Global Policy

The BRICS’ New Development Bank: Shifting

from Material Leverage to Innovative Capacity
Andrew F. Cooper

Research Article
University of Waterloo

Abstract
This article argues that the BRICS’ New Development Bank (NDB) deserves more attention not because it is equivalent to the
Asian Infrastructure Investment Bank (AIIB) but because of its differences. Unlike the AIIB the NDB does not possess impressive
material capacity or overt connections to a wider state-led geo-political strategy. What distinguishes the NDB is its creative
design with four significant elements of novelty. Unlike other multilateral financial institutions, including the AIIB, the NDB is
committed to a principle of equality across its core membership. Product innovation is advanced by its promotion of sustain-
able development with an exclusive focus on niche clean renewable energy projects. The expressed aim of the NDB with
regard to resources is to use green bonds denominated in BRICS’ national currencies. And the focus on delivery centers on
the need for speed. Although each of these elements face severe tests, the ability of the NDB to navigate around serious
internal tensions through improvisation and trade-offs points to an original emerging pattern of collective policy making and
global governance.

Policy Implications
• The principle of equality as pursued by the NDB merits closer attention, especially when the differences in the material
capability of the BRICS members are considered. The principle should be beneficial in leveraging organizational differentia-
tion as well as facilitating collective action, but it also opens up the possibility of internal rifts.
• An exploration of the potential value added offered by the NDB bending the traditional model of development in terms
of product innovation towards niche clean energy projects.
• The unequal weight and influence of China over the rest of the membership comes to the fore in the area of bond issu-
ance in national currencies of the BRICS members and in the relationship of the BRICS with credit rating agencies.
• An appreciation of the incentives on the part of the NDB to provide a dynamic of speed as a means of compensating for
the slow launch of the NDB in comparison to the AIIB.

The New Development Bank (NDB) has not received the
attention it deserves. The launch of the NDB has been over-
shadowed by the China-backed Asian Infrastructure Invest-
ment Bank (AIIB). While the AIIB is consistent with a model
of structural-driven change in global politics, the NDB neces-
sitates a more nuanced analysis around collective agency.
With 26.06 per cent of voting rights and a 30.34 per cent or
US$29.78 billion stake of the US$100 billion capital base
(AIIB, 2015), China possesses a de facto veto in the AIIB. In
sharp contrast the initial subscribed capital of US$50 billion
in the NDB is equally shared among its five members, China
along with India, Brazil, Russia and South Africa (New Devel-
opment Bank, 2014). While the NDB has so far restrained
from expanding beyond the BRICS, the AIIB opened up to
57 founding members thereby driving a wedge between
those countries willing to follow Beijing’s lead and those
(notably the United States and Japan) resistant in doing so.
Although the extent of the global reach of the NDB is still
very much in doubt, the AIIB is tied more explicitly to the
‘One Belt One Road’ (OBOR) or ‘The Belt and Road Initiative’
(BRI) designed to advance infrastructural development both
on the westward land route from China through Central
Asia and on the southerly maritime routes from China
through Southeast Asia and to South Asia, Africa, and Eur-
ope (Callahan, 2016; Chin, 2016; EU, 2015).
If the image of AIIB is one of the assertion of power asso-
ciated with the on-going rise of a single actor as a regional
and global power (Dollar, 2015; Smith, 2015; Whyte, 2015)
the NDB is seen by many observers as burdened by the fra-
gility of the BRICS’ shared identification. Originally created
by Jim O’Neill and Goldman Sachs in 2001 to highlight the
parallel trajectories (and investment opportunities) of the
four original big and fast growing BRIC entities, the concept
took on institutional life with the creation first of BRIC as an
official summit process in 2009 and subsequently (with the
addition of South Africa) BRICS in 2011. Notwithstanding this
progress, however, pervasive skepticism remains about how
this transition from artificial acronym into diplomatic club
plays out in terms of operational effectiveness. Although
proving resilient to the immediate shocks set off by the

Global Policy (2017) doi: 10.1111/1758-5899.12458 © 2017 University of Durham and John Wiley & Sons, Ltd.
 Andrew F. Cooper
2
2008 global financial crisis, since 2013 the economic perfor-
mance of the BRICS has been less stable. Goldman Sachs’
closed its BRICS investment fund in 2015, and the growth
record for all of the BRICS members slowed appreciably
(Sharma, 2012).
