What is new about the BRICS-led New Development Bank?

Originally published on Devex on 9 May 2016

About three weeks ago, the board of directors of one of the world’s newest multilateral institutions, the New Development Bank of Brazil, Russia, India, China and South Africa, met on the sidelines of the World Bank and International Monetary Fund spring meetings in Washington, D.C., to approve its first set of loans.

Valued at $811 million, this first tranche of funding will support renewable energy projects across the BRICS countries including two solar energy projects in India and China, and a hydropower dam in Russia. For Brazil, it created a credit line worth $300 million for renewable energy projects such as solar and wind power.

When the idea of a BRICS-led development bank was first announced by Brazil, Russia, India, China and South Africa four years ago in New Delhi, it was met with a range of reactions from wariness to cautious optimism to overt celebration. Almost from day one, it was seen to be a direct challenge to existing development banks, notably the Western-dominated World Bank and IMF. BRICS governments have maintained that their bank serves to complement and not substitute these institutions.

But what exactly is new about the New Development Bank?

Three key features set the NDB apart from existing multilateral development banks: “south-south” cooperation, equity in power-sharing and sustainable development.

Each of the BRICS governments has ownership of one-fifth of the share of the Bank, which translates into an equal say in decision-making. This is unlike the World Bank or the IMF where decision-making power is heavily skewed in favor of a particular set of countries.The creation of a development bank by countries of the “global south” for the global south is both unique and necessary. It has been created to meet the specific development needs of the global south, namely those of infrastructure. Based on their own experiences as recipients of foreign aid from the “global north,” the BRICS governments are keen to ensure that development funding provided by them is free of political conditionalities and is disbursed without delays.

Perhaps the single most important differentiating feature of the NDB is its stated commitment to the principle of sustainable development. This is a departure from a business-as-usual approach.

But apart from stating that sustainable development will be linked to the financing of particular kinds of infrastructure projects, namely “green” or renewable energy projects, the NDB has been less clear about how it will ensure that these projects will be rooted in sustainable practices. Also unclear is whether and how they will be linked to the implementation of the internationally agreed Sustainable Development Goals. While the bank has officially opened for business, addressing these questions will be critical for the next phase of the NDB.

The NDB could incentivize governments to design projects that are respectful toward the environment and local communities. It could offer differential interest rates and repayment terms on loans given to governments, depending on the latter's ability to meet certain criteria such as their consideration of potential socio-environmental impacts of projects, project alignment with international best practice in sustainable development and integration of key components of the Sustainable Development Goals. These criteria could be consolidated into a composite index to measure the actual sustainability of projects, both in terms of processes employed and outcomes achieved.

Linking sustainable development to incentives would encourage governments to think about sustainable practices not as bureaucratic formalities or risks, but as actions ultimately linked to better development outcomes. This would be a major shift in the way environmental and social standards are currently conceived in the international financial architecture.

While these are no doubt important questions for BRICS policymakers and the NDB’s officials to consider, they also open up the space for greater engagement by civil society. Defining the precise sustainability criteria against which projects could be judged for selection is an area where civil society could provide input. Civil society could also play a critical role in providing oversight of the NDB’s lending practices by ensuring that these preagreed criteria are indeed used to inform the bank's decision-making.

The NDB is expected to inject fresh thinking into development practice. It has already laid down the framework for this by placing sustainable development at the core of its mandate. Acknowledging that sustainable development is as much an outcome as it is a process will help to further guide the Shanghai-based bank in its selection and implementation of projects. As the NDB embarks on this journey, it should proactively encourage dialogue with different stakeholders, including civil society actors, who could be valuable partners in this process.

About the authors

Supriya Roychoudhury

Supriya Roychoudhury is a researcher, published author and commentator on "south-south" development cooperation issues, specializing in Indian development cooperation policy. She previously led Oxfam India’s foreign policy program.

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Karin Costa Vazquez

Karin Costa Vazquez is an adviser and researcher specialized in international cooperation for development, strategic planning and operations. She has worked with the World Bank, UNDP, and the Brazilian Ministry of External Relations, and published extensively on BRICS's contribution to the implementation of the Sustainable Development Goals.

