The near term priorities for the expanded NDB will need to focus on countering the pandemic crisis. This in turn raises the importance of sectors such as healthcare, digital economy development and other projects that are related to the development of human capital. There will also be more scope to deliver a strong contribution to the evolving “green/ESG transformation agenda”, writes Valdai Club Programme Director Yaroslav Lissovolik.
Perhaps the most important developments associated with joint actions of the BRICS economies to counter the crisis of the Covid pandemic have been associated with the operations of the BRICS New Development Bank (NDB). In particular, the Bank has extended anti-crisis loans to counter the pandemic to its members and forged ahead with issuance of financial instruments in BRICS national currencies. But perhaps the most significant stride undertaken by the BRICS in the past several years was the expansion in NDB’s membership this year, which effectively sets off the institutionalization of closer ties between the five BRICS economies and their partners from the developing world.
The first non-BRICS members to be admitted to NDB were Bangladesh, Uruguay and the United Arab Emirates. Earlier discussions about the admission of new members largely centred on the expediency of inviting those economies that are regional partners of BRICS. This was to provide sufficient scope for the implementation of connectivity infrastructure projects between BRICS core members and their regional neighbours.
In the end, the approach undertaken by NDB was a hybrid strategy of sorts which combined the regionalist approach with the strategy of bringing in countries with high reserves and credit rating. Uruguay and Bangladesh are the regional partners of Brazil and India respectively. They are part of the regional integration arrangements in which Brazil and India are members – MERCOSUR and BIMSTEC (Bay of Bengal Initiative for multi-sectoral technical and economic cooperation). These are also the economies that have common regional development institutions with BRICS economies – SDF in the case of Bangladesh and FOCEM in the case of Uruguay.
As for the United Arab Emirates, this economy has a sovereign credit rating of AA- from Fitch (outlook stable) and enjoys substantial reserves that are managed by some of the largest sovereign wealth funds such as the Abu Dhabi Investment Authority (ADIA). This provides scope for closer cooperation between the sovereign wealth funds of BRICS economies with those of UAE and more broadly between the BRICS countries and the Gulf region (Gulf Cooperation Council (GCC) economies).
Given the importance of the regional element in the expansion of NDB’s membership there is likely to be an important role played by the respective regional offices of NDB. There may also be a need to explore the possibility of closer cooperation with all three new entrants via some of the other BRICS cooperation mechanisms, such as the BRICS Contingent Reserve Arrangement (CRA). This in turn could be based on greater cooperation/coordination between the BRICS CRA and the respective regional financing arrangements where NDB countries are members – in the case of UAE it is the Arab Monetary Fund, while in the case of Uruguay it is FLAR (Fondo Latinoamericano de Reservas).
The near term priorities for the expanded NDB will need to focus on countering the pandemic crisis. This in turn raises the importance of sectors such as healthcare, digital economy development and other projects that are related to the development of human capital. There will also be more scope to deliver a strong contribution to the evolving “green/ESG transformation agenda”, particularly with such important actors in the oil sector as UAE.
The future trajectories of NDB’s membership expansion are likely to follow the same hybrid strategy as in the first wave of admission. It could well be possible that in the coming waves of Russia’s regional allies from the Eurasian Economic Union (such as Kazakhstan) could become new members of NDB. This in turn could reinforce the potential for NDB’s cooperation with Eurasia’s regional institutions such as the Eurasian Development Bank (EDB) and the Eurasian Fund for Stability and Development (EFSD). This in turn will lead the BRICS towards further stages of the implementation of a BRICS+ framework, whereby NDB cooperates with the regional development institutions (regional banks and regional financing organizations) in which BRICS economies are members.