 Hello and welcome to NewsClick, this program with Real News. We have with us former managing director general of ADB Rajat Nag and we will discuss the BRICS Summit. Rajat, the BRICS Bank and the Asia Infrastructure Bank were supposed to be challenges to the IMF and the World Bank. Particularly, the Asia Infrastructure Bank was supposed to fund a lot of infrastructure projects, which otherwise the World Bank was funding and this was supposed to also put forward a different economic model of how infrastructure should be developed. Do you think it has made a change or do you think it is exactly following the World Bank pattern? I think that the AIIB or the NDB were formed for a very different reason than the one you mentioned. It is true that one could argue that they were there to provide additional funding for infrastructure, different funding, etc. But the fundamental reason was that the governance of the Bretton Woods Institutions was totally out of sync with the reality, with the emerging economies now much more important, much more powerful than the reflection they had at the Bretton Woods Institutions. For example, the Bretton Woods Institutions, the voting was in the hands of essentially the older economists. Exactly. And for example, Belgium or Luxembourg had a higher voting percentage in IMF than Brazil, for example. Luxembourg, Luxembourg. I mean, that's almost a state of sensibility. But I think, though, to be fair, the IMF was trying some reforms and the World Bank was trying some reforms and some reforms have happened, but basically countries like China and India were not given the due place at the table. So the formation of the BRICS Bank or formation for the BRICS for that matter or the AIB was basically a statement by these emerging economies that, look, if you're not going to give us a place at the table, then we'll not only create our own table, we'll actually create our own kitchen. So the AIB, the Asian Infrastructure Investment Bank, was really a reflection of China's understandable growing impatience with the existing institutions such as the World Bank or the IMF. The NDB or the BRICS Bank was essentially, again, a reflection of that, that China and India, Brazil, Russia, they had very little in common, but they certainly had a common focus that they were not getting the due they deserved or the fail they deserved at the Bretton News Institution, including, I would say, at the regional institutions such as the Asian Development Bank. So that was the reason they were set up, but it is also true that it was expected that the AIIB and the NDB would fund infrastructure in Asia for NDB's case and also for AIB's case, because the demand for infrastructure is huge. Now, to that extent, I think those institutions, it's too early to tell. Certainly AIIB has already approved four loans for infrastructure in Asia. They are following essentially the similar principles of due diligence, environmental safeguards, social safeguards as the Asian Development Bank or the World Bank, but since they are new, they're probably a bit more nimble. Two other issues that come up. One is the terms on which they borrow. Do they actually end up by shorting up the dollar as the global reserve currency? Is it going to make a change in that? That's one set of questions. Other is China had a lot of money, essentially reserves. And using that to expand the infrastructure was also argued. It's also argued that it's a means of expanding the Chinese reach outside their countries and of their companies outside their countries. Do you think there's an element of truth in this? I think there is certainly definitely an element of truth in that. I think, again, taking a slightly larger picture stepping back, China has very assiduously pursued in recent years this one belt, one road philosophy. Now, it depends on who you talk to. If you talk to people in China, they would argue that the one belt, one road, by the way, they have now dropped one from the belt and road, belt road initiative, is not a way to encircle, as it were, Asia. But it's really a manifestation of greater regional cooperation, greater connectivity, et cetera. I'd like to add one element to this, which is not commonly known, that today 90% of global trade is maritime trade. Now, say if you take 300 years back, the most of the global trade in the Eurasian landmass was really road, essentially land trade. So in a certain sense, it is trying to reverse the global dominance of what I would call the maritime powers, which came up with the 17th, 18th, 19th century colonial powers, essentially, and what China, therefore, has, I think, very cleverly done, talked about the maritime route as well. So the belt is really the sea belt, and the road is the old silk road, which they're trying to put in place. But still centered around the Eurasian landmass, being stretched to Africa. And to Europe on the west. But the Chinese then not only put this sort of framework in place, they actually put money behind it, i.e. they put the AIIB in place. And the AIIB, though it is definitely a multilateral institution, it now has got more than 40 member countries. It'll expand to about 60 in the next few years. I'm sure Canada is the most recent country to have applied to join AIIB, the first North American country. But the AIIB is definitely a means for China in a multilateral setting to finance infrastructure. The BRICS Bank, set up by the BRICS countries, was done also for that purpose. But I have to say the rationale and the raison d'etre for the BRICS Bank suddenly seemed to have got a bit