Editorial: The BRICS NDB - None Of Your Damned Business?
Last week, history may have been made. In the post-soccer World Cup come down, the leaders of the BRICS nations met in the tropical coastal town of Fortaleza to sign a new supranational body into existence.
The New Development Bank (NDB) as it has been officially christened, will be headquartered in Shanghai and will open its doors to developing nations from 2016. It will have an initial capital pool of $50 billion that will rise to double that amount in due course. The bank will also have a "Contingency Reserve Arrangement" of some $100bn to insulate developing countries from the "short-term liquidity pressures" of the financial markets.
The primary goal of the NDB will be to drive economic progress in the developing world by fostering much-needed infrastructure projects. Currently, such projects in developing nations are costing an estimated $800 billion per annum. By 2025, it will be three times that amount, necessitating a global monthly spend of $200 billion – that’s an outlay analogous to the GDP of the Czech Republic every 30 days.
Brazil, Russia, India, China and South Africa account for 42 per cent of the world's population, and 30 per cent of global GDP based on Purchasing power parity (PPP). Crucially for the evolving global energy story, members of this cadre possess 31 per cent of the world's recoverable shale oil and 28 per cent of the world's shale gas.
Although the BRICS $50 billion initial war chest represents a paltry 12 per cent of the subscribed capital of the World Bank and Asian Development Bank, the collaborative intent is there - the recent $400 billion Russo-Chinese gas deal signed between Gazprom and the China National Petroleum Corporation (CNPC) is a testament to that.
The establishment of the NDB could be a first step towards a union of greater political and economic significance – and with the likes of potential shale gas superpower Argentina, the tenth largest oil producer, Mexico, and eighth largest gas exporter, Indonesia, looking to make BRICS into BRICAMIS, it could be a combine with some serious energy clout too. How fitting that NDB stands for Never Done Before....
Will the New Development Bank be positive for the developing world? Have your say below
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