In the past several weeks ahead of the BRICS summit in Brazil a number of initiatives were unveiled by representatives of the BRICS economies. One of the more significant discussions centered on the expansion in the membership of the New Development Bank (NDB). According to the Deputy Finance Minister of Russia Sergey Storchak BRICS countries may give the green light to the expansion in the Bank’s membership at the BRICS summit in Brazil this year. In effect, the expansion in the membership of the Bank may lower the urgency of the expansion in the core BRICS membership, while the pattern of the expansion in NDB’s membership may be considered as one of the trajectories of the BRICS+ cooperation between core BRICS members and their regional partners from the developing world.
In fact, it is through the expansion in NDB’s membership that the BRICS+ concept can be institutionalized during the very initial stages of its implementation. According to Sergey Storchak, one of the potential paths for the expansion in NDB’s membership could involve the accession to the Bank of the regional partners of the core BRICS economies. After the BRICS summit consultations are set to take place between core BRICS countries and accession candidates, with the technical details of the accession of new members hammered out at the technical level with the participation of Bank’s management.
Such a regional approach in the expansion of NDB’s membership makes economic sense since it allows core BRICS economies to pursue more actively connectivity integration with their regional neighbors with financing for the corresponding projects provided by NDB. Such a sequencing of the accession of new countries to NDB will also provide greater scope for customs cooperation that the BRICS countries are seeking to boost in 2020 – according to Sergey Storchak one of the priority spheres of cooperation will be the creation of BRICS authorized economic operators – organizations that will serve to facilitate the customs procedures in the trade between BRICS countries. A regional strategy in the expansion of NDB’s membership also enables the Bank to exploit the potential synergies that exist between NDB’s financial instruments and the regional mechanisms that may complement and amplify the effects of the bank’s project financing.
In this respect, the economic effects and the potential for pursuing connectivity integration of core BRICS economies with their regional partners could be further reinforced via creating a platform for the cooperation of regional development banks and funds where BRICS countries are members. This platform of regional development banks could comprise the Eurasian Development Bank (EDB), the Development Bank of South Africa (DBSA), the SAARC Development Fund (SDF), Mercosur Structural Convergence Fund (FOCEM), China Development Bank (CDB), China-ASEAN Investment Cooperation Fund (CAF), and the New Development Bank (NDB). As noted before, within this group of development institutions, the NDB could potentially perform a coordinating role with respect to BRICS+ initiatives.
In terms of cooperation between the regional development banks of BRICS countries, in 2016 the Eurasian Development Bank (EDB) in collaboration with the New Development Bank, Nord Hydro, and the International Investment Bank (IIB) signed an agreement on construction of small hydropower plants in the Republic of Karelia (Russia). The project may be the first completed NDB project in the Bank’s loan portfolio. In April 2017, the Eurasian Development Bank (EDB) signed a memorandum on cooperation with the NDB.
In the end, the main potential in the “regionalistic expansion” of NDB membership is the continental connectivity integration among BRICS members and their regional partners, most notably in the case of Africa. Indeed, connectivity integration lays a firmer foundation for African economies to pursue development via building regional cooperation rather than relying mostly on external assistance. A regional approach to building BRICS cooperation with African countries could also rely on the cooperation between the respective regional development banks, such as the Development Bank of South Africa as well as the African Development Bank – in both cases South Africa is a member. As noted back in 2017 in my Valdai publication, “the BRICS New Development Bank and its regional center in Africa could play a coordinating role in the efforts of regional and national development institutions in advancing greater regional connectivity” (see Yaroslav Lissovolik. A BRICS+ framework for Africa: targeting regional connectivity, Valdai club, December 4, 2017).
One of the questions will be whether it makes sense to have a material expansion early on or whether the approach should be incremental, with several rounds of expansion eventually bringing NDB’s membership closer to a combination of regional economic blocks where core BRICs countries are members. On this issue gradualism and caution may be warranted as the New Development Bank will need to establish a firm track-record of completed projects among its members early on before significantly increasing the ranks of its members.
In the longer term the patterns outlined by the expansion in NDB’s membership may set the trails for developing the BRICS+ format in other areas, including with respect to potential coordination of regional integration blocks, such as the Eurasian Economic Union, MERCOSUR, SACU and others. Another dimension with respect to the BRICS+ format may also be the cooperation among the regional financing arrangements (RFAs) such as the Eurasian Fund for Stabilization and Development (EFSD), the BRICS CRA, Chiang Mai Initiative Multilateralization (CMIM), etc. In effect the BRICS+ format may serve as a platform for bringing together the bulk of the countries of the Global South in areas of cooperation that span continental connectivity, trade, investment and assistance for purposes of sustainable development.