For long, Pakistan has remained dependent on west-dominated global financial institutions. But, as a strategic shift in the global economy gets under way – from the developed to the largest and fastest growing economies – the country can benefit from the New Development Bank (NDB) recently formed by the growing economies.
Known as BRICS, founding members of the NBD – Brazil, Russia, India, China and South Africa – have for the time being restricted membership to themselves. However, in principle, they have agreed to expand membership to other countries.
The bank will be headquartered in Shanghai, China with its first president from India. The newly born financial institution is widely perceived an alternate to global financial hegemony of the US and Europe.
The new financial institution will help break the monopoly of the World Bank (WB) and International Monetary Fund (IMF), which will benefit countries like Pakistan, according to an official of a multinational financial institution.
But for a country like Pakistan, heavily dependent on the west, there will understandable be pros and cons of joining a new bloc, according to analysts. They said Pakistan should become a member of the NDB at the earliest but will have to weigh in foreign policy implications before joining the club.
It opens the door for Pakistan to get funding other institutions decline to give. However, experts say that “it is too early” to expect that the NDB will replace the WB or the IMF. They say it will take at least 10 to 15 years before the NDB is counted as a near rival to the established global lenders.
The NDB will be one more window for getting finances for infrastructure projects but it will also not offer free lunch, said Dr Abid Hasan, a former operation WB advisor. The NDB might have less stringent conditions but it will ensure that its money is safely returned, he added.
Dr Hasan said there is a possibility that the NDB will raise funds by floating bonds like the WB and the Asian Development Bank. Bond investors will also seek solid guarantees and eventually the NDB will have to adopt policies which give comfort to investors, he added.
Pakistan’s ambitions to join the new club may face resistance from archrival India but it can successfully counter the Indian factor with the help of China and Brazil, said analysts. They said China is the dominant force among the five members and is considered close to Islamabad. Brazil may also neutralise political ambitions of India, the former being an important supplier of defence equipment to Pakistan.
The response of the US and European investors to the NDB will be another important factor for the new financial institution becoming a rival to the Bretton Woods System, comprising the WB and the IMF.
The Bretton Woods System are predominately Western institutions and over the years have been used for political purposes by the US and Europe.
The loans these institutions offer to developing economies like Pakistan are always linked to painful structural re-adjustments that create social and political troubles in the recipient countries.
Initially, the NDB will finance infrastructure and sustainable development projects, with $50 billion in capital. The BRICs have also announced a $1000billion Contingent Reserve Arrangement (CRA), to tide over members in financial difficulties. The CRA is going to be a substitute of the IMF, according to analysts. But it will take time till the NDB and CRA become global.
Each BRICS country will contribute $10 billion to the bank’s capital stock. China will provide 40% of a $100-billion Contingency Reserve Arrangement. While the NDB will have contributions from all five member countries, the dominant player in the organisation will be China.
China’s underline aim is that it wants Yuan become a global exchange currency —an objective that remained unfulfilled due to strong US influence.
Published in The Express Tribune, July 21st, 2014.
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COMMENTS (70)
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@tata: You don't know Pakistan is the only country in the world producing human bombs of best quality and they are proud owners of this consgtruction line though they failed to even produce its own locomotive an rail Coaches heavy power cuts but their factory don't need power.
@Hilarious: Seven times bigger in population, twenty times bigger in foreign currency reserve, fifteen times bigger in the GDP and so on ....
@pwb: If only wishes were horses...
The standards of the BRICS are not so low to include Pakistan as a member.IF Pakistan wants to become a member of a loan giving bank then it should form a group with the top 9 failed states.
@N.Sid: True, some of those statistics are crude joke and people simply forward for the sake of forwarding and the one you talk of I have seen that since 1988 there isn't an iota of truth in it but even if we consider the the 2004 numbers as quoted in article it isn't bad for a diaspora that is barely 1% of the population
@Fahd:
"This idea was first conceived and realised by a genius Pakistani banker called Agha Hasan Abedi in 1972 and the Bank of Credit & Commerce International (BCCI) was founded."
Sure, a brilliant Pakistani was also the first one to invent a car that runs on water.
