEED OF AN ALTERNATIVE FINANCIAL INSTITUTION:
- The BRICS bank sends a strong signal to the United States and other G7 countries that there can be alternatives to existing institutions when BRICS countries cannot rebalance governance structures in their favor.
- Its structure is based on the principal of one country one vote. It is a good sign that although Shanghai has been chosen as the headquarters of the new bank, the first president will be Indian the first chairman of the board of governors will be Russian, the first chairman of the board of directors will be Brazilian, and the first regional center of the bank will be in South Africa.So it is flawless of democratic deficit.
- It will lessen the dependence on the west and create a more multi-polar world atleast financially.Besides, it will break the dominance of US$ in global trade.
- The objective of the BRICS bank is to provide financial assistance for infrastructure projects.There is an arrangement of $100 bn Contigency Reserve Fund which is to be tapped in times of capital flight and attack on any currency on any of the countries. This will strengthen the economy of BRICS nations thus making them competent to the developed countries.
- The bank is accessible to other emerging countries including those which do not borrow from the IMF. This will strengthen the solidarity of the BRICS nations. It will enhance the bargaining power of BRICS in negotiations in global forums and will have positive impacts on attempts to forge stronger trade and economic ties. This will help in gradual fading of a polar world.
- If the BRICS bank, IMF and the World Bank work in complimentary manner IMF & World Bank too will become more transparent and more open.
- BRICS bank will be a supplementary source of funding to IMF and the world bank, this will be significant in the growth of future global economy.
Alternate banking and global financial systems are explained in the new book of Dr Bezgodov.
Kindly go through some concepts of Planetary Rent by following the given link: books.google.ru.