Altered images about the ‘rise’ of this cluster of countries
is reinforced by doubts – including those emanating from
Joseph Nye – concerning the BRICS members’ ability to sus-
tain meaningful forms of common action (Nye, 2013. See
also O’Neill, 2013). Were there enough commonalities to
allow a morphing into a sustained organization? Certainly
building a culture of cooperation necessitates overcoming
serious constraints in terms of national interest and identi-
ties (Cooper, 2016; Stuenkel, 2015). On top of fundamental
differences in economic profile, and domestic political sys-
tems, there are serious geo-political sources of competition
among the BRICS countries. China and India, as well as Rus-
sia and China, have embedded legacies of territorial dis-
putes. Institutionally, there is a marked contrast between
the advantages enjoyed by Russia and China in the global
system as veto-wielding insiders within the United Nations
Security Council (UNSC) and India, Brazil, and South Africa
as aspirants outside the Permanent Five (P5) membership.
Yet the NDB merits detailed examination precisely
because the BRICS have formed this institution despite the
challenges of doing so. Although the creation of the AIIB is
testimony to China’s material and diplomatic leverage, its
design borrows heavily from the foundations of established
multilateral financial institutions above all the World Bank/
The International Bank for Reconstruction and Development
(IBRD) and the Asian Development Bank (ADB). For example,
in a linguistic analysis of the founding declarations of the
three bodies, a detailed academic study demonstrates that
that they are virtually identical, save for two articles (Article
15 on technical assistance and Article 36 on references) in
the AIIB that diverge from the template (Wan, 2016). More-
over, the pull towards reproduction of established practices
is reinforced by the extension of membership to core actors
in the international financial order and the use of co-
financed projects with the World Bank and the ADB. As Wan
(2016, p. 84) concludes: ‘The newcomer AIIB is strikingly
nested to the IBRD and the ADB’.
In contradistinction the NDB departs not only from the
embedded model of these core multilateral financial institu-
tions (The Economic Times, 2015; World Economic Forum,
2015) but from earlier initiatives promoted by components
of the global South. From this perspective the NDB has a
claim of originality that belies the suggestion that it repre-
sents a continuation of ‘familiar initiatives by newly arrived
economies’ such as the creation of development banks by
the Middle Eastern oil producers in the 1970s (Kahler, 2016,
pp. 4–5). If indeed there are similarities with this category of
initiatives such as the Islamic Development Bank or the
OPEC Fund for International Development – due to the
combination of material weight, geopolitical purpose, a push
to recycle surplus savings into investment, and an asymmet-
rical distribution of power among members – this sem-
blance is with the AIIB not the NDB.
© 2017 University of Durham and John Wiley & Sons, Ltd.
This article argues that the NDB should be cast in a
revised manner due to the prominence of a number of dis-
tinctive features. The first is the substitution of the principle
of equality for the inequitable representative structure of
the traditional MDBs. Although this form of innovation in
terms of decision-making has been subject to lengthy nego-
tiations and is far from complete in operational practice, the
principle of equality with respect to the NDB’s members’
rights and obligations marks a distinctive shift in the appli-
cation of the tenets of global governance. A second feature
that distinguishes the NDB is the departure from the
emphasis on major infrastructural projects at the core of the
established model. Whereas the AIIB reproduces the tradi-
tional template, the NDB signals its intention of advancing
product innovation, as witnessed by the preference for sus-
tainable development via green infrastructure. If at the initial
stages of implementation, this turn is indicative of the NDB’s
focus on niche projects. A third feature of note is the
expressed aim of the NDB to build up its capital base
through innovative means by the issue of bonds denomi-
nated in BRICS national currencies, and with a focus on
green bonds. How this test of resource innovation plays out
is still before us, but its pursuit has serious implications
stretching into interactions with credit rating agencies.
Finally, a fourth feature of the NDB is its concern with catch-
ing up on delivery innovation. Given the delay in launching
the NDB, this emphasis on speed is in part a form of com-
pensation about the need to catch up in terms of perfor-
mance. A nimble and focused style of delivery has the
potential for differentiating the NDB from the other multilat-
eral financial institutions.
All of these features underscore the NDB as signaling a
shift from material leverage towards an association with
ideational capacity. Such a recalibration does not mean a
process in which a collective form of innovative leadership
smoothly overcomes the constraints of divergent positions
among the NDB’s members. Whereas the AIIB was animated
dramatically as part of China’s ‘striving for achievement’
grand strategy (Yan, 2014), the implementation of the NDB
was marked by intricate and time-consuming negotiation.
Each of the features central to the identity of the NDB has
been contested. India in particular remains wary of China’s
operational domination of the NDB, especially as it originally
took the lead in the creation of the institution (Mathur,
2016). While such disagreements cannot be ignored, how-
ever, they should not be exaggerated to the point where
the NDB risked failure. While significant tensions – and dis-
plays of power politics – continue to be on display, these
attributes have been contained by improvisation and trade-
offs indicative of a strong and resilient club culture (Cooper,
2016; Cooper and Farooq, 2015). In overall terms the NDB
constitutes a distinctive model in the design of collective
global policy.
