With the taking over as the first President (CEO) of the New Development Bank, which formerly was called ‘BRICS BANK’, it is expected that the NDB will be operational by the end of the current year or so. Subsequent presidents are to be nominated by other countries in rotation. NDB is to start with US$ 100 billion to realize the vision shared at Fortaleza. While it is joint venture of the five BRICS nations, no one is in doubt that NDB has come to fruition mainly due to Chinese financial muscle power. The NDB’s mandate is to be infrastructure financing. The NDB with have its HQ at Shanghai and all five members are to contribute USD 50 billion each eventually. Many rising economies including China and India were ‘not happy’ with the perceived domination of ‘Washington Consensus’ in the World Bank – IMF top management and desired an alternative international financing bank. Now, it is to be seen whether the NDB gets autonomy of project financing or it will be dominated by big brother China. China has many projects in Africa in which it wants to get control over resources and also extend its soft power.
With a huge pile of FE reserves, China obviously will get a way out to invest the surplus funds through NDB as NDB will obviously raise loans as well. China has foreign exchange reserve of 4 trillion USD now. Amazingly, India, Russia, and Brazil - all have similar level of FE reserves at 355-360 billion USD each as of March 2015. South Africa holds FE reserve of just under 50 billion USD.
Another parallel rival of the ‘Washington Consensus’ is in the offing by the way of the Asian Infrastructure Investment Bank, established in Beijing, on the initiative of the XI Jingping, the President of China in October last year. The participants here are much larger in number and they are still queuing up!. India, of course, is one of the ‘Prospective Founder Member’. It’s official objective is industrialization in Asia Pacific region. Up to last month there were 57 members already. USA is obviously not happy with a rival financial power centre coming up and is an absentee so is Japan as it said it ‘does not need to join’. This bank is also likely to commence operation by the end of 2015. Significantly, South Korea is like to join as it expects to get financing for its major global infrastructural companies.