diluted, if not confused, by the arrival of AIIB. Now one or the other certainly made sense. The BRICS Bank, I think, has more of a challenge. Who does it lend to? It has lent to Russia, for example. Does Russia need funding from another institution for infrastructure development issues to be discussed? But AIIB certainly has a much clearer mandate infrastructure in Asia, of which there is a huge need. And even with the Asian Development Bank and the World Bank putting a lot of money for infrastructure in Asia, still the needs are huge. And on top of that, the AIIB will obviously be able to mobilize funds from its owners, plus in the international capital market. So it's a much larger game plan that China is putting in place. So AIIB is also connected to the Belt Road Initiative, as you were saying, and the fact that the Asia needs infrastructure and funding for that ADB alone or other financial institutions were not enough. And China has surplus reserves at the moment, which it can use. But the other challenge, which perhaps the BRICS Bank could have played a bigger role, was essentially the financial structure of the world in which IMF still sort of sets the, shall we say, the basic policies in place. And the dollar is being the underpinning of global currency. Do you see that BRICS Bank, in any sense, could challenge that, or at the moment it seems? I think the BRICS Bank, I don't think, was intended to. And certainly, their emphasis at the moment very clearly also is on infrastructure and sustainable development. So both BRICS Bank and AIIB are focused on projects, particularly in infrastructure space. The two institutions are not getting into any of the macroeconomic, macro-financial, macro-monetary issues. Then what would it be in terms of the macro-financial structure? That means that it is really not going to challenge the global hegemony, which at the moment IMF still really enjoys. Two points here. One is China's growing importance in the world economy and India's as well will start to get reflected in the IMF structure. I mean, the Chinese Yuan is now part of the SDR. India is not far from it. But still, both India and China now do have greater voice in IMF. But I think IMF will continue to be the global institution. Now, within IMF, how the structure will change, and it's certainly changing very glacially, will have to wait the test of time. You might remember during the Asian financial crisis, 97, 98, Japan certainly tried and floated the idea of an Asian monetary fund as a counterbalance to the IMF. The Americans were deadly against it. IMF was deadly against it. And nothing really came off it. However, coming out of the Asian financial crisis, there were certain mechanisms put in place through the Asian Development Bank and the governments of Japan, China, and Korea. Something called the Chiang Mai Initiative basically creates some sort of a regional monetary surveillance framework. So some things were done. But nothing to compete or challenge, as you say, the global supremacy of the IMF. You talked about changes within the IMF. In 2008, 2009, there were certain promises made. And both China and India seem to have felt that they're going to get a bigger space. That really hasn't happened. It has happened, but slowly. And the US Congress, even after the US administration had proposed it, US Congress in a bulked at it. And ultimately, some of those have been approved by Congress, but many of them haven't. And I think this is the major challenge. And as I was saying earlier, the reason institutions such as AIIB and the NDB were formed was a frustration and very understandable frustration on the part of the emerging countries like China and India saying the global economic structure controlled from the better notes institutions is not reflecting reality. I'm afraid IMF realizes that. But the powers that be, i.e. Europe and the US, are still reluctant to let that power go. Do you think, for instance, Brazil, which was one of the really movers of BRICS, and that's why you have the B over there right in the beginning. It started with Ipsa, and then it also involved BRICS. Do you think that the fact that we have recently a coup, what is called the constitutional coup in Brazil, and Timber is very much in the American camp, do you think Brazil, sort of, if it weakens, this will also weaken the BRICS in the edits? Shall we say, unstated confrontation with the economic institution that we are talking about? You know, I think one should perhaps even think of why BRICS to begin with. The idea was emerging economies, and these sort of Brazil, Russia, China, India, then South Africa seem to be more or less in the same ballpark. But actually now, even within BRICS is a huge diversity. China and India, even though they're slowing down, and very understandable slowing down in China, even so, China and India are growing at about 7, 7.5%, slightly under 7% for China, 7% plus for India. Brazil and Russia, on the other hand, are seeing contraction in their economy about 4%, minus 4%, minus 3.8 or so. South Africa growing at about 1%. So the common elements within these five even is difficult to see, exacerbated by what you just said. So quite frankly, I do not know what the future is for BRICS. I mean, the elements which we're holding them together seem to be fraying at the edges. Thank you very much, Rajat, to be with us. And again, we will follow up these issues with you as and when they take place, particularly the BRICS summit. This is all the time we have today for NewsClick. Please keep watching NewsClick for further episodes.