For about the past two months the board of directors of the New Development Bank, one of the newest multilateral institutions in the world, operated by Brazil, Russia, India, China, and South Africa, approved its first set of loans evaluated as US$ 811 million dollars. The creation of the NDB has been, since the very beginning, considered as a challenge to the World Bank and the FMI. Governments from the BRICS countries, in turn, defend it as it serves to complement and not replace those institutions.
The NDB meets the needs of the infrastructure for the development of the ‘Global south’. Based on its own experiences as beneficiaries of foreign aid from Northern countries, the BRICS governments wish to guarantee the funding supplied by them to be free from political conditionalities and paid without delays.
Each one of the BRICS governments is assigned a fifth of the property from the NDB quota, which is converted into opinion equality in decision making. That is the difference between the World Bank and the FMI, whereas the decision-making power is strongly skewed favoring a specific group of countries. Perhaps that is the most important characteristic of the NDB, it is its declared commitment based on the principle of sustainable development. This approach innovates the manner how funding for development has been done until the present moment.
But, besides affirming that sustainable development will be connected to funding for specific types of “green” infrastructure, the NDB has been less transparent about how it will guarantee that these projects are in fact sustainable. That issue will be critical for the next phase of the NDB.
NDB can offer differentiated interest rates and payment terms according to the capacity of its projects considering the potential socioenvironmental impacts, the alignment of the project employing enhanced international development practices, and integration with the Objectives of Sustainable Development. Those criteria can be consolidated into a compound index for measuring the sustainability of projects funded by NDB, in terms of processes as well as achieved results.
Linking sustainable development to incentives would motivate governments to consider sustainability as actions connected to the improved results from development, and not as formalities or bureaucratic risks. This would be a great change in the way safeguards are conceived in the current international financial architecture.
It is expected NDB injects new ideas and development practices. This innovation framework was established at a time when sustainable development is at the core of the NDB mandate. It is important to recognize that sustainable development is a result, as well as a process, helping to further guide, the transactions of this new bank.