14
May
Last year, the five BRICS nations (Brazil, Russia, India, China and South Africa), had agreed to create a new multilateral development bank to fund unmet infrastructure investment needs. The bank’s launch, along with the setting up of a $100 billion crisis fund to contain currency volatility, are seen as counterweights to the US -dominated financial institutions such as the IMF and World Bank. A Primer:
BRICS in numbers
42%
Of the world’s population that live in the five BRICS countries
20%
Share of BRICS countries of world GDP
11%
Share of BRICS countries of the global capital investment
17%
Of the world’s total trade or $61.4 trillion that takes place among BRICS countries
BRICS Bank
It is a development bank that the world’s leading emerging economies –Brazil, Russia, India, China and South Africa—also called the BRICS grouping, have decided to set up.
How does it differ from commercial banks?
It is a multilateral development finance institution that will lend for development projects. The clients are its member governments, who are also its shareholders.
What is its mandate?
The bank is aimed at funding infrastructure projects in developing nations.
Where will the bank be based?
It will be based in Shanghai, China
How will it be governed?
India will preside over its operations for the first five years, followed by Brazil and then Russia.
What will the bank be called?
It will be called the New Development Bank
How will it be funded?
The bank will begin with a $50 billion divided equally between its five founder members, with an initial total of $10 billion in cash put over seven years and $40 billion in guarantees. Another $50 billion is expected to come from other members who join in
When will it start lending?
It is scheduled to start lending by 2016
Can other countries join as members of the bank?
The Bank’s membership will be open to other countries, under the condition that the share of BRICS countries cannot fall below 55%
What is the contingent reserve arrangement (CRA)?
In addition to the bank, the five BRICS countries have also decided to set up a $100 billion currency reserves pool to help countries forestall short-term liquidity pressures
How will the CRA be funded?
China, the region’s largest economy, will contribute to the largest share of $41 billion to the CRA. Russia, India and Brazil will contribute $18 billion each, while South Africa will contribute $5 billion.
BRICS Bank and its glogabl peers
International Monetary Fund (IMF)
History
The IMF was conceived in July 1944
Representatives of 45 countries met in Bretton Woods in the US
Framework agreed upon for international economic cooperation to avoid a repeat of economic policies that led to the Great Depression and also to deal with post-war reconstruction.
Mandate
Oversees the international monetary system
Promotes exchange stability and orderly exchange relations among its member countries
Assists all members that find themselves in temporary balance of payments difficulties by providing short- to medium-term credits
Supplements the currency reserves of its members through the allocation of SDRs (special drawing rights)
Finance
SDR 204 billion (about $316 billion)
Draws its financial resources principally from the quota subscriptions of its member countries
Total assets
$300 billion
Number of member countries: 182
Headquarters: Washington DC
Number of employees: 2300
World Bank
History
The World Bank was conceived in July 1944
During the first two decades of its existence, two thirds of the assistance provided by the World Bank went to electric power and transportation projects.
It has diversified its activities acquiring new insights into the development process.
Mandate
Seeks to promote the economic development of the world’s poorer countries
Assists developing countries through long-term financing of development projects and programs
Provides special financial assistance through the International Development Association (IDA) to the poorest developing countries whose annual per capita GDP is less than $865
Encourages private enterprises in developing countries through its affiliate, the International Finance Corporation (IFC)
Finances
$184 billion of authorised share capital, of which members pay about 10%
Acquires most of its financial resources by borrowing on the international bond market
Total assets
$490 billion
Number of member countries: 180
Number of employees: 7,000
Headquarters: Washington DC
Asian Development Bank (ADB)
History
Conceived amid the postwar rehabilitation and reconstruction efforts of the early 1960s
The vision was of a financial institution that would be Asian in character and foster economic growth and cooperation in the region – then one of the poorest in the world.
The ADB opened on 19 December 1966, with 31 members that came together to serve a predominantly agricultural region.
Mandate
ADB helps developing member countries tackle poverty by providing loans, technical assistance and grants for a broad range of development activities.
Focuses on five core areas of operations: infrastructure; the environment, including climate change; regional cooperation and integration; finance sector development; and education
ADB became the first multilateral organization to have a Board-approved governance policy to ensure that development assistance fully benefits the poor.
Finances
$165 billion
ADB’s capital base, tripled from $55 billion in 2009.
Raises funds through bond issues, also relies members’ contributions, retained earnings from lending operations, and the repayment of loans.
Total assets: $122 billion
Number of member countries: 67
Number of employees: 3062
Headquarters: Manila, Phillipines
Source: http://www.hindustantimes.com/business-news/new-development-bank-an-initiative-by-brics-members-for-economic-growth/article1-1345992.aspx