After three years of negotiations, officials from the world’s five major emerging national economies, Brazil, Russia, India, China and South Africa (BRICS), have officially unveiled their new collective multilateral development bank.

Considered a potential rival to the global influence of U.S.-led institutions like the World Bank and International Monetary Fund (IMF), the Shanghai-based New Development Bank (NDB) is the second multilateral bank poised to begin operations in the near future, along with the Asian Infrastructure Investment Bank (AIIB), which announced its launch earlier this year. Both banks will aim to provide increased funding for large-scale infrastructure development projects in poor and developing regions.

The leadership of the $100 billion NDB will come in the form of a rotating five-year presidency, with the inaugural term going to K.V. Kamath, an Indian banker who had previously worked at multilateral development institutions like the Asian Development Bank.

Experts anticipate that the emergence of the NDB and AIIB will mark a new era of development that will greatly complement Western-led development efforts. An increase in the level and diversity of multilateral investment will help to combat extreme poverty in more effective and creative ways.

“I’m optimistic that we are going to get a very different era when it comes to development cooperation. We’re at the beginning of the end of aid-led, Western-funded, post-colonial development,” said Civicus secretary-general Dhananjayan Sriskandarajah in an interview with Devex. “It’s not just about the rich giving charity to the poor through aid. It is about new forms of cooperation.”

In an open statement to the NDB, 44 civil society groups and social movements declared their hopes that the bank will deliver inclusive and participative development, prioritize poverty-focused goals and emphasize human rights and the environment. The signees claimed that these aims are critical if multilateral development institutions are to realize effective results in the coming years.

“Investment cannot bring development if it does not meet people’s needs. The NDB should support inclusive, accessible, participative development that is driven by communities, addresses poverty and inequality, removes barriers to access and opportunity, and respects human rights,” reads the statement. “If the BRICS can help create an institution that lives up to the above principles, they will have done the cause of international cooperation a great service, true to the name ‘New Development Bank’.”

Development experts note that many of the anti-poverty policies currently touted by leading institutions – austerity, privatization and liberalization, to name a few – have not yielded the results that poor and developing countries have hoped for. The emergence of alternative development institutions like the NDB and AIIB could challenge those long-prescribed economic policies.

According to the chief executive of ActionAid International Adriano Campolina, increased competition among multilateral development institutions will only increase the scale and effectiveness of anti-poverty projects in the regions that desperately need them. However, he noted that these institutions must strive to make poverty-reduction policies a focus on infrastructure development.

“Both industrialized and developing economies have been seeing a rapid increase in inequality,” he wrote in an article for Devex. “Development must also, therefore, prioritize policies like fair and equitable land tenure, creation of decent jobs, strong social protection and free access to quality education that have been proven to reduce inequality.”

Campolina and other experts note that in order for the New Development Bank to successfully differentiate itself from existing institutions, it must prioritize the aims of people in poor and developing countries, not those of itself and of its own donors. If it succeeds, it may well contribute to the absolute elimination of extreme poverty and help to develop the infrastructure required for poor countries hoping to make substantial steps in economic development.

Zach VeShancey

Sources: Devex 1, All Africa, Devex 2
Photo: Merco Press

Corporate Social Responsibility Boosting India’s Economy
India is one of the fastest-growing economies in the world. It is a member of the ‘BRIC’ countries (Brazil, Russia, India and China), which economists regard as quickly emerging potential economic powerhouses. Each BRIC country also struggles with internal poverty in some way or another, while India stands out among the rest. India is the only country that has a legally mandated corporate social responsibility (CSR) quota. The Indian government requires 2 percent of all corporate profits to be spent on projects that benefit the poor.

Many Indian companies are beginning to follow a practice, coined by Bill Gates, called “creative capitalism.” That is to say that CSR does not need t0 be a corporate cash donation, but rather businesses can use their specialized skill sets and resources to produce a greater impact.

As of now, Indian companies are still trying to figure out the best way to spend on CSR and the government is attempting to direct those funds in the most effective way. One example is Indian tech company ZMQ Technologies. The software company applies the CSR mandate toward building programs and donating supplies to rural areas in India. This empowers the communities through information and learning, creating more skilled modern workers, and thus helping to boost the economy.

