Notion of BRICS development bank has sparked worldwide interest as it will primarily address the finance,trade and political environment issues while furthering development goals of BRICS and other emerging economies. Unlike its western counterparts the bank is aspired to bring about an improvement in the economic and social conditions of those surviving at the margins,bring reforms in the international financial sector and to make it more responsive to the development needs of developing nations.
Albeit serving as key step in the gradual rebalancing of the global economy,the bank would have to overcome many difficult challenges. Developing countries in the bloc hardly invest in one another. Just 2.5% of foreign investment by BRICS countries goes to other countries in the group while more than 40% of their foreign investment goes to the developed worlds largest economies,the European Union,the United States and Japan. Moreover,the sharply slowing BRICS are beset by domestic economic challenges. Thus,along with the deliberations on the structure,governance,funding and risk management of the bank,BRICS may also want to address bilateral trade disputes,border tensions and internal competition amongst themselves in order to get strong shareholder support from BRICS member countries(responsible for injecting capital should the need arise).
While there is no doubt that the BRICS development bank is a good platform to reshape the existing international,political and economic system,the right framework to supplement the existing efforts of multilateral and regional financial institutions is the need of the hour.
Institute: School of petroleum management,PDPU Gandhinagar