The principle of equality in process innovation
A strong impetus for the creation of alternative multilateral
financial institutions was to create a structure based on
Global Policy (2017)
 The BRICS’ New Development Bank
equity of membership. The commitment to the principle of
equality in governance decision-making stands out as one
of the most striking characteristics of the NDB (Zhu, 2015).
Significantly, however, the details of how this principle was
to be implemented proved to be one of the major sources
of tension among the BRICS, with China willing to bend the
principle, by offering to make a larger financial contribution
to initial subscribed capital on grounds of efficiency and
India in particular holding the line that the NDB should
maintain its uniqueness through a strict form of equity of
contribution.
Because of its concerns about Chinese domination of the
NDB, India maintained its stance on the equality principle
through the various stages of negotiation (Krishnan, 2014;
Sahu, 2013). The intensity to which India held this position is
testimony not only to the frustration that it felt about the lack
of fairness in dealing with the International Financial Institu-
tions (IFIs) but also to the sensitivity that its ideational leader-
ship on the NDB initiative was threatened by China’s financial
clout. Looking back it is important to note that it was India
and not China that took the lead in exploring alternative
strategies for development financing in the aftermath of the
2008 global financial crisis. Prime Minister Manmohan Singh
built on his own extensive background as chief economic
adviser, reserve bank governor, and head of the Planning
Commission, as well as his role as Secretary General of the
South Commission, to champion such efforts. At the Seoul
G20 Summit in November 2010, for example, Singh argued
for the use of a different sort of tool to foster infrastructure
development (The Hindu, 2010). Faced with the challenge of
massive imbalances, he proposed a new institutional instru-
ment for recycling surplus savings into investment.
Given this context, it was not surprising that India made
the establishment of a New Development Bank the pivotal
agenda item at the March 2012 BRICS summit it hosted in
New Delhi. The finance ministers’ meeting held just prior to
the summit endorsed this initiative as a priority. And, signal-
ing the extension of the BRICS from an exclusive state-centric
club to a wider network, the 2012 BRICS Academic Forum –
which included leading Indian think tank Observer Research
Foundation (ORF) –recommended the summit study ‘the
establishment and operational modalities of financial institu-
tions such as a Development Bank and/or an Investment
Fund that can assist in the development of BRICS and other
developing countries’ (BRICS Academic Forum, 2012).
China did not block the establishment of the NDB, but its
initial ambivalent reaction to India’s proposal slowed the
process of negotiation and institutional creation. Throughout
the protracted negotiations, Chinese commentators ques-
tioned whether the principle of equality undercut institu-
tional performance. As Zhu Ning, a professor at the
Shanghai Advanced Institute of Finance, was quoted from
an interview with China Central Television: ‘If the five coun-
tries have an equal share in the same entity, there will be
coordination problems’ (Krishnan, 2014). The main concern
remained instrumental. If the NDB was to be successful
China took the point of view that it needed the requisite
resources to deliver in terms of institutional performance.
Global Policy (2017)
3
Ultimately, with the help of the other members, India was
able to mobilize a successful defense of the broad principle
of equality, a condition embedded in the declaration of the
NDB. But China pushed back on two other issues that
although they undercut the image of equal treatment
among the members were also driven by concerns about
efficiency. The first of these centered on the location of the
headquarters of the bank. India made its claim to this func-
tion by playing up its role as the inspirational force behind
the bank (Chand, 2013). China instead took the view that
the headquarters should be in Shanghai, a position that was
championed as well by key Chinese think tanks (Shanghai
Forum, 2013) on the basis of comparative advantage.
A second issue related to the principle of equality was on
the question of whether or not the NDB could lend to BRICS
members only or to non-members as well. China pushed to
open up the client base beyond BRICS members; while India
– looking to meet needs at home – wanted a more concen-
trated focus. Put another way, while India prioritized build-
ing its own infrastructural capacity, China with its advantage
of an enormous current account surplus sought alternative
and less sensitive means to finance development projects
on a global basis.
To its credit, the club culture of BRICS – with the initiative
symbolizing an assertion of political sovereignty of the five
members – enabled the members to remain cohesive even
under stress. Yet maintaining organizational cohesion was
predicated on a somewhat awkward equipoise on the major
issue under debate. While the BRICS adhered to the original
model on initial subscribed capital, with the allocation of
$50 billion from equal contributions by the members (di-
vided into paid-in shares of $10 billion and callable shares
of $40 billion), it was also decided that over time the NDB
would move toward achieving an authorized capital of $100
billion.
