Yesterday, after the conference of the BRICS nations (Brazil, Russia, India, China and South Africa) in the Brazilian city of Fortaleza, we got exciting news that had been long overdue. The BrRICS nations are going to set up a developement bank. The BRICS nations, who account for a fifth of the global economy and some 40% of global population have been negotiating this project for some time now, but the final agreement seems to have been reached.
The Indian Prime minister whose country is to head the bank proposed the name by which the bank is to be referred to: New Developement Bank.
With an intitial capitalization of $100 billion, and a subscribed capital of $50 billion, the bank is expected to aid in infrastructural projects and shave off future economic crises. The bank was set up to counter Western monopoly on financial markets and capital.
The Washington-based World Bank is increasingly seen as an arm of the West, and the IMF doesn't seem to represent the inrterests of emerging markets.
In a press confrence, the presdident of Brazil, Dilma Roussef said, "These initiatives show that, despite our diversity, our countries are committed to a solid and productive association,". Russian president Vladimir Putin certainly agreed with the Brazilian president when he said when he said the agreement was "a very powerful way to prevent new economic difficulties."
The so-called BRICS bank came as a necessity to manage the outflow of capital from emerging markets that camme as a result of the stimulus measures proposed by former U.S. Federal Reserve chairman Ben Bernanke. This led to falling currencies in BRICS countries.
The bank is set to start lending in 2016 with an initial total of $10 billion in cash put in over seven years and $40 billion and open it's doors to other countries, but the share of the BRICS countries can't drop below 55%. The contingency currency pool will be held in the reserve of each BRICS nation. China, holder of the world's largest foreign exchange reserves, will contribute the bulk of the contingency currency pool, or $41 billion. Brazil, India and Russia will chip in $18 billion each and South Africa $5 billion.
Having won the bid to host the bank, China will be the last to hold the revolving office of head of the New Development Bank.
Here's why I think the success of this bank has the potential to change the World Order.
First of all, Russia just signed a $400 billion gas deal with China which aimed at countering the effects of western sanctions over it's annexation of Crimea. In addition to that, India and China did not support sanctions on Russia at the UN Security Council. These two also vetoed war crimes resolutions on Syria, still at the UN Security Council.
That's just the tip of the iceberg. Take a look at the list of countries that have issues with the West besides the BRICS nations: Argentina, Iran, Syria...These are all countries that would line up to offer their allegiance to the BRICS exchange for their support; not to mention the resource rich but financially poor African countries that are weary of extremely high interest rates offered by western banks on bank loans.
This for them is a 'The Messiah' come to take their financial misery away, and they would lmine up at the doors of the bank to create ties in order to seek financing on 'fairer terms'.
Consider this too. The IMF recently imposed cut in oil subsidies on a number of countries, which they had little or no say in, and this has been the practice for decades; imposed reforms on countries even when they are not ready for them. The 1997 Indonesian riots were blamed on the IMF.
The western monopolisation of global financual markets and financial power also means that the West can easily impose sanctions on Countries that do not 'toe the line', like Russia and Iran. If this power moves West, it becomes easier for such countries to dodge these sanctions by simply looking West. Do I need to remind you that Iran has been labelled The Next China?
In case you haven't noticed, I have above given four reasons why the institution of the New Development Bank should raise western eye brows. But the one most important reason I haven't mentioned, The Rise of China.
China, the second largest economy in the world, and poised to overtake the U.S., has finally found a way to gain more control over the 'rest'. Let's be reminded that China is the largest contributor to this bank. Of course the West fears the Rise of Putin's Russia too, but that in no way compares to a China that could grow beyond the West's ability to control it.
Tke a look at China's territorial disputes in Asia, and you get a sense of where China is headed. If this China should gain more influence over rising countries like Iran, Nigeria, Indonesia and even some of the European countries hit with recession, it's certainly bad news for the West.
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