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BRICS Long-Term Strategy

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As a result of the increasing demands for reforms following the financial 

crisis, the 14

th

 General Review of Quotas was concluded in December 2010. 

This included proposals for wide-ranging reforms to reflect the increasing impor-

tance of emerging economies that were further approved by other G20 finance 

ministers and central bank governors at a meeting in 2010 in Gyeongju, Korea 

(IMF, 2010b). Despite proposals from multiple stakeholders, ratification by the 

US Congress is a significant hurdle in the actual implementation of reforms.

5

As of October 2014, the USA has the majority voting share of 17.69 per cent at the 

IMF and 16.07 per cent at the World Bank. To be fully implemented, the reform 

package will require approval by three fifths of the members, representing 85 per 

cent of the total voting power. The 85 per cent supermajority rule implies that 

the US must be a member of any winning majority, assuring it a unilateral veto. 

In January 2014, the US Congress failed to ratify the IMF reforms, undermining 

the implicit understanding between the G20 leaders. However, even if the reforms 

are passed, the US voting share will still be 16.5 per cent and will not eliminate 

this systemic dependence. 

TABLE 4

Voting shares at the IMF before and after implementation of reforms agreed in 2008 
and 2010

As of March 2011

Post-2008 reform

Post-2010 reform

Advanced economies

59.5

57.9

55.2

Major advanced economies (G7)

44.3

43.0

41.2

United States

16.7

16.7

16.5

Other

27.6

26.3

24.7

Other advanced economies

15.2

14.9

14.0

Emerging market and developing countries

40.5

42.1

44.8

Developing countries

32.9

34.5

37.1

Africa

5.9

6.2

5.7

Asia 

11.6

12.8

16.1

Middle East, Malta and Turkey

7.6

7.3

6.8

Western Hemisphere

7.8

8.2

8.4

Transition economies

7.6

7.6

7.7

Total

100

100

100

Source: IMF, IMF Members’ Quotas and Voting Power, and IMF Board of Governors, 16 Dec. 2014.

5. In the 2014 spring meetings of the IMF and the World Bank, finance ministers and central bank governors

of the G20 

indicated that if the 2010 reforms are not ratified by year-end, they will move forward with the reforms without the USA.

Political and Economic Governance

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Although the capital structure and voting rights have been amended at both the 

World Bank and the IMF, voting power is still skewed towards advanced economies. 

BRICS countries, accounting for more than a fifth of global output, have 

a mere 10.3 per cent share of the total allocated quota. European Union (EU) 
countries, by contrast, are allocated 32 per cent as against 21 per cent of output 
(The Economist, 2011). In the World Bank, high-income, non-borrowing countries 
hold more than 60 per cent of the total voting power. 

TABLE 5

Voting shares of selected countries at the IMF and IBRD, as of 24 Oct. 2014

Voting Share (%)

IBRD

IMF

United States

16.07

17.69

Japan

8.02

6.56

Germany

4.50

6.12

France

4.01

4.51

United Kingdom

4.01

4.51

BRICS

13.46

11.51

Source: IMF, World Bank.

The proposed reforms will lead to a realignment of voting shares – more than 6 

per cent of quota shares will shift to dynamic emerging and developing economies, 

and the BRICS (except South Africa) will be among the 10 largest shareholders.

Under the IMF Articles of Agreement, each of the five members with the 

largest quotas appoints an Executive Director, and the remaining members elect 

other Executive Board members. Presently, the IMF Executive Board consists of 

24 Executive Directors presided over by the Managing Director.

The World Bank follows a similar governance structure. For instance, under 

the IBRD Articles of Agreement, each of the five members with the largest number 

of shares appoints an Executive Director, and the remaining members elect the 

other Executive Directors. Presently, the IBRD Board of Directors consists of 

25 Executive Directors presided over by the President. 

The inequitable distribution of voting power is reflected in the number of 

countries represented by each Executive Director. Large shareholding member 

nations have their own representative on the Executive Board, whereas many 

smaller members are grouped into constituencies representing four or more 

countries. For instance, 45 countries in sub-Saharan Africa are grouped into just 

two constituencies and represented by only two Executive Directors.

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Moreover, all past Presidents of the World Bank have been US citizens, while 

the past Managing Directors of the IMF have all been Europeans. This sort of 

representational inequity only serves to detract from the efficacy of the Bretton 

Woods Institutions. The 2010 reforms seek to redesign the Executive Board by 

electing members instead of appointing them. Moreover, advanced European 

countries should reduce their combined board representation by two chairs. 

2.2.3 Enabling efficient resource allocation and transparent decision-making 

The IBRD and the IDA collectively loaned about USD 40 billion in 2013-14. 

Out of this, total spending on infrastructure including energy, transportation, water, 

sanitation and health amounted to USD 13.8 billion (World Bank, 2014). However, 

this amount is grossly inadequate when seen in the context of the development 

needs of emerging and developing economies. It is estimated that infrastructure 

requirement in BRICS countries are well over of USD 1 trillion. 

In addition to quota reserves, the IMF has a supplemental fund of resources 

called the New Arrangements to Borrow (NAB) – a temporary credit arrangement 

between the IMF and 38 member countries – worth approximately USD 588 billion. 

On top of this, in 2012, as economic and financial conditions worsened in 

Europe, 38 countries committed to IMF resources further by bilateral borrowing 

agreements, totalling USD 461 billion, of which 32 are effective as of August 

2014, totalling USD 425 billion. The IMF has had to resort to the NAB on 

multiple occasions in the recent past. This has demonstrated the inadequacy of 

the quota reserves; especially on occasions when a collective response was required 

(the proposed 2010 reforms aim to double the quota reserves to about USD 750 

billion). Before the 2012 G20 Summit in Los Cabos, BRICS leaders collectively 

pledged USD 75 billion to the IMF’s bailout fund for the Eurozone debt crisis 

(The Times of India, 2012).