@Rudra: It's trust deficit, and it does not go away so easily. Look at the author of this article... 1) He assumes that India will likely block its membership, and China will prevent that because??? China is investing in Pakistan (Hilarious - Last time they asked for loan from China it was refused since it did not make any economic sense to Chinese and moreover the infrastructure that is being built is to ensure that Chinese have alternate supply route for energy and supplies... Not that they have brotherly love with Pakistanis), Brazil will help Pakistan because Pakistan is buying arms from Brazil??? (Maybe... - Its like being a customer guarantees political help/clout??) these are poor rationale and justifications from the author and also provides a peek into their mentality (Anti-Indian, this author isn't the only person I have seen on the net. Most of the uneducated, though they may be literate, resort to name calling in the comment section of YouTube, CNN and elsewhere and of-course there is a retaliation) and I don't blame them because its a typical South Asian street mindset (maybe lack of international exposure). World does not work that way , everyone looks for financial gain since nations are realizing that financial power is true might. Though they do have some philanthropic side... There are lot many other biases they have that are ill founded but this isn't the right forum to discuss that...
@Ali: When WW2 ended, it was not Indian economy, It was British economy. WW2 ended in 1945 and India got independent in 1947. The way Britishers plundered India, it is a surprise and a miracle that India recovered to become such a huge economy despite having large number of poor people. Also I don't know which Cold war you are talking about where India became base for US at any point of time. India did put its gold as mortgage to get money but it never offered any bases to any of US operations. From the very beginning, Indian leaders advocated Non Alignment Movement ( NAM) to exert that they are in neither of the camp of either Russia or US. Of course India had warm relations to Russia because of proximity in the region.
@Rudra
Wasn't talking about papers without moderation.ET's moderating system is similar to the New York Times (an American newspaper). It's there to weed out sub-quality comments. What does ET's moderating system have to do with censorship in Pakistan? ET is a private company not a state run paper.
"bound to get replies and facts on it" Sorry, but insulting Pakistan and Pakistanis isn't called sharing facts. Adding insults, like so many of you do, isn't sharing facts! The very first comment says, "snap! snap! time to wake up from your delusions pakistanis" and that's only the first one. Let's look at the comment from an actual rational perspective. The article is pretty neutral, a few opinions are expressed by individuals, that really aren't that controversial. In turn Indian trolls take that as a queue to bash all of Pakistan. I'm not going to even talk about the sick polio jokes , which really shouldn't have passed the moderation system in the first place.
@Station to Station: @Rudra: There is more to it than meets the eye. Indians uses these forums to brag about a lot like here is a TOI report about the fact that no more than 3-4 percent NASA staff is Indian origin and all over internet the Indians brag about that 36 % of NASA is Indians, 32 % of Microsoft people are Indians, so on and so forth. In reality this is an internet hoax, and the government is now woken up to the real facts. Earlier these utopian figures were spread by the Indian government itself. The moral of the story, Indians brags like anything, suffers from huge inferiority complex, hence the hogwash and boasting. Psychiatrist now believe that people who boast and brag a lot suffers from severe inferiority complex. ET is not the only forum, it is much widespread than this.
http://timesofindia.indiatimes.com/IndiarisinginUSGovtfallsvictimtonet_hoax/articleshow/2856295.cms
http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=389x2991956
@Station to Station: It doesn't matter if it's a Pakistani or Indian website. What matters is that facts are posted, which seems to be the case. What exactly is your problem with facts?
The point missed is that tiny European countries like Luxemberg, Belgium and Netherlands have more voting rights in world bank than India and China combines hence the incentive to develop BRICS bank free of western hegemony
@kashif You people are shown dreams. Have you ever thought that why still there is no mining ? Because Gold there is quite less that is 0.2 gram per tonne, and mining is not profitable.
@Fahd After reading about BCCI in detail, what happened to that, what crimes were relatedm how many people lost money.... overall you did dent the image of Pakistan.
@N.Sid I agree, but that is business, that I said. If you have stability as well as less hostility towards India then Indian investors too will invest in Pakistan. Everyone want to take advantage of market. Pakistan have issues in electricity, water, railways etc and that is opportunity for investors. China is investing, BRICS may lend money, that can be considered indirect investment. China have her own requirements. Pakistan and China have nothing in common. There is no question of friendship. Its just the location of Pakistan having long border with India, that matters to China.
@Hilarious
Look, I've never commented on an Indian website nor do I ever plan to. I don't spend my days telling Indian's how bad they are or how evil their country is on their news websites. It's a waste of time and just out right nasty. I could care less about what is going on in India. I only take issue when your compatriots come to our message boards and tell us how bad we are. I beg you to reconsider who is actually obsessive here. Furthermore, I have visited many Indian news sites and many of them, infamously, don't even publish comments from Pakistani commenters. The fact that you are allowed to comment on this site just goes to show you how liberal ET is compared to most South Asian news outlets. So please tell your compatriots to stop insulting the Pakistani ET staff and readership. Just because they can doesn't mean they should. ET gives very fair and balanced coverage of India, after all it is modelled after and affiliated with the New York Times, one of the finest liberal papers on the planet. Let's also not forget that most of the trolling is on AFP articles, or are they also barefaced/half-truth liars? If you take issue with the opinions expressed in the articles by individuals, then that is your problem and not ours. Opinions are just that opinions, so stop generalizing Pakistanis like we are some homogeneous entity.