In an even more evident sign of a balancing act within
the club culture, China secured the location of the bank in
Shanghai. As a form of trade off India in return received the
first term of the presidency for five years, followed by five-
year terms for Brazil (which in the initial distribution
received the first chair of the board of directors) and Russia
(which received the first chair of the board of governors)
(New Development Bank, 2014). On the issue of eligibility
for receiving loans China won out as well, with the accep-
tance of the idea that the NDB should be able to lend on a
global basis. If China gained most of the advantage from
this extended reach in terms of delivery, India received
some compensation on the resource dimension. For an
endorsement of the principle to allow a minority voting
share (between 40 per cent and 45 per cent) to other coun-
tries including industrialized nations supported the position
that India had long advocated. This opening up not only
allowed some possible diluting of Chinese dominance, it
contributed to the possibility that the NDB could add to its
capital resources from other countries with top tier credit
ratings (Sahu, 2013).
In institutional building terms living up to the idea of pro-
cess innovation based on equality proved a struggle. In
© 2017 University of Durham and John Wiley & Sons, Ltd.
 Andrew F. Cooper
4
declaratory terms the dominant theme continued to be that
the NDB epitomized a new form of democratically oriented
financial institution. Significantly though, the incoming
Indian president (with experience at both ICICI Bank and
software services exporter Infosys as well as the ADB), KV
Kamath acknowledged the need to navigate around the dif-
ferent interests and identities of the member countries (Wil-
dau, 2015).
In comparative terms the success of the NDB in maintain-
ing the strong club culture resonates because of the differ-
ences with the AIIB. In terms of membership of the AIIB’s
board a degree of fairness was institutionalized, with China
receiving only one seat among the 12 (non-resident) board
of directors (AIIB, 2015). However, in a variety of other ways,
Chinese control over the AIIB systematically reproduces the
structural power provided for the US and Europe with
respect to the post-1945 IFIs and within regional organiza-
tions such as the ADB where China and India have relatively
small shares of voting rights, China 5.5 per cent and India
5.4 per cent respectively up to 2015 (Reisen, 2015; Vester-
gard and Wade, 2013) and 6.4 per cent and 6.3 per cent
thereafter. Along the lines of the IFIs, the basic votes and
founding members votes are set and the share vote is dis-
tributed based on the size of each member’s GDP, providing
China with a built in advantage. Considerable autonomy is
given as well to the executive management team of the AIIB
and in particular to the president, the selection of which
China has a dominant say. Through this lens the design of
the NDB, with its variety of compensatory trade-offs, marks
an important departure in the model of collective global
policy making.
Advances in product innovation
A second element that united the BRICS was a deep frustra-
tion with the way the traditional financial institutions deliv-
ered development. In terms of product innovation the core
grievance centered on the inability of the World Bank and
other institutions such as the ADB to meet the infrastructure
financing needs in the global South (Griffith-Jones, 2014). In
tandem with the reluctance of private investors along with
pension funds and sovereign wealth funds to take on long-
term projects the gap stretched out to some $1 trillion
annually (Bhattacharya and Romani, 2013; Chin, 2014).
The AIIB sought to address these deficiencies by a degree
of institutional parallelism to the traditional financial institu-
tions. Responding to the sheer size of the deficiency the
AIIB sought to scale up its activities. With the prospect of
obtaining a AAA bond rating (due to the presence of a
number of major economies), a scenario by which the AIIB
could build its capital well beyond $100 billion by 2025 is
quite likely, giving it a sizeable presence albeit still one con-
siderably lower than the size of the $400 billion combined
capital base of the World Bank and ADB (Elgin-Cossart and
Hart, 2015; Humphrey, 2015a). An optimistic scenario sug-
gests that the AIIB in five years would be able to lend $20
billion per year, a figure roughly equivalent to the annual
lending by the World Bank’s IBRD window (Dollar, 2015).
© 2017 University of Durham and John Wiley & Sons, Ltd.
What stands out in this approach is the degree of ortho-
doxy attached to it. Akin to established economic develop-
ment theories the approach places primacy on major
projects focusing on transport links and energy. The former
was placed in the most prominent position with the major
projects announced in its initial cluster of projects being the
China-Pakistan Economic Corridor, an expressway connect-
ing Dushanbe, the capital of Tajikistan to the border of
Uzbekistan, and a ring road in Almaty, Kazakhstan’s largest
city (AIIB, 2016). The latter component aroused special con-
troversy as the president of the AIIB, Jin Liqun, suggested in
an October 2015 speech that the AIIB could consider invest-
ing in coal-fired power plants – along the lines of the World
Bank’s support for projects such as Medupi coal-fired power
plant project in South Africa – where there was no other
forms of access to power (Brookings Institution, 2015).
