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Political and Economic Governance

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FIGURE 7

Infrastructure spending, percentage of GDP

(In %)

6,4

2,6

5,1

6,9

4,0

3,6

4,9

8,5

5,0

3,4

4,7

3,4

2,6

1,5

0

1

2

3

4

5

6

7

8

9

China

Japan

South Africa

India

Russia

United States

Brazil

%

Estimated need

Actual spending

Source: McKinsey Global Institute, infrastructure productivity: how to save $1 trillion a year, Jan. 2013.

The Articles of Agreement of the NDB proposes to complement “the existing efforts 

of multilateral and regional financial institutions for global growth and development” 

and “support public or private projects through loans, guarantees, equity participation 

and other financial instruments”. It also underlines the need to “cooperate with inter-

national organizations and other financial entities, and provide technical assistance”. 

It may be noted that in this context the involvement of international organisations 

and private stakeholders may enable large capital infusion at times of contingency, 

and provide specific experience and expertise for NDB’s operations. 

Similar to existing models at the Asian Development Bank and the African 

Development Bank (table 7), the NDB’s capital will comprise both Ordinary 

Capital and a Special Fund, both to be governed by specific terms and conditions 

including repayment of principle and interest charges. Special Funds could 

earmark projects aimed at building infrastructure networks such as ports, roads 

and highways, to promote regional economic integration. 

TABLE 7

Means of financing – existing MDBs

MDB

Arm

Type of financing

Commitments in FY 

2013 (USD billions)

World Bank

IBRD

Non-concessional loans and loan guarantees

15.2

IDA

Concessional loans and grants

16.3

IFC

Non-concessional loans, equity investments and loan 
guarantees

18.3

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BRICS Long-Term Strategy

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MDB

Arm

Type of financing

Commitments in FY 

2013 (USD billions)

African Development Bank

AfDB

Non-concessional loans, equity investments and loan 
guarantees

2.7

AfDf

Concessional loans and grants

3.4

NTF

Concessional loans and grants

0.1

Asian Development Bank

ADB

Non-concessional loans, equity investments and loan 
guarantees

11.9

ADF

Concessional loans and grants

4.5

European Bank for Reconstruction 
and Development

EBRD

Non-concessional loans, equity investments and loan 
guarantees

11.2

Inter-American Development Bank

IDB

Non-concessional loans and loan guarantees

13.2

FSO

Concessional loans

0.3

Source: Annual Reports – World Bank, ADB, EBRD, IADB.

The NDB Articles of Agreement also allow the option of financing certain 

projects in local currencies. Such instruments can offer safe investment alternatives 

in shallow bond markets. For instance, the IFC raised bonds denominated 

in Indian rupees worth USD 2 billion in August 2013 to finance infrastructure 

projects (Kumar, 2014). In the context of the NDB, modalities of local bond issues 

in nascent capital markets must be developed in conjunction with retail investor 

awareness and education programmes.

For non-concessional finance, the Articles of Agreement use a ratio of 1:5 

between paid-in and callable capital, similar to other MDBs. This gives the NDB 

the leverage to finance projects worth USD 50 billion for every USD 10 billion 

actually disbursed. 

The NDB must be able to fulfil an ambitious and expansive development 

mandate. While financing transformations within infrastructure and sustainable 

development sectors in developing countries is already established as the operational 

mandate, a set of well-articulated development principles would help to distinguish 

the directional and definitional aspects of the NDB’s mandate. 

The global development discourse has largely been driven by institutions 

that were formed in the 20th century, and does not reflect contemporary realities. 

For instance, the only development “consensus” today seems to be that the 

“Washington Consensus”, which stressed the maximisation of the role of 

the market and minimisation of the role of governments in developing countries, 

is not in fact a panacea for global development deficits. 

The NDB could follow a demand-driven approach to financing which 

would place the onus of identification of viable projects for financing on recipient 

governments. This process is already being followed within many development 

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financing institutions of BRICS countries and is seen to be a pillar of mutually 

beneficial cooperation. Particular emphasis would have to be maintained on the 

transparency of demand origination, as well as the assessment process followed 

by the NDB’s executive branches for deciding on funding commitments towards 

various stakeholders.

The NDB could conduct thorough assessments of various domestic economic 

and political contexts of recipient countries. A “one-size-fits-all” development 

approach has not been successful; this is evidenced by the variable levels of progress 

by developing countries on the Millennium Development Goals. Structural 

considerations have often limited the flows of development financing, particularly 

in the case of funding flows routed through existing Bretton Woods Institutions 

towards developing countries. The macroeconomic fundamentals of different countries 

should not be assessed through a static framework of reference but, instead, 

through a dynamic and to some extent qualitative assessment, particularly within 

the specific sectors that are being considered for financing.

Developing countries have a shared challenge of building up domestic insti-

tutional capacities to enhance development. The efficacy of development finance 

cannot be ensured without commensurate focus on capacity-building. Indeed, 

capacity-building in many instances would be a prerequisite to aspects such as “good 

governance” or the effective utilisation of financial flows towards specific projects. 

The NDB could support existing domestic capacities for project management and 

implementation, as well as institutions which can facilitate the measurement of 

developmental impact in recipient countries. 

A Technical Evaluation Group should be set up within the NDB, tasked 

with: 

i

) monitoring and assessment of projects and audit functions; 

ii

) supervision 

of financial and non-financial risks; and 

iii

) advisory support towards projects.

2.4 Coordination in multilateral institutions 

As BRICS assumes a pivotal role in the global governance architecture, it has to 

strive towards affecting structural changes within existing multilateral institutions, 

to promote effective governance, inclusiveness and transparency. The BRICS 

countries must be propositional and share relevant governance experiences with 

each other to further this central objective.

