So much has changed in the political and economic landscapes of Brazil, Russia, India, China and South Africa since they launched a new bank tasked to support sustainable infrastructure development in 2014.
With each BRICS member country hit by some crisis in the past five years, the New Development Bank (NDB) met in Cape Town, South Africa, this week charged by critics as opaque and having failed to establish the promised new model for financing development.
“The bank has been very slow to produce results,” Paulo Nogueira, the NDB’s vice-president from 2015 to 2017, told Diálogo Chino. “For a bank that had the aspiration of becoming a global bank, still having five members after almost four years is very little.”
Lack of transparency
Transparency was a key value promoted by the NDB. Yet, three years after it became fully operational, its decision-making process still baffles observers.
You expect us to pay for something when we don’t know how deep the hole is?
Lumkile Mondi, an economics professor at the University of the Witwatersrand in Johannesburg, can’t understand why the NDB decided to loan US$180 million to utilities company Eskom, which is severely in debt and mired in a sprawling corruption scandal.
The NDB’s website says the loan is part of a set of disbursements planned to aid Eskom and integrate renewable energy into the national grid but the bank did not respond to Mondi when he questioned the deal.
“Everyone is worried about the probability of default. But the New Development Bank gave them a loan. We wondered: how did they reach this decision, given that no one was willing to fund it?” he asked.
“You expect us to pay for something when we don’t know how deep the hole is?”
Heavy on rhetoric, light on proof
Environmentalists were hopeful of the NDB’s promise to go beyond the standard pledge of not harming the environment to being an agent for a broader transition to a more sustainable form of development.
If the bank really wants to be what it promises - a modern, green institution, based on sustainable development - it will need to be even more transparent than traditional institutions
However, it hasn’t ruled out ‘dirty’ energy projects, such as coal.
Li Xlulan, from Chinese environmental research group Greenovation: Hub said that even though the NDB has no coal projects in its current portfolio, the bank should make a commitment to prohibiting investment in the fossil fuel.
“We suggest the NDB clarify their coal finance policy in their statement...in order to support the low carbon transition in recipient countries via more resilient and sustainable investments."
While the bank says it invests a great share of its resources in sustainable development projects such as Eskom’s, it doesn’t share the criteria it uses to decide whether a project is environmentally-friendly or not.
Nor does it doesn’t offer detailed explanations of how a project will work or why it was approved.
“If the bank really wants to be what it promises; a modern, green institution, based on sustainable development, it will need to be even more transparent than traditional institutions,” said Julia Cruz, an advisor to Brazilian rights NGO Conectas.
Cruz said the bank has been receptive to Conectas’ recommendations on how to make its lending criteria clearer but lacks information on whether it will introduce them or not.
“It’s a positive step forward, at least from a rhetorical point of view,” she said, adding that the bank itself, which already backs 34 projects, conceded it often lacks the human resources to respond to questions.
Slowly but not so surely
Though the NDB has announced billions of dollars in loans, it has disbursed scarcely US$380 million.
has been disbursed by the NDB. It has approved loans of US$6.7 billion
Nogueira said he believes the bank’s problems are rooted in both administrative issues and global politics.
Russia faced economic sanctions for its annexation of Crimea; the relationship between India and China has been tested by the latter’s financial support of Pakistan; China’s own economic growth has slowed, hindered of late by a trade spat with the US; and domestic political crises toppled governments in Brazil and South Africa.
For a nascent multilateral institution, such complicated issues have proven challenging.
Nonetheless, Nogueira said the bank lacks talent and has been unable to get positive coverage for its projects. “The bank kind of went off the grid,” Nogueira said.
Brazil will pick the bank’s new president next year as the five-year mandate awarded to India’s Kundapur Vaman Kamath ends.
Nogueira said Brazil was the bank’s most diplomatic member but that political and economic crises since 2014 meant the country has taken a back seat in the NDB. He said Brazil could overcome the obstacles the current administration faced.
“It’s an opportunity for the bank to restart.”