Concerns by India have emerged about the wider implica-
tions of China’s material leverage in using the AIIB to drive
the BRI, with particular reference to the China-Pakistan Eco-
nomic Corridor project. Through a strictly economic lens a
strong argument can be made about the promise of BRI in
allowing ‘India a new track to its own attempt to integrate
South Asia’ (Saran, 2016). Alternatively, through a geo-strate-
gic lens, the emphasis remained on the potential danger of
the initiative adding to, not easing regional tensions. Most
significantly, the Indian government had sensitivities about
the China-Pakistan Economic Corridor because it included
projects in territory that India claims. Under these conditions
India insisted that a provision be inserted in the charter of
AIIB that requires project financing in disputed territory to
have the agreement of the disputants, a restriction that ulti-
mately shifted funding for this project from the AIIB to the
bilateral Silk Road Fund (Madan, 2016)
By this standard the NDB stretched the model of product
innovation in a number of important ways. Eschewing any
desire to mirror the repertoire of the traditional financial
institutions, or for that matter the AIIB, the NDB set out to
constitutionally promote an alternative mode of develop-
ment the foundation of which is sustainable development
via projects promoting green infrastructure.
From the perspective of product innovation the feature
that stands out in the first round of loans (announced in
April 2016) amounting to US$ 811 million is not the
embrace of a large infrastructural model. Rather the design
privileged small-scale projects with between 12 and 20 year
terms related to clean renewable energy in each of the
BRICS with the exception (at least in the initial announce-
ment) of Russia. Brazil’s Banco Nacional de Desenvolvimento
Economico e Social received the biggest loan, to the
amount of $300m, to help build 600MW of renewable
energy capacity. The NDB also gave a $250m loan to India’s
Canara Bank, with $75m earmarked for 500MW of renew-
able-energy projects. South Africa’s Eskom secured a loan of
$180m for power lines that can transmit 670MW and trans-
form 500MW of renewable energy generation. China’s
Shanghai Lingang Hongbo New Energy Development also
got an $81m loan, to fund 100MW of rooftop solar power
(BRICS Post, 2016b; Sasi, 2015).
Global Policy (2017)
 The BRICS’ New Development Bank
As on the commitment to the principle of equality in
terms of process innovation India provided the ideational
catalyst for this component of product innovation. In the
targeting of the clean energy sector the intervention of
Prime Minister Narendra Modi was decisive. At the Ufa sum-
mit Modi asserted: ‘I would like to see the first major project
funded by the New Development Bank to be in the area of
clean energy. BRICS bank’s first project should be green’
(Pashley, 2015).
Unlike on process innovation, it needs emphasizing, this
push on sustainable development by India with regard to
the NDB did not accentuate tensions with China. On the
contrary it tapped into China’s own desire to pursue a green
agenda, as evidenced by both the central tenets of the
2016–20 five-year plan aiming to transition to a low carbon
economy and the more ambitious effort to develop an ‘eco-
logical civilization’ (Zhang, 2015).
For all of its ambition a number of serious limitations
stand in the way of the NDB substantively advancing pro-
duct innovation. In country specific terms the delay in pick-
ing a project from Russia in the public announcement of
the first round of investment stands out as a deficiency on
the principle of equality. Although this delay did not last
long – from April to July 2016 – with the announcement of
NDB financing for the construction of two small hydroelec-
tric power stations in Karelia – Byeloporozhskaya HPP-1 and
Byeloporozhskaya HPP-2 with a total investment of 11.8 bil-
lion rubles (TASS, 2016), the differentiated roll out is puz-
zling. Not only was Russia a strong supporter of using the
bank for internal BRICS development but had moved out
ahead in presenting a small-scale power generation project
in Karelia as a candidate for support, consistent with the
statement of the Russian finance minister Anton Siluanov on
the sidelines of the G20 ministerial meeting that the NDB
would have its ‘priority on green energy developments’
(NDB, 2016). However, for reasons either because of the
need to confirm the green credentials of this project and/or
complications due to the wider geo-political environment
(some hydropower operations in Karelia as in other parts of
the Russian federation have come under pressure from US
sanctions over Crimea/Ukraine, as witnessed by the sale of
the assets of TGC-1’s assets to the Finnish company Fortum)
a Russian project was left off the initial list.
Another problematic feature is one of continuity. To
experiment with small-scale projects focusing on green
energy within the BRICS members does not exclude the
possibility of moving into major infrastructure projects
beyond this locational confinement. When the chair/presi-
dents of the national development banks of the BRICS –
vital if a process of on-lending was to be instituted – met at
the 2015 Ufa summit, the challenge of proving green cre-
dentials was subordinated to the principles of equality,
mutual benefit, and responsible financing (Exim, 2015).
As it is there is pressure building up among the BRICS
membership for scaling up the quantitative ambition of the
bank, so as to send a signal that the massive infrastructure
gap in Africa and Latin America would not go unfilled. High-
lighting the tension between the focused component of the
Global Policy (2017)
5
first projects endorsed by the NDB and the much wider
need are the proposals by the South African government for
a more ambitious set of projects to be financed by the Afri-
can (regional) Resource Centre of the NDB, a list that
includes the Inga hydro power station in the Democratic
Republic of Congo (DRC), a water project connecting it to
Lesotho, electricity transmission lines in South Africa, and a
water pipeline project in Gauteng province (Xinhua, 2016).