2.4.1 United Nations Security Council

The primary role of the United Nations Security Council (UNSC) is maintaining 

international peace and security through peaceful dispute settlement or, in some 

cases, the imposition of sanctions and authorisation of the use of force. 

The UNSC also recommends candidates for the role of Secretary-General of the 

BRICS Long-Term Strategy

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UN and nominates new member nations; together with the General Assembly, it 

elects the judges of the International Court of Justice. 

The UNSC comprises 15 members – five permanent members with veto 

powers (the P-5: China, France, Russian Federation, the United Kingdom and 

the United States) and 10 non-permanent members with ordinary voting powers, 

elected for two-year terms by the General Assembly (currently: Angola, Chad, 

Chile, Jordan, Lithuania, Malaysia, New Zealand, Nigeria, Spain and Venezuela). 

The voting pattern of the important UNSC resolutions in the last five years is 

highlighted in table 8. 

Discussions on UNSC reform have been multifaceted – including areas such 

as increasing overall membership, improving efficiency and streamlining processes. 

A well-established motivation for reforms includes the steady growth in UN 

membership from 51 to 193 members. Moreover, the growing economic and 

political prominence of emerging and developing economies, such as Brazil 

and India, has highlighted the need for broader representation (table 8). 

TABLE 8

P-5 vs. G-4 (2013)

1

Population (millions)

GDP (current USD 

billions)

Peacekeeping troops

UN funding

 (% of total funding)

Defence budget 

(USD billions)

Brazil

200 (5)

2245 (7)

1685 (21)

2.93% (10)

34.7 (10)

India

1252 (2)

1876 (10)

8104 (2)

0.66% (27)

36.3 (9)

Japan

127 (10)

4901 (3)

271 (46)

10.83% (2)

51.0 (7)

Germany

80 (16)

3634 (4)

204 (52)

7.14% (3)

44.2 (8)

China

1357 (1)

9240 (2)

2192 (14)

5.15% (6)

112.2 (2)

Russia

143 (9)

2096 (8)

91 (67)

2.44% (11)

68.2 (3)

France

66 (21)

2735 (5)

933 (27)

5.59% (4)

52.4 (6)

UK

64 (22)

2522 (6)

287 (45)

5.17% (5)

57.0 (5)

USA

316 (3)

16800 (1)

117 (62)

22% (1)

600.4 (1)

Sources: World Bank Data, UN Peacekeeping, International Institute for Strategic Studies. 
Note: 

1

 2013 or most recently available.

Although reform of the UNSC has been on the UN agenda since 1993, 

the status quo remains. Different groupings such as the G-4 (Brazil, India, Japan 

and Germany), the UFC (United for Consensus: Argentina, Canada, Colombia, 

Costa Rica, Italy, Malta, Mexico, Pakistan, Republic of Korea, San Marino, Spain, 

Turkey) and the African Union have proposed varied solutions.

Changes to the UNSC membership can only be affected via amendments to 

the UN Charter. These amendments must be ratified by a two-thirds supermajority 

of the UN as well as the mandatory consent of each of the P-5 countries. 

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To be effective, it is imperative that BRICS countries articulate a collective 

voice on issues of global importance. At the Fortaleza Summit

they highlighted 

“the need for a comprehensive reform of the UN, including its Security Council”, 

and China and Russia reiterated “the importance they attach to Brazil, India and 

South Africa’s status and role in international affairs and support[ed] their aspiration 

to play a greater role in the UN” (BRICS, 2014)

. 

BRICS countries should 

consistently take a clear position on substantive reforms, both within the BRICS 

forum and outside it.

2.4.2 United Nations Framework Convention on Climate Change

The United Nations Framework Convention on Climate Change (UNFCCC) is 

an international treaty, ratified by 196 countries, to respond to global warming 

and climate change. The Convention was adopted at the Rio Earth Summit in 

1992, and negotiations were launched in 1995 to strengthen the global response 

to climate change. Since then, the Conference of Parties (COP) – the governing 

body of the UNFCCC – has been convening annually to assess the progress on 

the overall objectives. There have been 19 COPs, and some of the prominent 

outcomes/agreements are highlighted in table 9. 

TABLE 9

Notable COPs and outcomes

Year

Location

Agreement/Outcome

1997

Kyoto

Kyoto Protocol

2001

Bonn

Design of flexible mechanisms such as emissions trading, joint implementation,  
Clean Development Mechanism

2001

Marrakech

Detailed rules for implementation of the Kyoto Protocol

2005

Montreal

Montreal Action Plan to extend the Kyoto Protocol 

2007

Bali

Bali Action Plan – negotiation of a post-2012 framework 

2009

Copenhagen

Copenhagen Accord negotiated by 25 countries including the USA and China; countries submitted 
non-binding pledges

2010

Cancun

Agreement on a USD100 billion per annum Green Climate Fund and a Climate Technology Centre 

2011

Durban

Durban Platform for Enhanced Action 

2012

Doha

A new commitment period under the Kyoto Protocol for Annex-I Parties up to December 2020

2013

Warsaw

Warsaw Framework for Reducing Emissions from Deforestation and Forest Degradation (REDD) Plus

Source:  UNFCCC. Background on the UNFCCC: the international response to climate change. Available at: <http://goo.gl/og2cwO>. 

Accessed: 1 Oct. 2014.

At COP15 in Copenhagen four members of BRICS – India, China, Brazil 

and South Africa – formed the “BASIC” grouping. Since then, members of BASIC 

have been meeting on the side-lines of climate change negotiations. Such close 

cooperation efforts are indicative of the potential of BRICS nations to address climate 

change in accordance with historical responsibilities, current capacities and on key