New Development Bank Impact on the Global Development Financing

Chapter I 3
1.1 Introduction 3
1.2 Background of the problem 5
1.3 Problem statement 4
Objectives 6
1.5 Research questions 6
1.6 Hypothesis 7
1.7 Significance of the Study 7
Transition 8

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Chapter II 9
2.0 Literature review 9
2.1 The countries involved in BRICS9
2.2 The economists perspective on BRICS 14
2.3 An analysis of IMF and WB performance 15
2.4 New Development Bank (NDB) 18
2.5 Foreign direct investment (FDI) and economic growth 23
2.6 Foreign debt and economic growth 25
2.7 Summary 27

Chapter III 29
3.0 Methodology 29
3.1 Introduction 29
3.2 Chinas Case study 29
3.3 Brazil's case study 34
3.4 Russia Case Study 35
3.5 A case study in India 38
3.6 Summary 39

Chapter IV 41
4.0 Results 41
4.1 KPI Strategic Indicators 41
4.1.1 Geographical Location 41
4.1.2 Customers 44
4.1.3 Financial Performance 46
4.2 Correlation Analysis 47
4.3 Regression Analysis of Financial Sector of BRICS (Banking Industry) 48
4.4 China 48
4.4.1 Regression Analysis of China's FDI and GDP 51
4.5 India 54
4.6 Russia 57
4.7 Brazil 59
4.8 South Africa 60
4.9 Analysis of Effect of NDB on the US Dollar Hegemony 62

Chapter V 72
5.1 Conclusion 72
5.2 Limitations of the research 78
5.3 Recommendations 78

Chapter I

1.1 Introduction

Before the year 2000, developing countries had few options to turn for funding. The global development finance landscape was dominated by the International Monetary Fund and the World Bank. However, since the turn of the century, new models of financing and new actors in the field of global development financing evolved. Some of these took on the form of private-public partnerships while others took the form of philanthropic actors like Bill Gates. The most important of these developments, however, has been the entry into the donor category of countries like India, China, and Brazil. With the setting up of the New Development Bank, the field of international development financing will get a new major actor. What will be the Impact of this New Development Bank? Will this New Development Bank change the current global economic environment by paralleling the current institutions like the IMF therefore decentralizing the landscape? This master thesis will seek to answer these questions and to discover the implications on the Global financial landscape of the setting up of this new bank. The new development bank (NDB) is a multilateral financial institution set up by six developing middle-income countries, namely Brazil, Russia, India, China and South Africa. One of the main objectives of this thesis will be to investigate whether this new bank is being set up as an answer to other international financial institutions like the IMF and the world bank or it is being set up to complement these institutions. The New Development Bank as proposed poses as an alternative to developing countries, providing a source of funds that unlike the pre-existing financial institutions does not force economic policies down the throats of the aid receivers. For the past years, some of these BRICS countries have been giving financial help to other developing nations with the main player in this field being China.

The master thesis will seek to investigate the main goals and intents of this bank and the framework; it intends to use to achieve these objectives. This master thesis will also investigate whether the New Development Bank will be aimed at funding development as defined by the previously existing financial institutions like the International Monetary Fund or the Bank will be aimed at fostering and nurturing a true industrial and economic transformation in the developing countries. Th thesis will find out the proactive steps that the architects of the new Development Bank have taken to ensure that the mishaps blamed on the other International Financial Institutions like the World Bank and the IMF do not haunt the new bank. It will also analyze the measures that the new development bank will take to ensure that its success in accomplishing its objectives translate to real economic transformation in the countries that it aids.

The New Development Bank will have the challenge of shedding the image that the pre-existing international financial institutions have forgotten over the years of being used as a tool of exploitation by the powerful and rich countries. The International Monetary and the World Bank have been blamed for the economic growth slump, especially in developing countries from the year 1980 to 2010. The blame mainly felt on these institutions owing to the flawed economic policies that were a prerequisite for developing countries to implement before they could access funding from these institutions. These policies have been framed to suit the first world, without considering an individual country circumstance and priorities. The New Development Bank will have the unique challenge of forging a more friendly and conciliating image and not a tool of control. Among the main objectives of this thesis is to study the ways in which the New Development Bank will face these challenges while at the same time studying whether there are better alternatives for dealing with this challenge.