Finally there are an array of barriers between introducing
the green energy projects and devising a set of policies or
procedures that take into account environmental and social
risks. Unlike the AIIB that formally set up an ambitious –
albeit highly contested – draft framework along with a pro-
cess of consultation, the NDB has put off setting up any
social and environmental guidelines. As a representative of
the NGO Friends of the Earth put it: ‘How the bank defines
green is something the bank should clarify up front before
issuing any finance . . . it is a red flag that the bank remains
immature as a financial institution and may not be ready for
the international stage’ (Soutar, 2016).
The test of resource innovation
On the anticipated means of raising capital from markets
beyond the subscribed level initially allocated by the BRICS
members states the claims of novelty by the NDB is extended
appreciably further. Akin to the World Bank and the other
multilateral development banks, the AIIB indicated its adher-
ence to the US-dollar dominated international finance system.
The structural leverage exerted over the AIIB, further, facili-
tated China’s mobilization of its US dollar reserves through
this instrument to invest in regional infrastructure. If flagging
the possibility that in the future it could denominate some of
its loans in other currencies such as euros or RMB, at the core
of its model was a business as usual approach.
There were some practical incentives for the NDB to raise
capital through the issuing of bonds denominated in the
local currencies of the member states, in that to do so could
potentially create five capital pools (He, 2016). Building on
the momentum of the first round of loans allocated by the
NDB President Kamath elaborated on the plan to issue debt
in local currencies, with a bond worth 3 billion RMB
($455.93 million) in the Chinese market ‘in the next four
weeks’, followed by an Indian issue of approximately the
same size, a potential Russian ruble dominated issue ‘in the
next two quarters’ focusing on pension funds and banks as
the key investors, a rand dominated issue in South Africa
‘slightly smaller’ than China, and into the distance a real
denominated issue ‘of course’ (Golubkova, 2016).
The crux of the NDB plan was to turn material weakness
into ideational strength. Financing from the hard currency
international markets, in the orthodox fashion as anticipated
in the AIIB, presented a difficult hurdle for the NDB.
Although the NDB wanted the big 3 rating agencies to give
the NDB a rating before it issued the first round of loans,
this goal was not achieved (BRICS Post, 2015; Humphrey,
2015b). This deficiency opens up the NDB to the disadvan-
tage of higher loan costs.
© 2017 University of Durham and John Wiley & Sons, Ltd.
 Andrew F. Cooper
6
Among the individual members only China has a credit
rating (AA-) of an investment grade high quality and low
risk to enable international financing of the nature necessary
for infrastructure investment (Wang, 2017). Such limitations
reinforce the attraction to look to financing in domestic
markets. Stretching the model of innovation even
further, the issuing of green bonds was made pivotal to this
strategy.
As in other areas, the attraction of this type of bond was
in large part instrumental with respect to opening up a new
finance flow allowing a successful confrontation with the
impact of climate change. Still a more deep-set attraction
for the NDB to differentiate its practices from other financial
institutions was normative in nature. By utilizing green
bonds as the vehicle for raising capital to support its man-
date of promoting sustainable development the NDB
wanted to make a statement about its new-fashioned
model. As Kamath put it: ‘All of this comes together to sign-
post something that is significantly more than just economic
change’ (Aneja, 2016).
Although lacking a rating from the big 3 credit agencies,
the NDB made some tangible progress in the implementa-
tion of this model. In China, where the bank had been
accorded an AAA investment rating from domestic agencies
(China Chengxin Credit Rating Agency and China Lianhe
Credit Rating) (Wang, 2017), the NDB moved quickly so as
to be able to issue five-year RMB bonds. In India ICICI bank
positioned itself as the initial partner with NDB, based on
the notion that it would facilitate the issuance of rupee-
denominated bonds, along with co-financing, treasury man-
agement, and human resources (ICICI, 2016).
This progress, nevertheless, does not disguise the extent
to which the structural barriers confront the implementation
of the NDB’s strategy. Without the advantage of a rating
from the three big credit agencies, the scale of the capital
pool by the issuing of bonds was smaller than initially
intended. Although Kamath maintained an optimism that a
bond issuance worth 3 billion RMB or $455.93 million would
take place in the Chinese market (with Vice President and
Chief Financial Officer Leslie Maasdorp taking the figure to
be between 3 and 5 billion RMB) (BRICS Post, 2016a), when
the first bond float took place it was to the order of up to
$384 million in green bonds – still a substantive amount but
one reduced (with RMB devalution) from the original figures.