"Brazil may also neutralise political ambitions of India," ++++++++++++++++++++++++++++++++++++ Brazil now hates Football...after the 1-7 drubbing by Germany...footballs supplied by Pakistan ! So supporting Pakistan is out of the question....:)
This is not a new concept or a new idea. This idea was first conceived and realised by a genius Pakistani banker called Agha Hasan Abedi in 1972 and the Bank of Credit & Commerce International (BCCI) was founded. BCCI went on to the become the bank of choice for the Third World countries and an alternative lender for the developing countries of the world who otherwise would struggle to obtain loans from the World Bank and the IMF. The BRICS Bank being formed 42 years later is just an extension of the original BCCI idea and I'm glad to see a BCCI being reborn, this time led by China.
@Station to Station
Well, I guess your definition of 'ground realities' doesn't match ours.
And, as to why Indians 'troll' your web sites, if your newspapers and indeed most of you weren't so obsessed with India, maybe we wouldn't be responding so much to half truths and barefaced lies. Anyway, if you visit our news sites, there are enough of you guys hanging around there. It's just that we are 6 times bigger than you (in every way), so we're bound to be more visible, don't you think?
How about converting BRICS to BRICSP by adding Pakistan rather than just aiming to advance loans.
@Hilarious The first comment on any given ET article these days is an Indian troll 90 percent of the time. At this point it has become completely insuferable. Don't label us as the ones with complexes when we reply back on our own websites. You people love pointing out all the problems with Pakistan yet when Pakistanis reply back with some ground realities about India it's chalked up to complexes. Hypocrisy at its finest.
Pakistan doesn't need loans. All it needs is for Pakistan Army metallurgists to take over Baluchistan gold reserves and manage the rest of the minerals too!
It opens the door for Pakistan to get funding other institutions decline to give! pakistani corrupt english elits are happy to knock the new doors!
BRCIS nations have prepared a list of countries that could join it in future. Turkey and Indonesia are 6th & 7th members next. Pakistan is the 198th out of 200 countries to join BRICS. 199th & 200th are Afghanistan & Somalia.
@tata: @lol: This is a new report from Times of India published about 5 days ago, clearly depicts the huge poverty in India. India should accept the reality and stop behaving like a super power, in reality India is super poor. The first step to solve a problem is to accept the reality. Need to get over from the delusions and illusions.
http://timesofindia.indiatimes.com/india/1/3rd-of-worlds-extreme-poor-in-India-Report/articleshow/38485157.cms
Will India get some loan to alleviate its huge poverty levels. Worst than sub saharan Africa. One third of world's poor live in India.
http://timesofindia.indiatimes.com/india/8-Indian-states-have-more-poor-than-26-poorest-African-nations/articleshow/6158960.cms
The reason experts don't know what to make of the new Brick Bank is that it's members have little in common, are sometime enemies, and it's likely not going to succeed. As far as Pakistan becoming a member - why not - that makes as little sense and Indian and China forming a bank.
@Sudhanshu Swami: China is already investing 52 billion USD in Pakistan over a period of 5-8years. Investment and loans cannot be compared. That includes the economic corridor from Gwadar to China(rail link and road). Gwadar deep sea port. Huge investment in power projects, In mono rail in Lahore, in coal based power projects, in KANUPP 2 and 3(nuclear power plants) near Karachi. Also investing in Gadani power projects of 6600 MW's. Also investing in textiles and a host of other projects. This is much more than what china has committed in the BRICS.
http://www.thenewstribe.com/2014/02/24/china-agrees-to-invest-52-billion-usd-in-pakistan-in-next-five-years/
Pakistan don't need any favor from any of these banks and organizations. Pakistan is the future, the next big thing and the world will see.
Pakistan is too much optimistic about China. Man this is money driven world. nobody cares about emotions when international matters are there. China, Russia are more kafirs than rest of the world ! If any one is closer to Pakistan then that is India only. Mind it. We will give you money and will ask you to buy our products by that money.
No loans to failed state ..... though we can think of giving credit for polio and latest one the brain eater amoeba
"The new financial institution will help break the monopoly of the World Bank (WB) and International Monetary Fund (IMF)," ++++++++++++++++++++++++++++++++++++++++++++++++ If there are WB and IMF then its duopoloy and if many more its oligopoly. Ok Lets blame that to Typos.
