Finance in BRICS Countries
by the Heinrich Böll Foundation.
volume aims to provide background information for an
informed debate about development financing from the
perspective of emerging economies, especially the BRICS
For decades, the world of development banking was dominated
by a few multilateral actors, foremost the World Bank
Group as well as regional development banks.
In recent years, some established
banks have much expanded their scope of operation, while
new actors and interests are moving in. A number of
national development banks, for example from China and
Brazil, have entered the international arena in a big
way, often operating far outside of their respective
home countries and becoming truly global actors.
The BRICS group of five major emerging
economies (Brazil, Russia, India, China and South Africa),
during the BRICS Summit in Fortaleza, Brazil, in July
2014, formally announced the creation of the group’s
own New Development Bank (NDB). China, in October 2014,
launched the Asian Infrastructure Investment Bank (AIIB),
and in May 2015, Japan announced a massive 100 billion
USD financial package for an Asia infrastructure programme
within the framework of the Asian Development Bank.
The new rush into development banking is going to have
substantial large-scale political, socio-economic and
environmental implications. At the same time, development
banking, it appears, is becoming more diverse and competitive
than ever. Or is it?
The very concept of "development" means different
things to different people. In fact, there have been
branches of development banking directed, for example,
at the support of small scale farming or medium-scale
businesses. But overall, it is the creation of infrastructure
– and of large-scale infrastructure – which has been
at the heart of development banking in the post-World
War II era. The very rationale of development banking
is to mobilise long-term, large scale financing for
projects where other – usually private – sources of
finance either do not exist or are unable or unwilling
to participate due to the risks of long-term engagement.
The new and expanding institutions of development finance
reflect the considerable growth of political and economic
self-confidence in the emerging economies. It remains
to be seen how far they will really challenge established
patterns of global development banking.
In the midst of major expectations of the positive political
impact of the new development finance institutions for
the developing world, considerations of the kind and
quality of the very "development" that these
banks may contribute to have largely taken a back seat.
Investment in large-scale infrastructure is necessary
for economic growth; but at the same time it typically
entails considerable social and ecological costs. Frequently
there are manifest and severe implications, especially
the displacement of local populations and the destruction
of natural habitats and biodiversity.
For decades, protests and social movements in affected
regions and countries have pointed to these issues,
and some of them have managed to stop or modify projects.
For example, since the 1990s, the number of big dam
projects commissioned declined in many parts of the
world, at least outside China. Local resistance and
international criticism appear to have made it more
difficult to construct big dams in the same manner as
in decades past.
After numerous struggles, social and environmental safeguards
and procedures apply to financing of infrastructure
by the World Bank. Despite criticism, especially from
civil society actors, about their implementation, the
World Bank standards create the reference baseline against
which to evaluate and debate infrastructure projects;
they constitute the precondition for a degree of transparency
which allows public scrutiny of the work of the world’s
major development finance institutions.
With growing competition within the world of development
financing, existing standards and safeguards could be
at risk. Competition between financing institutions
could contribute to weakening them; various national
development banks are far less susceptible to international
pressure than the World Bank.
In this regard, critics view the ongoing revision of
the World Bank safeguards with scepticism. From the
perspective of social and ecological protection, it
would be a tragedy if an increased diversity of actors
and the stronger role of the Global South in the field
of development finance, as desirable as it appears from
the political perspective, resulted in a weakening and
crowding out of safeguards and standards applied in
decisions about infrastructure financing.
Many champions of social and environmental protection
for vulnerable groups and endangered habitats feel ambivalent
about the recent expansion of development banking, particularly
for large-scale infrastructure development. Some question
the entire development model behind large-scale infrastructure
directed towards economic growth. Others focus on engagement
with governments and especially the existing and newly
emerging development finance institutions in order to
achieve better outcomes. Non-specialist actors in the
development field may wish to improve their understanding
of new trends and challenges in the field of development
finance and expand their engagement on this issue. As
the NDB is being created by the BRICS countries, it
is worthwhile to take a closer look at the practice
of and experiences with development banking in each
of these countries in order to understand where they
are coming from and what perspective they are taking
in its creation.
This volume aims to provide background information for
an informed debate about development financing from
the perspective of emerging economies, especially the
BRICS countries. It includes five essays that address
the experiences with (mostly national) development banks,
showing a high degree of diversity in national policies.
In the first essay, C.P. Chandrasekhar provides an overview
of the rationale and major trends in global development
banking, comparing experiences and trends from emerging
economies within BRICS and beyond them. The four contributions
that follow look at the national experiences in each
of these countries. For Brazil, Carlos Tautz, João
Roberto Lopes Pinto and Fabricia de Andrade Ramos study
the rise of the Brazilian Economic and Social Development
Bank (BNDES) from a national to a global player, whose
structures and policies many observers believe will
influence the NDB created by the BRICS countries. Mark
Grimsditch and Yu Yin look at the large "policy
banks" created by China’s government In order to
promote national infrastructure expansion and China’s
international engagement; in terms of sheer scale, these
banks have changed the world of development finance
over the last two decades. C.P. Chandrasekhar looks
at the decidedly different experience of India, where
large-scale development banking has lost relevance;
instead, public-private partnerships have been used
on a large scale for infrastructure financing, with
quite mixed results. Finally, Mzukisi Qobo studies the
two main development banks of South Africa, with a particular
focus on identifying ways to increase civil society
engagement with these banks and their policies.
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