The creation of the New Development Bank (NDB) became one of the most debated outcomes of the 6th BRICS summit which took place in the Brazilian city of Fortaleza on July 15–17. According to the declaration signed on the first day of the summit, the capital of the BRICS’ new financial institution will amount to approximately $100 billion, making it one of the largest in the world. The NDB headquarters will be located in Shanghai with a regional office in Johannesburg, with membership of the bank open to all UN members. The financial organisation aims to become an alternative to the World Bank which had been criticised by the BRICS countries many times for inadequate allocation of votes on the most important economic decisions.

Another document signed at the summit agreed to create a reserve currency pool worth $100 bn, which will be used to protect national currencies from financial market volatilities; this structure promises to become a worthy alternative to the International Monetary Fund and is expected to begin operations as early as 2015. According to foreign observers, the signed agreements signify the decision of the BRICS countries to make a shift towards multipolar world order; overcome Western dominance in banking and currency issue and create counterparts to the US dollar and the dollar-based economy. The leaders of the five BRICS countries — Brazil, Russia, India, China and South Africa — also discussed other promising projects, such as cooperation in innovations and export credit areas.

According to Christopher Wood, Researcher with the Economic Diplomacy Programme at the South African Institute of International Affairs, the discussed ideas were mostly at a very early stage, which makes it hard to comment on them. However, he noted that the decisions to create the NDB and the reserve currency pool were the most important. “The bank is vitally important to the BRICS, because it gives the five countries the capacity to act as a group. Just as the World Bank is used as a mechanism to turn G20 decisions into action, BRICS New Development Bank can turn the BRICS words into action,” he said. He stressed that the decisions may not only unify the group against the common tasks and rovide them with the tools to influence the world economy, but also facilitate trade relations between them. “Inter-BRICS trade is already high, but it is dominated by Brazil, Russia, India and South Africa trading with China, while not trading much amongst themselves. This offers an avenue to boost trade between BRIS group,” the Researcher explained.

At the same time, Lauren M. Phillips, of the Department of International Relations at the London School of Economics and Political Science, suggested that many inconsistencies that exist between the BRICS countries may impede successful cooperation and effective operation of the financial institutions. “The World Bank and IMF were founded by a set of allied nations who had a lot to lose if they failed to cooperate, and the two institutions were informed by a vision about the shape of the global economy. The New Development Bank and reserve fund, are instead founded by a diverse set of countries who have very little in common,” she argued. She does, however, still consider the decisions significant; the resulting effect will depend on a number of aspects that must be taken into account when planning the NDB strategy.

According to Alexey Maslov, head of the School of Asian Studies at the Higher School of Economics, the summit agreements are particularly significant. “This is perhaps the first constructive decision made through out all the six summits. Until then, BRICS had no platform for further development and was only a platform for discussions. For the first time in the world, there are signs what BRICS may do in the future,” he said. According to Masolv, the decision to found the New Development Bank shows that the common influence of the five countries on the rest of the world will be mainly economic in nature.

Pallavi Roy, senior teaching fellow for Centre for International Studies and Diplomacy at the SOAS University of London, noted that the five countries in question have conflicts of interests in a number of areas, and that it is currently hard to say how their relationships will develop in the future and how effective will NDB be in solving the most urgent problems in Brazil, India and South Africa. At the same time, he highlighted the common understanding that together, the BRICS countries will command more credibility than separately. “Under the current circumstances in Ukraine, Russia probably needs this credibility and the capital, more than the others. This could also be a way of signalling to the West that the effect of the sanctions can be mitigated. China would want to prove it is a responsible rising power that can be a part of a multilateral order. Brazil, India and South Africa have correspondingly less to gain as they are not yet the sort of powers Russia and China are but being seen as ‘leaders’ in the developing world is part of each country’s strategic roadmap,” he suggested. In addition, Roy suggested that the decisions made by BRICS may create an effective alternative to the current state of the world economy, even though the group’s statements do not yet mention a threat to the US dollar as the international reserve currency. “This is certainly a very interesting development in efforts to create a more multilateral world. This is the first time that a widely diverging set of developing countries have come together in the interests of financial cooperation, though calling Russia a development country might be not be very accurate,” he stressed.

Crucially, Mark Weisbrot, economist and co-director of the US Center for Economic and Policy Research, pointed out that the decisions made by the five countries may have been caused by their state of affairs in the existing financial institutions. “The BRICS countries have more than 40% of the world’s population but still have little voice at either the IMF or the World Bank, even after decades of talk of governance reform at the institutions,” the economist noted. The decisions made by BRICS have the potential not only to break the pattern of the US-EU global financial domination, but also remove a number of conditions harmful to growth of the developing countries. “With a handful of rich allies, the U.S. has controlled the most important economic decision-making institutions for 70 years, including the IMF, World Bank, and more recently G-7,8, and 20; and they wrote the rules for the WTO. This is the first alternative where the rest of the world can have a voice,” Weisbrot concluded.

The BRICS group, formerly known as BRIC, unites five major emerging national economies: China, Russia, Brazil, India and South Africa.