Brics bank a move in right direction
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The NDB will provide much-needed financial assistance – without the West’s hefty conditionalities, says Shannon Ebrahim.
Johannesburg - The launch of the Brics New Development Bank (NDB) in Russia this week is very much political. It seems the World Bank and International Monetary Fund (IMF) got a clear message from the world’s most important emerging economies: don’t use your economic power to threaten us or dictate the terms of our development any longer.
As the powerful Brazil, Russia, India, China and South Africa business communities grouping launched the NDB at the seventh Brics summit, it sought to find alternatives to a system that has been built on Western dominance and control.
It is important to understand that Brics is not looking to jump off the global capitalist bandwagon but is looking for more room to manoeuvre within it. The Brics are buying themselves more room under their foreign policy. They no longer want the West to be able to threaten them along the lines of “if you don’t do what we want, we can block your currency payments, block the banks and strangle you”.
President Jacob Zuma shone a spotlight on the thinking of Brics leaders when he told Russia Today this week: “We’ve had difficulties, even with the help that we get. It comes with so many strings attached… the lenders want to dictate what you should do.
“You can’t utilise that kind of assistance the way you want. So, in a sense, it has conditions that will keep you dependent all the time. That’s what we’re trying to take ourselves out of, and we believe that an alternative bank – like the NDB – does provide an opportunity for us,” he said.
The NDB will provide Brics and other developing countries with much-needed financial assistance without onerous conditionalities. There will be capital available to fund major infrastructure development projects. What the NDB will help us avoid is the subsidising of economic and food dependency by the World Bank and IMF.
The NDB will be far more democratic in its operating procedures. Each member will have an equal vote and there will be no veto power. This stands in contrast to the World Bank, which assigns votes based on capital share, and gives the US a veto. The campaign to reform and democratise the World Bank and IMF always came to naught. The issue of the IMF granting more voting powers to developing economies was blocked by the US Congress for years, and it is unlikely to be passed anytime soon.
We only need to look at Greece to see that the interests of the Western financial institutions have never been the same as those they purport to help. Greece was told that it had to privatise its natural resources and sell off its gas rights in order to pay its debts. It was only when Russia’s Gazprom offered to buy Greek gas that the European creditors decided that Greece didn’t need to sell its gas after all because they didn’t want Russia to buy it.
Even Greece has indicated that it wants to find an alternative to the Western-controlled financial lending system, which has never had Greek interests at heart. The government of Alexis Tsipras has made noises about seeking the possibility of joining the NDB, although no official request has been made. Russia’s Deputy Finance Minister Sergey Storchak has said: “Becoming part of the NDB will require Greece to make a political decision.”
Many other developing countries, such as Argentina and Indonesia, may also want to join the NDB. According to South Africa’s Leslie Maasdorp, the newly appointed vice-president of the NDB, “the membership of the bank is open, but its core members will define the bank. We will need to determine how new members can join, and the process involved.”
Maasdorp, who will take up his six-year post at the new NDB headquarters in Shanghai, has hailed the launch of the bank as “an exciting opportunity for Brics to give meaning and real economic depth to what it is about”. After all, together the Brics countries account for 41 percent of the world’s population and 21 percent of global GDP.
Maasdorp was quick to point out that the NDB is not being set up as an alternative to the IMF and World Bank but to work in a complementary fashion with all other development finance institutions. The fact that the NDB will have initial authorised capital of $100 billion (R1.2 trillion) while the financing shortfall for infrastructure development is in the realm of $1 trillion explains the need to co-operate with other financing institutions.
While the NDB may co-finance projects with other partners, it will do so on terms favourable to developing countries. It will not ask countries under fiscal pressure to sell their water or natural resources and raise prices to make payments.
Creating the bank is part of an attempt to bring about true economic indepen-dence from the Western powers. Perhaps Lumumbism isn’t dead after all.
* Shannon Ebrahim is Independent Media’s foreign editor.