Shanghai: Is the BRICS founding principle of multilateralism fraying at the edges? If one looks at Brazil, the new government of Jair Bolsonaro appears to privilege its relations with the U.S. (and by extension the West) rather than multilateralism. This is most evident in its foreign policy:
Bolsonaro cocked a snook at the world and showed his contempt for climate change as fires devastated swathes of the Amazon; he has withdrawn Brazil from the recently signed pact on migration; he’s given every indication of backing U.S. intervention to topple Venezuela’s President Nicolas Maduro and strains are evident in ties with China.
However, none of these strains were evident when a team of Indian journalists met the top brass of the BRICS Bank (New Development Bank (NDB) as it is officially known) earlier this month in its Shanghai headquarters. Bankers are much like diplomats, conservative, cautious to a fault and tight-lipped. So the discussion focused on the bank’s activities in the four years since getting off the ground.
Leading the charge for the bank was India’s KV Kamath, current and first president, backed up by representatives of the other stakeholders (Brazil, Russia, China & South Africa). The first question obviously centred on the U.S.-China trade war and the disruption it is causing all over the world.
In Kamath’s view, “this is because a change in the order is in progress, it will take time for equilibrium to take hold”. This does not mean India cannot grow. “Will India’s growth aspirations be throttled because of this global uncertainty? The answer very simply is no.”
Kamath believes India could borrow a leaf from the Chinese experience of the last two decades and focus on some priority sectors: “Water, animal husbandry, infrastructure, manufacturing and services driven by technology,” are some of the areas where India needs investment which in turn would drive growth.
“Our focus is sustainable infrastructure,” said Kamath, “so the focus is on green. Ten years back, renewable power was impossible but today solar is very attractive.”
He was dismissive of the downturn in the Indian automobile sector (which the Finance Minister Nirmala Sitharaman has attempted to resolve with some concessions). “In China too automobile sales have fallen. It is a worldwide phenomenon. Young people today don’t want to buy vehicles, preferring to hire cabs or use public transport. This is something India is looking at.”
As of August 2019, the bank had cleared 38 projects worth a little over $10 billion. Much of current lending by the NDB is heavily skewed in favour of two countries: India and China but this is changing. In recent months, South Africa has received nearly $800 million in loans from the NDB for a number of infrastructure projects. Brazil has been slower off the mark since it wants the bank to do the ground work on what project to fund and where. In the case of India and China, such work is done by the national and local governments. A Project Preparation Fund has been set up with over $6 million in the kitty.
The bank’s approach to funding is apolitical, said Kamath, with the aim of “enabling developing countries to stand on their feet. Other banks tend to dictate, we listen to our clients, are open to new ideas and move accordingly,” he said. “We have board meetings every year which helps build bonds.”
Regional centres are coming up in Sao Paulo and Brasilia this year and one in Russia by the end of this year. The India office will open next year. Incidentally, the bank moves into its own headquarters building in Shanghai by September 2021.
Looking ahead, Kamath is clear that in the interconnected world of the future, technology is the driver. “Digital infrastructure can address many traditional infrastructure deficit areas,” he said adding that “going digital can have larger social and economic impact, ensure community well-being.”
As for the NDB, he believes there is huge potential for economic growth and “win-win cooperation between the BRICS countries.” He bases his optimism on the growing role of the emerging markets, led by the BRICS, in the global financial system. Add to that the NDB’s “unique governance model based on equality of its member countries.”