NDB readies to finance multi-polar world, by Dr. Wesle Seale

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Spring was on time this year after a rather wet winter in Cape Town.

This past weekend marked the beginning of a new season for global south but even more so for the delegates who attended the Ninth Annual General Meeting of the New Development Bank (NDB) held in South Africa’s ‘Mother City’.

As delegates departed, a warm sunny sun and bright blue skies marked the “new chapter for the bank” as described by South Africa’s minister of finance, Enoch Godongwana.

“The NDB has kept its commitment to not only benefit BRICS countries”, said Godongwana, “but to extend its horizon to other emerging markets and developing countries - to build a world that is fair, a world that is just, a world that is also inclusive and prosperous.”

For Godongwana, and other governors of the NDB, the new chapter was about financing a multi-polar world.

The dawning of a new chapter for the Bank

The NDB, or commonly known as the BRICS Bank, was established by the then five BRICS countries, i.e. Brazil, Russia, India, China and South Africa, a decade ago.

As mentioned by Godongwana, the Articles of the NDB were co-signed at the bloc’s sixth summit in Fortaleza, Brazil, and significantly the signing ceremony took place on the first day of the summit given that much discussions and preparation for the establishment of the Bank had already taken place.

Seven years later, in 2021, an additional four members were added as members of the Bank: Bangladesh, the United Arab Emirates, Uruguay and Egypt.

This year, at the Cape Town meeting, Algeria was admitted as a member of the Bank and the expansion of the membership of the Bank indicates a move towards the realisation of the BRICS Plus countries’ desire to create a multi-polar world order with a multi-polar global economy.

 BRICS Plus and the NDB

With the expansion of the BRICS group of nations earlier this year to include Egypt, Ethiopia, Iran and the United Arab Emirates as well as the additional members of the NBD in the last three years, we have seen a solidifying in the positions of Egypt and the UAE in their standing within the BRICS Plus countries.

While Argentina’s new right-wing administration has indicated their withdrawal of their country’s application to join the group, Saudi Arabia has shown an interest in joining both the group and the Bank.

Yet Saudi membership of the Bank was not confirmed in the Cape Town meeting and we will have to wait for the group’s summit happening in October in Russia to see whether the Saudi’s will attend or not.

However, what is significant, especially since the conflict in the Ukraine and attempts by the West to isolate Russia, is who the member countries are and where they are located geographically.

If one recalls, BRICS was formed precisely because Africa was not represented in the original BRIC group of emerging markets and to gain some legitimacy the group had to include a member country from the continent which promises the international community and market so much resources and opportunity.

The $1 billion loan secured from the bank to the South African logistics giant, Transnet, must be seen within this context.

South Africa was chosen as the obvious candidate with the most sophisticated economy on the continent but also at the same time competing with Nigeria and… Egypt.

While the Nigerian economy has taken a knock in recent times and even democracy in South Africa bringing about instability with the outcomes of elections, Egypt, with the second/third largest economy on the continent as well as located strategically geographically, has served as a balancing partner to South Africa from the continent on the group.

Egypt also happens to have the largest army on the continent, enjoys reasonable political stability since the upheaval of 2011 and diplomats would attest to the prowess of Egyptian diplomacy.  

China’s long established links with Ethiopia as well as their budding relationship with Egypt would have spurned on the membership of these two countries into the group.  

With the Saudi’s hesitancy in their membership, the group, did well in their selection of both Iran, on the one hand, and the UAE, on the other, in the selection of Middle East players.

While the Egyptians would also be killing both the African and Middle East birds, the UAE have simply, to use a very Chinese word, leapfrogged in terms of its economy and leadership in the region.

As Brazil tries to cooperate with other partners in the Latin American region, it is almost certain that they would have encouraged Uruguay to get involved while the Indians may have done the same with Bangladesh.

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A multi-polar world

All of this political manoeuvring and geographical spread of the group does not only ensure the BRICS Plus’ diversity in people, economy and resources but also its legitimacy.

It is truly a strategic bloc within the emerging markets and developing countries.

While a number of other countries have sought interest in joining either the Bank and/or the group, the potency of this BRICS Plus would remain in its limited membership. Ideally BRICS Plus members do not want to create another G20or G77.

According to scholars such as Ramos et al. (2018), large groups such as the G20 and G77plus China are not necessarily efficient, effective and strategic.

At the same time while the G7 exists within the G20 and we have seen the significance of this small group of countries in the global economy, it would be important fora small group of countries, such as the BRICS Plus, to maintain their close knitted membership in order to realize the desires of other G20 plus Africa andG77 plus China members as well as that of other emerging and developing countries.

Similarly, as Mustafa et al. (2017) highlight in their work none of the BRICS countries are members of the Organization for Economic Co-operation and Development (OECD) and thus the forum gives these leaders of emerging economies the space to discuss global issues among themselves.

This then translates into a coordinated effort in reaching out to other emerging economies as well as having a coordinated approach to existing global institutions such as the United Nations and the Bretton Woods Institutions(BWI).

Hitherto all BRICS summits have highlighted the need for multilateralism and a multi-polar world.

For BRICS Plus members, the UN, G20 plus Africa or even G77 plus China appear to be important platforms that serve as alternatives to the G7 which seeks to be hegemonic.

With the introduction of the G20 plus Africa, G77 plus China and BRICS Plus, a group such as the G7 become almost obsolete.

Bank president Rousseff’s leadership

Therefore at this critical stage of world history, the coordination of the BRICS Plus group as well as of its bank, ‘the new chapter for the global community’ as it were, there can be no one better suited to lead the bank than former Brazilian president and current bank president, Dilma Rousseff.

The Chinese news outlet Xinhua reported Rousseff as saying that for emerging and developing markets “a just transition requires a huge amount of resources and long-term financing.”

For this to happen, “first, it is necessary to channel the international liquidity to developing countries and reduce the burden of high interest rates; second, develop alternatives, such as local currency financing, to increase fiscal space for investment.”

“The use of local currency is, therefore, one strategic option,” said Rousseff.

"By promoting transactions in local currencies, we also facilitate investment growth, helping governments and the private sector overcome the cash flow mismatch between projects and financing. This approach provides greater predictability and reduces the high costs associated with hedging needs."

BRICS Plus countries therefore know that the group must be able to put its money where its mouth is and therefore Rousseff does not only appreciate the political imperative of an international group such as BRICS Plus but also the transforming role that an international financial institution such as the NDB can play in the global economy.

This role is not to be in competition or out manoeuvre the BWI but to act as other options, multi-polar, that emerging and developing economies can go to.

It is for this reason that Rousseff has led in the discussion on the use of local currencies. If we can’t de-dollarize fast enough, then we should explore other alternatives, suggests Rousseff, in the meantime and as an eventual option as well.

In the aftermath of the 9^th AGM of the NDB, this season of spring has one message for south-south development: summer is on its way.

Seale has a PhD from Beijing Foreign Studies University and wrote it on BRICS.

References:

Mustafa, S.et al. 2017. “BRICS: Is the Group Really Creating Impact?” In International Journal of English Literature and Social Sciences. Vol. 2. Issue 6.Bloomington: Infogan Publication.

Ramos, L.et al. 2018. “A Decade of Emergence: The BRICS’ Institutional Densification Process.” In Journal of China and International Relations: Special IssueChina and Brazil at BRICS: “Same Bed, Different Dreams?”. Li, X. (ed.).Aalborg: Aalborg University Press

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