NeST launches analytical framework for South-South cooperation

This post was originally published on the SAIIA website. Authors are responsible for the concepts, ideas, views and opinions disseminated in the blog posts.

In March 2015 a group of 25 prominent academics and development co-operation experts from the Network of Southern Think Tanks (NeST) gathered in Midrand, South Africa to discuss a common analytical framework for South−South co-operation. Representatives from Brazil; China; Colombia; India; Kenya; Malawi; Mexico; Mozambique; Namibia; South Africa; Turkey; Uganda; and Zimbabwe; provided insights and discussed conceptual and methodological dimensions of measuring the quantum, quality and impact of South-South Co-operation within the arena of international development.

This was the first meeting in a series of Technical Working Groups tasked with developing a Southern analytical framework. As part of a wider consultation to provide inputs to NeST’s conceptual work, a multi-stakeholder policy dialogue on the topic ‘Emerging Partners in Africa’s Development’ was organised to discuss the rol and contribution of South−South co-operation to international development and appropriate monitoring and accountability frameworks for such. A subsequent Technical Working Group has since been held, in Johannesburg in early September to further develop the indicators to measure the quality of South-South partnerships and processes.

The working document titled; “Developing a Conceptual Framework for South-South Cooperation”, summaries the insights, consensus and divergences emerging from the various technical workshops of the Network of Southern Think Tanks. The working document covers areas such as: Defining South-South Co-operation; Information Management for South-South Co-operation; Evaluating the Impact of South-South Cooperation; Assessing the Quality of South-South Cooperation; along with updates from the various National and Regional chapters of NeST.

Network of Southern Think Tanks (NeST) in Action - How to Measure SSC Impact

This post was originally published on the South-South Opportunity by Multipolar. Authors are responsible for the concepts, ideas, views and opinions disseminated in the blog posts.

* Read the blog in 80+ languages with the translator widget on the right side of the page!

The new year has started with great news for Southern academia working on South-South and triangular cooperation. Building up on previous attempts - notably the extinct Task Team on South-South Cooperation and the subsequent BRICS Academic Fora -, the Network of Southern Think Tanks (NeST) was launched in 2014. It strives to provide a "global platform for Southern Think Tanks to collaboratively generate, systematize, consolidate and share knowledge on South-South Cooperation (SSC) approaches in international development."

Currently key members include RIS (India) - hosting the Secretariat -, CAU (China), IPEA (Brazil), as well as SAIIA and WSG (both South Africa). In particular think tanks, universities, research institutes and NGOs from countries receiving SSC are warmly invited to become "Nest-ed".

One of the key tasks for the NeST will be to assess the quantity, quality and impact of SSC, as a way to respond to the manifold challenges still found in the institutional and operational reality of today's SSC. To this end, the global NeST effort will be enriched by national NeST chapters. Two of these have recently been launched in South Africa and Brazil, with great energy for all involved stakeholders.

In addition, the NeST held a first global Policy Dialogue on Measuring the Impact of SSC in Midrand, South Africa, on March 3 2015, with participation of academia from numerous African and LAC countries (more details here and agenda here). The outcomes will be available soon, so stay tuned to the NeST here at southsouth.info and other partnering platforms.

Three challenges for the Global Partnership for Effective Development Cooperation

Earlier this year, I published a list of milestone events for shaping the policy field of development cooperation in a post-2015 context. Among these milestone events is the first Global Partnership for Effective Development Cooperation (GPEDC) high-level meeting, convening in Mexico next week.

GPEDC members will meet amid uncertainty regarding what sort of momentum the forum will be able to generate. First announced in 2011 at the 4th High Level Forum on Aid Effectiveness (HFL4), the GPEDC would ensure accountability for the implementation of the five HFL4 commitments at the political level: ownership, results, inclusive development partnerships, transparency and mutual accountability. 