The New development bank will also have the challenge of formulating a code that ensures social and environmental concerns will be addressed while fostering development in the developing nations. While the existing international financial institutions mainly measure development in terms of GDP, environmental conservation continues to be a major concern. It will be up to the architects of the New Development Bank to make sure that the projects that they fund for development are environmentally conscious. The projects should also be aimed at improving the quality of life of the people who are directly affected by such projects. This Thesis will study the concerns that the New Development Bank faces and the measures that are being implemented to ensure that the bank serves its mandate of fostering development while at the same time ensuring it remains socially and environmentally conscious.

The master thesis investigates the expected reaction from the existing international financial institutions towards the new bank. Further, it will analyze the likely relationship of the new Southern controlled multi-lateral bank to the existing international financial institution which are mainly Northern-influenced and controlled. While these institutions have anticipated a possible partnership, it will be challenging for the new Bank to work with these institutions as it proposes an alternative path of economic development to the developing nations. As the bank tries to cast an image different from the existing financial institutions, one of the main challenges that it will have to face is to foster the relationship with the preexisting financial institutions. The research will objectively study the stance that the New Development Bank has taken so far in regards to this issue.

1.2 Background of the problem

Since the turn of the century, there have been dramatic changes in the global finance landscape. The Entry of the New Development Bank is set to be the biggest change in the global finance field yet. This thesis is set to investigate the implications the bank will have on the global development financing landscape.

1.3 Problem statement

The establishment of the BRICS New Development Bank will herald a new shift in the global development financing arena. This change is expected to develop the field by impacting on the hegemony of the United States Dollar and by providing new options for developing countries in want of development monies. This thesis will seek to investigate the extent of this change and the direction in which the bank will influence the global development financing sphere.

1 .4 Objectives

This thesis aims to investigate in detail the circumstances surrounding the establishment of the New Development Bank., To find out the main objectives of the New Development Bank the methods of the bank will be analyzed

To investigate how the New Development Bank will differ from the current international financial institutions like the IMF and the World Bank

To investigate the measures that have been taken by the New Development Bank to ensure it remains socially and environmentally conscious in its operations.

To study the relationship between the New Development Bank and the current international financial institutions.

1.5 Research questions

What are the main objectives of the New Development Bank and what are the methods it intends to use to achieve these goals?

How does the New Development Bank differ from existing international financial institutions like the IMF and the World Bank?

What are the steps the New Development Bank has taken to ensure that it remains socially and environmentally conscious?

What will be the relationship between the new development bank and what are the implications of this relationship with the recipients of aid from these financial institutions?

1.6 Hypothesis

The New Development Bank set to be established by the BRICS nations will be an important new player in the global financial field. As it is being funded by countries that have been previously considered developing, the new bank will provide an alternative to Developing nations, many of whom have blamed the traditional financial institutions for their economic woes and slow growth rates. The bank will also challenge the supremacy of the United States as the World Superpower by challenging the hegemony of the US dollar in international financial markets. It will also focus a lot more on the developing world by supporting and funding realistic development projects that will yield relevant improvement in the living standards of the countries that it funds. The New Development Bank will also be a significant symbol of the coming of age of the BRICS countries, therefore giving them more negotiating power on the global playing field. It is the savior of the developing world from the developed nations which have in the past been accused of using the international financial institutions to further their ends.

1.7 Significance of the Study

This study will examine the implications of the Establishment of the New Development Bank. It will offer insight into the sphere of global development financing institution. The study will investigate the implications of the establishment of a powerful new multilateral bank that is not backed by the traditional donor countries.

TransitionThe master thesis will be organized into several chapters. The first chapter includes an introduction and the research questions. In this chapter the scope of the research will be determ...