The birth of new regional lending institutions, like AIIB and NDB, was provoked partly by the US Congress’ refusal to reallocate IMF voting shares in 2012. Conceived out of a desire for a diplomatic status equivalent to their growing economic clout, the emerging economies of Brazil, Russia, India, China, and South Africa coalesced in 2012 and founded the NDB. Aimed at mobilizing “resources for infrastructure and sustainable development projects in emerging and developing economies,” BRICS offers alternatives to American and European-led lending institutions like the International Monetary Fund (IMF) or World Bank. While seemingly diverse, we must now speculate whether these distinctly non-western projects will support one another or increase development competition.
NDB’s launch took considerably more time than AIIB’s. First proposed in 2012, the bank took just over three years to launch, celebrating its official establishment in July 2015. AIIB, however, was first conceived in 2014 and will launch in early 2016. The five founding members of BRICS endured three years of negotiations in order to consolidate their structure. Contrastingly, AIIB’s unilateral founding has enabled its speedier, year and a half formation. Perhaps indicative of superior organization and efficiency, critics worry that AIIB may outpace the development of BRICS.
This concern is furthered by the comparison of voting shares between the two banks. Within BRICS, all five founding members have contributed an equal share of $10 billion out of its $100 billion in assets. In AIIB, China easily dominates, having contributed nearly $30 billion of its $100 billion capital base. This in turn, positions China with the greatest number of voting shares held by AIIB member countries. Critics caution that China will possess considerably more voting power than its fellow member states, and will utilize that power in determining the organizational structure of AIIB.
Though analysts hypothesize that AIIB and NDB may compete, others suggest that the two institutions are meant to complement one another. Aimed at alleviating the gaps in Asia’s infrastructural needs, the two banks could benefit from cooperation. Aligned with the NDB, AIIB has potential to make a greater contribution within international debate. Although there is skepticism that China will not be able to comply with human rights or environmental regulations, supporters of NDB emphasize that the influence of fellow emerging economies, like Brazil or Russia, will motivate China to recognize western standards.
Alongside emerging markets that are similar in economic and diplomatic statures, BRICS and AIIB may act independently of western lending institutions. Analysts stress that cooperation between AIIB and NDB could even break the ‘monopoly’ held by the IMF and World Bank. Proponents hope that potential partnerships between AIIB and NDB will compel western-led institutions to act more democratically. While these banks formed in response to the unequal allocation of voting shares in western-led institutions, they may still desire to reform voting powers, and thereby further integrate emerging markets into the international order.
Gabrielle Torres is an undergraduate studying Government and Spanish at the University of Texas at Austin.