At the same time some of the ideas designed to bind the
BRICS together were also curtailed. As originally conceived
by Kamath the NDB’s model forecast an appetite for new
instruments including swaps (in which monies could be bor-
rowed in one country and lent in another country), but in
practice exchange rate risk pushed the borrowing and loans
back to the national currencies of the BRICS (BRICS Post,
2015).
Even if the float was not quite as large as predicted, the
move into green finance held some considerable attractions.
On a national basis China gained a number of advantages
from the issuance of green bonds on the domestic market.
For one thing it allowed China to embed the practice of
issuing green bonds – a practice where China has moved
© 2017 University of Durham and John Wiley & Sons, Ltd.
out in front in terms of official rules established by the
National Development and Reform Commission (NDRC) – as
part of a wider strategy of financial diversification and stan-
dard setting. Also, Shanghai was strengthened as a financial
hub, piggybacking on the moves to liberalize the bond mar-
ket and capital markets. Additionally, it provided China with
comparative advantage in terms of other financial mecha-
nisms. China’s domestic bond rating agencies – seeking
credibility – were given a boost in the absence of a rating
by the big 3 agencies. And as witnessed by the appoint-
ment of four Chinese banks and two international banks
(with the Bank of China in the lead) to act as the underwrit-
ing group on the bond issuance new types of collaboration
could be forged. To give just one illustration of the spillover
relational effect China Construction Bank (included in the
underwriting group on the RMB bond issuance) went on to
sign a strategic cooperation agreement with the NDB
designed to forge a ‘long and mutually beneficial partner-
ship’ (BRICS Post, 2016c).
Nonetheless these innovations opened the way for a
wider set of benefits. Although the NDB green bonds were
issued initially only in RMB, the image of collective decision-
making was reinforced because – as highlighted by NDB
Vice president Zhu Xian – this was the first case of bonds
being issued by a non-Chinese entity on the Chinese bond
market (Sputnik, 2016) And as the NDB moves toward the
second round of loans in 2017, expectations have been
accentuated that these will be delivered in local currencies
as a means to advance sustainable development projects.
President Kamath has talked for instance of the NDB raising
$500 million through rupee-denominated bond, although
pointing again to the lack of deep capital markets beyond
China this would be done as a masala bond targeting over-
seas markets (Kumar and Singh, 2017; see also Bagchi,
2012).
Catching up in terms of delivery innovation
In addition to all the other modes of innovation central to
its model, the NDB wanted to do things differently with
respect to delivery. Frustrated by the slow pace of imple-
mentation from the traditional financial institutions the NDB
stated repeatedly that one of its foundational priorities was
speed. As President Kamath stated at the time of his
appointment: ‘One of the areas that we will focus is that
lenders want the borrowers to follow a certain timeline. We
need to see what innovation is required to ensure that this
timeline is met or to try to reduce this timeline’ (The Eco-
nomic Times, 2015).
In some aspects these concerns cross over to the AIIB.
The institutional features of the AIIB and the NDB reveal an
undercurrent of criticism towards the operating style of the
World Bank – and ADB- with the privileging of a resident
board that approve all loans. Such a format was deemed
not only to be a large strain on budgetary resources, but an
impediment to efficient project management. Moving away
from this mode of operation both the NDB and the AIIB
choose instead a non-resident board on the premise that
Global Policy (2017)
 The BRICS’ New Development Bank
this format would allow decision-making in a timely and
budget-conscious manner (Dollar, 2015). The first round of
NDB loans, for example, were announced at the board of
governors on the sidelines of the annual meets of the IMF
and World Bank.
In an effort to quicken the pace of delivery, the NDB has
become more risk oriented than the AIIB in entertaining a
different balance between speed and oversight. The main
point of differentiation with traditional financial institutions
for the AIIB has been a break with practice of conditionali-
ties. Where it accepted the culture of the same financial
institutions is on the requirement for legally transparency
and social and environmental protection, through the AIIB’s
Environmental and Social Framework.
Confident that its projects will have little or no impact on
the environment, the NDB is far more robust in its break
with forms of institutional oversight. The institutional
emphasis on catching up in terms of delivery innovation,
though, came with a cost in terms of wariness from civil
society groups. As noted above in the debate about product
innovation, suspicions persisted that a faster pace in the
delivery of the projects supported by the NDB were incon-
sistent with sustainable development goals.
In any case, without the material heft of the AIIB the NDB
had to improvise as it went along. The mantra of the NDB
became not ‘best practices’ reflective of a ‘too rigid, inflexi-
ble, and slow’ orthodoxy but ‘next practices’ showcasing
development as a dynamic and flexible process (Financial
Times, 2015).
What offers some extra encouragement that the NDB can
indeed catch up in terms of delivery innovation is the evolu-
tion of the NDB’s management team as an autonomous
entity. From the outset the NDB had to carefully balance
the national interests and identity of its members. But
through the use of the mantra of speed, the NDB profes-
sionalized bureaucracy offers a means of cajoling the mem-
bers to work faster to meet the goals of the NDB and thus
signaling that the NDB has an important point of compara-
tive advantage with respect to other institutions.
