NEW YORK – At the conclusion of their summit in Durban in March, the leaders of the BRICS (Brazil, Russia, India, China, and South Africa) announced their intention to establish a New Development Bank aimed at “mobilizing resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries.”
The significance of this decision cannot be overemphasized. For starters, it reflects the enormous successes in economic development during the last four decades (the BRICS’ aggregate GDP is now greater than that of the advanced countries when the Bretton Woods institutions were founded) and the rebalancing of global economic power that this implies. Indeed, the decision demonstrates the BRICS’ ability and willingness to work together, for their own benefit and for that of the entire world. Emerging markets and developing countries are taking the future into their own hands – at a time when rich countries are muddling through their own self-inflicted problems.
A new development bank is clearly needed. The infrastructure requirements alone in emerging-market economies and low-income countries are huge – 1.4 billion people still have no reliable electricity, 900 million lack access to clean water, and 2.6 billion do not have adequate sanitation. At the same time, an estimated two billion people will move to cities in the next quarter-century. And policymakers must ensure that the investments are environmentally sustainable.
To meet these and the other challenges confronting the developing world, infrastructure spending will have to rise from around $800 billion to at least $2 trillion annually in the coming decades. Otherwise, it will be impossible to achieve long-term poverty reduction and inclusive growth.