There is also a crucial need for directing the resources of the Bretton Woods 

Institutions towards the sectors that can directly address the attendant challenges 

of emerging and developing economies. The World Bank declared that it will 

avoid funding towards the coal sector in 2013.

6

 This is in direct conflict with the 

development priorities of many emerging and developing economies. For instance, 

coal-fired thermal power accounts for 60 per cent of India’s total power generation, 

which makes it systemically important for economic growth (Central Electricity 

Authority, India).

6. “The WBG will provide financial support for greenfield coal power generation projects only in rare circumstances. 

Considerations such as meeting basic energy needs in countries with no feasible alternatives to coal and a lack of 

financing for coal power would define such rare cases” (World Bank, 2013). 

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Similarly, the IMF has a mandate to ensure global financial stability. However, 

when providing funds during crises, the strict conditionalities it often imposes can have 

adverse impacts on long-term growth. Countries such as Indonesia, Republic of Korea 

and Thailand were forced to adopt strict structural adjustment policies in exchange for 

IMF bailouts during the East Asian crisis in 1997. More recently, the G77 and China 

have called for more flexible financial responses to the needs of member countries 

without the imposition of pro-cyclical conditionalities (Group of 77 and China, 2010). 

2.3 The New BRICS Development Bank 

At the 2014 BRICS Summit at Fortaleza, the BRICS countries signed an agreement 

on establishing a New Development Bank (NDB), “with the purpose of mobilizing 

resources for infrastructure and sustainable development projects in BRICS and 

other emerging and developing economies” (BRICS, 2014). 

Infrastructure financing still remains a significant hurdle in the development 

of many emerging and developing economies and is a clear priority for members 

of BRICS. For instance, within BRICS the averages of key development indicators 

such as per capita electricity consumption (3502 kwh), fixed broadband internet 

subscribers (8.9 per cent), total rail lines (53,065 km) and paved roads (51 per cent) 

compare poorly with developed countries. 

The lack of a regular supply of infrastructure such as power and running 

water impedes economic growth. In fact, infrastructure deficits have proved to be a 

primary constraint for businesses in emerging and developing economies – between 

3 and 10 per cent of total sales were lost to electricity outages in developing countries 

in the latest available year of the 1994-2004 period (MDB Working Group on 

Infrastructure, 2011). The reliability of infrastructure and the maintenance of 

existing infrastructure is also a challenge that BRICS countries collectively face –  

and perhaps there is room for the NDB’s financing mandate to cover this core 

development concern.

While infrastructure development is a widely acknowledged ‘hard development’ 

challenge within BRICS, the key challenges within ‘sustainable development’ are 

more nuanced and context specific. Perhaps distinctly divergent from the position 

taken by advanced economies, BRICS countries have repeatedly stressed poverty 

reduction and inclusive growth as the prerequisite to sustainable development. 

Indeed, a common position within these economies has been to “take eradicating 

poverty and promoting development as the centre-piece of the Development Agenda 

beyond 2015” (People’s Republic of China, 2013), as well as collectively “addressing 

the challenges of poverty and inequality” (BRICS, 2014). This is not surprising, 

as human development indicators within BRICS countries continue to lag behind 

developed economies. Chapter 3 provides closer discussion of social indicators.

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To address the above-mentioned development challenges, it is important to 

make economic growth a priority task, and advance economic, social and environ-

mental development in a comprehensive and coordinated manner. In this context, 

the NDB’s sustainable development linked financing mandate should not only 

focus on environmental sustainable projects such as environmental protection and 

improvement, renewable energy, circulator economy, but also focus on supportive 

project of reducing inequality, improving inclusion and enhancing social and 

human development. Given the current state of infrastructure and the overarching 

objective of sustainable development, capacity building in the relevant sectors 

should be the utmost priority of the NDB. According to estimates by the MDB 

Working Group on Infrastructure,

7

 the weighted average of infrastructure invest-

ment will need to be roughly 7 per cent of the respective country GDPs (table 6). 

This figure, however, is likely to be much higher for BRICS countries. 

TABLE 6

Projected infrastructure investment, percentage of GDP

Regions

Need (average annual 2010-2020)

Estimated actual spending

USD billion, 2005 constant

% of projected GDP

East Asia and Pacific

408

5.5

207

Central Asia

13

5.2

NA

Eastern Europe

NA

NA

NA

Latin America and the 
Caribbean

81

2.6

44

Middle East and North Africa

75–100

10.0

44

South Asia

191

10.8

46

Sub-Saharan Africa

93

9.8

45

Weighted Average

-

7.2

-

Source: MDB Working Group on Infrastructure, 2011. Supporting infrastructure in developing countries, submission to the G20.

According to more conservative estimates by the McKinsey Global Institute 

(2013), the value of infrastructure stock – the sum total of fixed assets of 

an economy – averages around 70 per cent of the GDP in most economies.  

To maintain this ratio, developing regions will need to allocate 5.6 per cent of 

GDP towards infrastructure investment up to 2030. Specifically, BRICS countries 

require an average infrastructure investment totalling 5.5 per cent of their respective 

GDP, while the figure for the USA stands at 3.6 per cent and for Japan 2.6 

per cent (figure 7). Notably, within BRICS only China’s infrastructure investment 

exceeds its total needs. 

7. Comprising the African Development Bank, Asian Development Bank, European Investment Bank, Inter-American 

Development Bank, Islamic Development Bank and the World Bank Group.