The New Development Bank(NDB) operated by the five member-countries of Brazil, Russia, India, China and South Africa (BRICS) is all set to take off with an intention to develop economic relations amongst developing countries. It is considered to be an important institution since it is the first to be created by emerging countries with the hope to finance many important projects.

1. BRICS: United We Stand Divided We Fall
Greece was the first non-member to be offered BRICS membership, even though
ironically the association of the emerging economies is yet to take off. The New
Development Bank (NDB) operated by the five member-countries of Brazil, Russia,
India, China and South Africa (BRICS) is all set to take off with an intention to
develop economic relations amongst developing countries. It is considered to be an
important institution since it is the first to be created by emerging countries with
the hope to finance many important projects. The BRICS bank will be financing
projects by the year’s end, with special focus in the member countries. The launch of
the bank was on July 7, 2015; just ahead of a summit that was held in Ufa, an
industrial city of Russia.
The bank comes as a boon to Russia since the country suffers from western
sanctions and losses from falling oil prices. Russia’s diplomacy brought the dates of
the two summits pretty close. The two blocs of BRICS and Shanghai Cooperation
Organization (SCO) could be a hope for struggling economy of Russia. Ufa summits
were attended by many members that were at least a member to one of the
organizations that focused on regional development. While SCO has member
countries of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan,
BRICS consists of emerging economies. Interestingly, India and Pakistan, the two
countries with years of growing tensions since partition are the new approved
members of SCO, the membership of which will begin in 2016. SCO focuses on
activities related to political, economic and military organization. It emphasizes on
promote democracy, equality and regional security from rising threats due to
terrorism, separatism and extremism.
The Contingent Reserve Agreement of $100 billion may not be used immediately by
any of the fours member countries of Brazil, India, China and Russia with an
exception of South Africa. The contribution made by each member country towards
the bank is:
i. China – USD 41 billion
ii. Brazil – USD 18 billion

2. iii. Russia – USD 18 billion
iv. India – USD 18 billion
v. South Africa – USD 5 billion
But will BRICS New Development Bank be able to deliver?
The New Development Bank starts its funding next year and it potentially will be
giving loans to those projects that probably have been rejected for funding by the
international funding organizations like those of World Bank and IMF. These
projects could turn into bad loans creating further problems for the emerging
markets.
While the nations involved remain very optimistic about getting co-operation
especially during meetings, it might not be as simple and easy as it seems. While
emerging markets have their own tale to tell and could be struggling economically,
things might appear difficult in the long run.
BRICS largest contributor China: China enjoys the benefit of having the
headquarters of both New Development Bank (NDB) and China-led Asian
Infrastructure Investment Bank (AIIB) in Shanghai and Beijing respectively With

3. China being the largest contributor for BRICS, the ailing country itself had a $3
trillion crash in the main stock market from the peak just about three weeks ago
with real estate markets getting affected. China’s stock investors are selling their
homes to cover up the losses from stock market crash, which could trigger a concern
over the real estate market. While 58% of China’s issues remain suspended, the
entire nation seems to be facing a crisis, a term it was unaware of just last year.
China currently faces two damages that could occur simultaneously: stock market
crash followed by a real estate crisis. While the amount of money lost in the Chinese
stock market varies, it seems most had invested in the markets. The volatility of
China’s markets is greater since 80% of investors are retail investors and the cost of
government intervention to stabilize markets was at a very high cost. China also
remains a member of both blocs of BRICS and SCO. Many critics are of the opinion
that New Development Bank is formed to stop the growing influence of developed
nations of the West through international organizations like IMF and World Bank.
While this may be true, China still continues to be a buyer of US Treasury bills with a
record holding.
Russia remains a member of BRICS, SCO and EEU (Eurasian Economic Union
consisting of mostly northern Eurasia). The country has a lot to worry about at the
moment when it comes to its economy and it seems it is willing to take up the

4. challenge. Russia has big worries: Western sanctions over Ukraine crisis; trouble
with its domestic currencies, the rouble; its trade ban with 28-nation EU, Russia’s
first trading partner and falling oil prices (oil being its main export). Russia had
banned foods from EU in response to Western sanctions but maintained good
relations with Hungary, Cyprus and Greece. For Russia, BRICS brings back some
hope for its falling economy. In June 2015, European Union governments extended
economic sanctions on Russia until January 31, 2016. The ties with the western
world keeps getting worse for Russia and its membership with various Asian
associations seems to be a positive sign for the country. However, on the whole, the
country wants to establish its position at a global level by looking towards Asia-
Pacific and Eurasia region.
South African economy, also one of the surprising entries in BRICS, is stumbling and
may probably be in urgent need of loans once the New Development Bank starts
lending next year. It is hindered by a debt crisis and a national criminal wave.
Brazil still faces massive corruption levels especially a recent case of Petrobras, an
energy giant that accounted for 10 percent of Brazil’s annual economic output.
Brazilian economy is very weak hovering at about 1%.
India, a pro-US nation could be challenged by the intentions of both Russia and
China, which is more to do with establishing a comparative institution to the likes of
International Monetary Fund and The World Bank. India could have conflict of
interests with the emerging nations, not soon but in the coming years of NDB’s
functioning.
Conclusively, BRICS might just be another bloc that will initiate the plans for growth
and development across the region but how far it will go is difficult to tell. However,
with each individual country either facing economic or political turmoil, sooner or
later all of the member countries might be looking at project funding from the
BRICS-bank. For BRICS to remain strong and reach a global level, it would require at
least one member country to be extremely strong, both economically and politically
and not only in the Asia-Pacific region but at a global level.
© 2015. Deena Zaidi. All rights reserved.