The article is written with the assumption that if Pakistan beats indian resistance it will secure its position in BRICS. The group is an exclusive club for promising economies with global ambitions. Pakistan recently made it into the list of top ten failed states, so even the Chinese won't be extending a hand in this case. The writer also assumes that Brazil will favor Pakistan over india, which is useless chest thumping. The nations will contribute equal share of money starting from 10 and then to 20 billion each, that is more than pakistans foreign reserve.
@Station to Station: I really like when you said "Even with all the strides India has made, it is still very much a third-world nation." It shows that how hard indians are trying for the development but in case of Pakistan. Everyone has lost hope.
With Pakistan as member it will be known as P(B)RICS.
@Xman: Pakistan always have romantic ideas about sweeter than honey friendship with China and Ummah brotherhood with Saudi Arabia. But the bitter fact is when Pakistan sought help from them to avoid going to IMA, both of them refused. It takes some time for Pakistan to wake up to the reality.
@Strategic Asset
In fact you need not have written anything at all. Here's an article by a Pakistani journalist on a Pakistani newspaper on how Pakistan could best make use of this bank to fulfil its developmental requirements. Fair enough. But then you have ill informed observers here questioning how India considers itself a 'super power' and why it feels the need to lend money when itself has so many poor. The inferiority complex is so deep rooted that sometimes it really is no use trying to make these guys understand. And the hatred is so deep rooted that nothing India does will ever be appreciated here. Kudos anyway for trying...
ET and its Indian agenda...
The author just gathered few tit bits from here and there , added some Pakistani tandoori masala and presented this article. The contingency fund is 100 billion.not 1000 billion, though he corrected it later.The bank was formed as a result of neglect from the west in decision making of IMF and World Bank.The West welcomes the money, but decision making is theirs.They manipulated the policies of the borrowing nations to suit the western hagemony. It is nothing but Neo Colonialism.No member country can dominate the proceedings here, since everyone contributed equal seed money.Yuan or Remnibi cannot become a global currency as long as it is manipulated value by Chinese. Finally, Pakistan cannot have free ride because of China. There are legislations to be made to legalise this entity.But the developing world welcomes this initiative including the entire Latin America.
@Shahbaz Rana: The BRICs have announced a $100billion Contingent Reserve Arrangement (CRA) not $10000 billion - there is a typo here.
ET, 2nd try.
By insisting on equal participation of $10 billion each (soon to be raised to $20 billion each) by all BRICS countries, India has already ensured that NDB would not come under Chinese hegemony.
Moreover all countries have together decided that no Chinese representative will be head of NDB for the next 14 years.
It is also well-known that India gives more importance to the IBSA grouping and generally they have been together. To say therefore that Brazil will antagonize India is a bit of a stretch.
The Yuan is not a free float currency. So long as it continues to be rigged, there is no hope of it ever becoming a global currency.
There are many inaccuracies in this article, but I stop here.
@Blunt There are not moderators, it is automated filtering !
@Sudhanshu Swami: To ET Moderators, It's ok if you publish the comments of Indians twice, but comments of Pakistanis must be published atleast once.
@Sun Tzu This has helped India how? Donating billions when a large chunk of your population is below the poverty line isn't smart. It's called playing pretend. Stop trying to impress the world, because no one is buying it. Even with all the strides India has made, it is still very much a third-world nation. The truth is at this point India's Human Development Index score is much closer to Pakistan's than it is to the United States, so stop pretending otherwise. The IMF is backed by some of the wealthiest and most developed nations on the planet, they can actually afford to finance such institutions without depriving their population of basic amenities. India at this point is a 100 years too early.
wake up mate…..
Brics membership for Pakistan is a pipedream. The next in line to join is Argentina
@pwb and Pakistan will be on moon soon. World's most import decisions will be made in Pakistan.
Well Chinese or Indians aren't in a position to compare themselves with westerns in terms of managing money, though they might be able to do so in future.
Though IMF, WB have been used for political purposes from long time, it's highly unlikely they approve loan to any Country by taking the risk of bankruptcy.
It's the sick mentality of people who are planning to secure some loan from a new bank which is not even operating yet.
For Pakistani they should bring some patriot politicians in power so they can bring stability, economic growth and long term policies.
For the knowledge of Indians lashing out at Pakistanis about bankruptcy and aid, at the end of Cold War when Indian economy was at the edge of bankruptcy, thanks to Arab war when USA needs Indian soil for his operations. Indian accept that offer in return of money and few other things and avoid bankruptcy. Today Indian economy is better than Pakistan but it doesn't mean they have done everything suppose to be done for common Indian. They have long way to go and they only can do it by resolving all their disputes with Pakistan including Kashmir and I wish them all the best.