Two years onwards, not only the quantity but also the quality of aid seem to have increased. According to the OECD, official development assistance (ODA) rose by 6.1% in real terms in 2013 after a two years of falling volumes and reached the highest level ever recorded (USD 134.8 billion). A OECD/UNDP report covering 46% of total ODA highlights that country ownership continues to strengthen, donors are sharing information on development cooperation more transparently, and there is greater recognition of the important role played by non-state actors in development. 

However, in an evolving international architecture for development cooperation there is much more that needs to be done to shift the global debate from "aid effectiveness" to "effective development cooperation" and actually transform cooperation practices. Under this scenario, some of the issues GPEDC members will face next week in Mexico and beyond are: i) the legitimacy of its agenda; ii) the effectiveness of its monitoring framework; and iii) its relevance to the development cooperation debate. 

Whose interests at stake

The GPEDC high-level meeting next week is expected to provide development actors an opportunity to review what has been achieved since the HFL4 and identify ways forward to effective development. However, a quick look at the agenda of the meeting sheds light on the actual composition of the debate and some of the interests at the table. 

The meeting is organized in five plenary sessions on the following topics: i) progress since Busan, ii) taxation and resource mobilization for development, iii) SSC/TrC and knowledge sharing, iv) development cooperation with Middle Income Countries, and v) business as a partner in development. Could such agenda be understood as an attempt to extend GPDEC's mandate beyond monitoring post-Busan performance to a role in helping frame the Post-2015 development debate? If so, what is the need for such stronger mandate given the already existing MDGs and other UN processes? Could the GPEDC more prominently feed into the post-2015 process on the 'how' global, regional and national development efforts should be undertaken, rather than the 'what' the global development agenda would be?

In addition to the plenary sessions, 37 focus sessions (side events) are expected to engage GPEDC members in in-depth discussions and gather support to voluntary initiatives around the topics of the main meeting. From the 33 focus sessions with information available on GPEDC website [1], 27 are organized by at least one OECD-DAC member and/or think-tank funded by an OECD-DAC country [2]. Only five South-South cooperation partners and/or non OECD-DAC countries (Colombia, El Salvador, Indonesia, Mexico and Mozambique) are co-organizing focus sessions with a traditional donor. The governments of China and India are not leading nor co-organizing any focus session, but one Chinese and one Indian think-tank are co-organizing a focus session with a German think-tank. The governments of Brazil and South-Africa are neither leading nor co-organizing any focus sessions. How representative of the breadth of development players is an agenda apparently dominated by traditional donors?

The unfinished aid effectiveness agenda

Consensus is emerging on the need to adopt a new set of rules and standards that are inclusive of the different development actors. The GPEDC global monitoring framework tracks progress on the commitment and action agreed at the HLM4 based on ten indicators in areas like gender equality and women's empowerment, untied aid, and partners using results frameworks. 

However, questions remain on whether the HLF4 partners beyond OECD-DAC countries (e.g. South-South partners, private sector, civil society and philanthropic foundations) have the incentives to report their development assistance according to this framework, and how the issues of capacity and differentiated commitments tie into this.

For example, three indicators in the GPEDC global monitoring framework measure progress towards the HLM4 principles of transparency and accountability. Indicator #4 specifically measures the state of implementation of the HLM4 common, open standard for electronic publication of timely, comprehensive and forward-looking information on resources for development cooperation by cooperation providers.

The 'common standard' referred in Indicator #4 combines three complementary systems and processes for tracking development cooperation flows. These are two OECD reporting instruments (the DAC Creditor Reporting System - CRS - and the Forward Spending Survey - FSS), which contain comprehensive statistical information; and the International Aid Transparency Initiative, a self-publishing system with notifications to a registry that provides current management information on cooperation providers' activities. 

The CRS, the FSS and the IATI standards are primarily designed to track ODA flows down the delivery chain. Despite ongoing efforts to broaden their scope (e.g. through the inclusion of indicators to measure humanitarian flows in the IATI standard for instance), these standards are not yet ready to capture non-ODA flows like South-South and triangular cooperation, non-concessional finance, and climate finance, among others. Consequently, neither should the common standard be. 