Conclusion
It is tempting to maintain the view that the NDB is simply a
smaller, materially less significant, replica of the AIIB. The
mainstream literature continues to depict the NDB in this
manner. As one close observer notes: ‘Many questions
remain unanswered about the two banks . . . What is evi-
dent is that the AIIB is well positioned to become a major
player in development finance in coming years, while the
NDB’s future impact is much less clear’ (Humphrey, 2015a).
Although acknowledging that the NDB has far less
resources than the AIIB, there is both a normative and
instrumental purpose to the institution that departs from –
and improves – the model of other financial institutions.
This originality is especially evident in terms of the features
of privileging of equality and the degree of product innova-
tion. To be sure, the commitment to the principle of equal-
ity in process innovation should not be exaggerated beyond
Global Policy (2017)
7
recognition. As Kahler (2016) points out the NDB cannot
avoid touching on sensitive governance issues. The first
choice of China was an asymmetrical form of contributions,
with the Chinese government willing and able to make capi-
tal allocations at a much higher ratio than the other mem-
bers. Yet the implications of a sustained commitment by the
NDB to a democratic culture should neither be ignored.
Institutionally it means that the NDB has to constantly nego-
tiate rather than react to the interests and identity of a sin-
gle powerful country.
In terms of product innovation the decision to promote on
an exclusive basis green infrastructure with respect to energy
projects serves as another attractive point of departure for
the NDB. Again this approach was not completely seamless
one. Nonetheless, an integral connection between the NDB
and sustainable development has been carved out. As in the
case of the equality principle such a focus alters the image
of the NDB as a distinctive institution. Unlike other initiatives
including notably the AIIB that are deemed be both a replica
of the traditional multilateral model and a threat to the
embedded order, the NDB avoids being typecast as either.
Through its exclusive association with clean renewable pro-
jects it seeks originality of design. By what can be termed its
soft alternative approach of institutionalization it avoids an
association with a hard geopolitical challenge.
The toughest test for the NDB to deal with concerns
resource innovation. At one level this problem becomes
obscured by China’s backstopping of the NDB. As the others
members fall back in terms of capabilities, China has
stepped up notably by experimenting creatively with green
bonds backed up by viability of Shanghai as a financial cen-
ter and the use of national credit agencies. At another level,
though, this disjunction opens up further potential strains
with respect to the solidarity of the BRICS (Chin, 2014,
p. 372; see also Cooper and Farooq, 2016). A case in point is
the suggestion that the BRICS create a new credit rating
agency of their own. Whereas India appears to be pushing
the idea – in a reprise of its earlier bout of leadership –
China appears indifferent or even opposed (India Express,
2016). A Memorandum of Cooperation for instituting a
BRICS credit rating agency, a draft of which was discussed
by a technical group at Udaipur in March 2016, was not
signed at the Goa summit (Katz, 2016).
Catching up in terms of delivery innovation, a process
where the management team of the NDB has become as
vital as the member states, could play out in different ways.
By moving the NDB forward there is the possibility that the
separation between China and the other members will be
accentuated. Equally, however, an argument can be made
that it is only by pushing the other members forward
although in an asymmetrical manner that the NDB can
come up to its impressive promise as an innovation-oriented
institution.
Far from being marginal, then, the NDB rests at the inter-
section of a variety of key debates about global governance.
Can a club model work when it moves from informal activity
to formal institutionalization? Can an initiative based on
green development be sustained on parallel lines by the
© 2017 University of Durham and John Wiley & Sons, Ltd.
 Andrew F. Cooper
8
BRICS? Can the NDB be instrumental in upgrading their
resource capacity without exacerbating a division between
asymmetrical partners? And can the NDB reinforce the
image of speed through a continuous process of fast deliv-
ery. While this article provides an initial assessment about
the trajectory of the NDB, each of these questions deserves
ongoing review.
Acknowledgements
This article has benefited greatly from interviews in June
2016 of a number of NDB officials including three senior
members of the management team. Although I am extre-
mely appreciative of this access the usual disclaimer applies.
I wish also to thank Gregory Chin and Zhu Jiejin for their
insights on the BRICS and the NDB along with their support
on a number of related research initiatives. My colleagues
Eric Helleiner and Hongying Wang, as well as two anony-
mous referees, contributed a number of insightful com-
ments that improved the work.
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Author Information
Andrew F. Cooper is Professor at the Balsillie School of International
Affairs and the Department of Political Science, University of Waterloo.
From 2003 to 2010 he was the Associate Director of the Centre for
International Governance Innovation (CIGI). His work covers the relation-
ship between global governance, diplomacy, and political economy.
Global Policy (2017)