@Station to Station:
just casual seach showed India recently has given $5bn credit line to Africa. Sri Lanka, Bangladesh, Nepal, Bhutan, Vietnam, etc has all benefitted enormously from Indian credit and also Aid. Over $2 billion donated to Afghanistan is also very well known.
wake up mate.....
I like the idea.
Oh...so Pakistan is going to change its master.....well...
Contingent Reserve Arrangement (CRA) will consist of $100 billion not $1000 billion.
@Sun Tzu & IndianDude Pakistan bashing on ET, colour me surprised. If it makes you feel better, Pakistan has no need for the NBD. Why go for the Indian knock off when the genuine thing is available. It's cute when India tries to play shooper-power. Get your own country to first world status first, before lending money to others or is China that will be putting in most of the money?
Chins's biggest burden is Pakistanis. without any statement from China. Pakistanis start giving statement and make themselves burden on China.
No country needs to be a member to apply for and avail funds from the new Bank, they merely need a feasible and bankable project. All the founding members will have equal shareholding so there is no question of domination by any country.. Secondly, political equations will not determine the direction or quantum of lending, merit of the proposal will.
Pakistan has the best financial experts in the world. They must create a world bank and call it Pakistan World Bank. and head quarter can be in Lahore. This bank will provide cheap loans for developing countries. Muslim countries will pool together $ 1 Trillion give to Pakistan World Bank.
its just nightmare !!!
Such a wrong information, this is the reason, Pakistanis are always misinformed. China will give 40 billion and Russia , Brazil , India will give 18 billion and South Africa will contribute 5 billion. All the countries have an equal say, no country is dominant. All the member countries have veto power. This bank is not a rival to IMF but a new financial institute to help the member countries from global financial fluctuations. I see no chance Pakistan would get any benefit from this bank , because this bank has lot of lucrative projects to finance in the member countries itself. China can do nothing to help Pakistan out of the way, as it can be vetoed by India or any other country.
Mr. Shahbaz Rana is wrong at saying India will try to oppose Pakistan's membership to NDB. In fact, India is already encouraging SAARC nations (including Pakistan) to come together and will readily agree to allow membership to Pakistan into NDB. Also, another stupid argument is of China taking Pakistan's side if India opposes. In reality, I feel China is known for doing everything that is in its own self-interest, and being the biggest contributor in NDB, China itself will be the real 'harsh' entity, instead of India, putting pressures on Pakistan for various issues including, & especially related to, repayment of loans taken by Pakistan from NDB. And anyway, India with its vast resources is a founding member of the new bank, whereas Pakistan with its debt-ridden economy is just a small country requiring a new way of gaining funds. So I do not see why India would have any problems into letting Pakistan become a new "member" of the bank. Afterall, Pakistan becoming a "member" of NDB is like a small investor becoming a shareholder of a large multi-billion dollar MNC by buying a few hundred shares - it does not make him equal to the Owner of the corporation.
It will be better for Pakistan if she joins the BRICKS and make it BRICKSK I could not under stand the logic that India will block Pakistaan entry.
The author must make clear what exactly he means by Pakistan becoming a "member" of the bank. There are two types of members - (1) Those who deposit money/contribute funds and (2) those who borrow /take out loans. The BRICS are all former type. Which type is Pakistan going to be? There is a difference of Heaven and Earth.
'Pakistan's ambition to join the new club ...'. Or should it be join the new bank? Anyway day dreaming does not stop even with 20 hrs power cut !
The BRIC countries have been earnestly trying to stand up a viable alternative to the Western institutions They have put in billions of their own money for this noble goal and here we have the same old story: Pakistan muddying the waters and trying to get a free ride, with all it's baggage of anti-India rhetoric.
Pskistan needs to get totally involved and without delay - this is the future .
Another loan another bank, cycle will continue.
Pakistan neither needs IMF, or BRICS, when Saudis are just one "Umrah" away.
In the BRICS there are two of the most bania nations in the world after the jews, china and india. Both chinese and indians spend their money wisely. So pakistan can forget about getting a loan from the New Development Bank (NDB), which will be largely controlled by the chinese and the indians. These two bankers don't believe in lending to a country like pakistan which is on brink of bankruptcy every few months and has to be bailed out just so that pakistan can pay interest on already the borrowed loan that they can't possibly repay!. snap! snap! time to wake up from your delusions pakistanis.