Rule makers, rule takers...‘rule spoilers'

The GPEDC adopted a multi-stakeholder governance mechanism for itself, portrayed as “global-light and country-heavy” with high-level meetings every 18 to 24 months. However, this governance mechanism "has not been subject to an encompassing intergovernmental negotiation and has never been endorsed by the UN membership"[3]

Skepticism persists among the big emerging economies in terms of continued association of the GPEDC with the OECD-DAC. China and India openly criticize the new set-up as “too Northern” and have yet to engage. Brazil in its turn argues that discussions on development cooperation effectiveness should start among the country focal points. In a second stage, it should be taken to the High-Level Committee on South-South Cooperation (in the case of South-South partners), and ultimately to the Development Cooperation Forum.

On the other end of the spectrum, Mexico, Korea and Turkey (all new members of the OECD) have agreed to participate in the DAC systems and report more systematically on their aid. Other middle-income countries like Colombia, Indonesia and Peru have also taken an active role in the GPEDC Steering Committee.

Although these emerging economies are not a unified block and have very different policy approaches to development, they generally share a disapproval of the mainstream aid-effectiveness agenda and a preference for engagements with other developing countries on the basis of horizontal partnerships, exchange, friendship and solidarity.

Many of these emerging economies have been developing their own definitions, standards, information databases and measurement systems to support the accountability of their development cooperation at the domestic and/or regional levels. 

At the global level, however, there is still an overall lack of leadership in defining norms, frameworks and instruments for such modalities of development cooperation and/or for meeting the needs of some of these countries which still play a dual role as both recipients and providers of development cooperation. 

One of the challenges for a greater engagement of emerging economies in the global development debate is the lack of a natural 'home' for South-South cooperation in the same way that the OECD-DAC is the reference point for the North-South cooperation. In fact, as the lead intergovernmental bodies within the UN for coordinating South-South and overall development cooperation, the High-Level Committee on South-South Cooperation and the Development Cooperation Forum (DCF) would have such role. However, the DCF has no mandate to negotiate political outcomes and has achieved few tangible results since its creation in 2008. The forum meets every two years and has few follow-up mechanisms in-between the meetings.

The efforts to strengthen the DCF are also hampered by the political incentives that countries have to maximize their individual influence through parallel discussions on the GPEDC and the DCF (or even through the absence of discussion!). Countries like Colombia, Indonesia, Korea, Mexico, Peru and Turkey would still be able to negotiate at the DCF through the G-77 and China, as well as individually through the GPEDC. Others like Brazil, China, India and South Africa have been sending strong messages against the current state of affairs but have yet not shown their leadership in shaping the new development cooperation debate. 

This 'sequestration' of the global development agenda could have a detrimental effect on the efficiency of cooperation. First, by missing the opportunity to substantively contribute to the implementation of the post-2015 agenda. Second, by creating additional structures with dubious legitimacy. For example, one of the proposals for the GPEDC meeting next week is the re-launch of the Task Team on South-South Cooperation, a 'spin-off' from the OECD Working Party on Aid Effectiveness with no participation of the big emerging donors. 

The way forward

Could the GPDEC concentrate on its mandate to monitor HLM4 commitments? Knowledge exchange on how this agenda links with broader development cooperation issues and how existing ODA-focused norms, standards and systems could contribute to the development of norms, standards and systems on broader modalities of development cooperation would also be welcome. These exchanges could feed into the DCF, which would have the normative power over the broader development cooperation agenda and its links with the post-2015 process.

In order to increase the legitimacy of GPDEC's agenda; improve the effectiveness of GPDEC's monitoring framework; and ensure GPDEC's relevance to the broader development cooperation debate, at least three questions need to be answered:

Whose and what interests are really at stake during the Mexico meeting and beyond? 

Can the GPEDC set standards and indicators that are truly inclusive of the different developments actors? 

Could the GPEDC be an 'implementation arm' of the DCF? 

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Part #2: Enhanced UN support for South-South Cooperation? The United Nations Office for Development Cooperation Strategic Framework 2014-2017

[1] http://effectivecooperation.org/first-high-level-meeting-draft-agenda/

[2] Only the organizations that were listed as (co) organizers and that provided a contact person were considered.
[3] See D.I.E report