CSR programs are not only helping the millions of impoverished Indians but the country as a whole. Economist and business talk show host Punita Kumar-Sinha expects India to become the fastest growing economy, thus overtaking China by 2017. She cites CSR as a major reason that India’s GDP could grow so quickly. “These CSR projects are already resulting in many innovative poverty alleviation schemes and would lead to more widespread growth than in the past,” she said. As time goes on and companies become larger and more specialized, their impact will grow too.

Joe Kitaj

Sources: Forbes, Business Insider
Photo: ahemahem

One doesn’t automatically think of making money by giving it to the world’s poor, but through the eyes of a business leader, a wealthier population means dollar signs. Millions of new consumers around the globe are always great for business and they come in the form of emerging markets.

Dr. Vladimir L. Kvint, one of the world’s leading economists and strategists defined emerging markets for as a society transitioning from a dictatorship to a free-market-oriented economy with increased economic freedom, gradual integration into the global marketplace, an expanding middle class, improved standards of living, social stability and tolerance, and increased cooperation with multilateral institutions.

Simply put, an emerging market is a national market in the early stages of economic development that is expected to grow rapidly.

The four largest emerging markets are often referred to as the “BRIC” economies–Brazil, Russia, India and China. These markets are watched very closely by Multinational Enterprises (MNE) because of the increased availability of whole populations to their products, many of which are U.S. based.

One example of the importance of emerging markets is the sale of iPhones. According to the Economic Times, Apple CEO Tim Cook said emerging markets such as China and India were among Apple’s biggest consumers during the first few months of 2015. The California based company sold 6.12 million iPhones during the first three months of this year, 40 percent of which were sold to buyers in emerging markets.

For someone who has trudged with soaked feet through the floodwaters drowning a tiny village in Cambodia, it might be easy to tell the difference between an underdeveloped and a developed country. For those who don’t, however, it comes down to statistics such as life expectancy rates, literacy rates and per capita income. A nation rated lower in this statistical criteria would be considered underdeveloped and a prime candidate to grow into an emerging market full of Apple iPhone users.

As an underdeveloped nation grows and its population’s quality of life increases, so too does the probability that it will become a contributing member in the global economy.

According to the United Nations, 900 minority families in Vietnam have escaped poverty through projects backed by the United Nations Development Program (UNDP). With funding from the Global Environment Facility Small Grant Program (GEF-SGP), thousands of Vietnamese minorities are now able to make a living wage through a lost tradition of insect farming, which produces a resin used in food, fine arts and medicine.

Programs such as the ones backed by the UNDP are important examples of aid to underdeveloped nations that can make the difference between a population in poverty and the emergence of a middle class with purchasing power.

Most of the world’s population lives outside the U.S. Foreign aid accounts for less than one percent of the U.S. budget. If this was increased to fund even more programs like those in Vietnam, how many more people around the globe could afford to buy U.S. products?

– Jason Zimmerman

Sources: International Invest, Economic Times Forbes UNDP
Photo: Flickr

The New Stars of Emerging Markets
As the economy continues to expand, the stories of economic growth and development are shifting.  The new stars of emerging markets are beginning to rise and take the spotlight in the story of development.  Over the past decade, the most well-known stories of rising nations within emerging markets have been that of BRIC nations-Brazil, Russia, India, and China. Reporting double-digit growth numbers over the past several years has catapulted them to the top of the emerging markets.  However, their growth is starting to level off and has fallen back into single digits.  They are more stable and sustainable in their growth and have paved the way for new stars to take the spotlight.

Head of emerging markets at Morgan Stanley Investments Ruchir Sharma believes the BRIC nations are beginning a period of slow-down and their slower growth will leave room for other nations to take center stage.  The stories of the BRIC nations are remarkable. China’s double-digit growth has turned the nation into a sustainable nation with a growing middle class.  This is a huge step in overall country development. The creation of a middle class provides additional opportunities for advancement and brings in outside investors to the nation who are interested in the increasing consumer spending capacity.

Who are the new stars?  Sharma says the nations to watch for are the Philippines, Thailand, and Indonesia, as well as parts of Latin America such as Peru, Chile, and Colombia. Political leaders in these countries are stable and have a strong understanding of economic reform. These nations have great potential to be the new emerging markets and double-digit growth-producing countries.

The Philippines is one of the most cost-competitive destinations of technology and business service centers. While India used to dominate the call-center world, the Philippines is fast becoming a strong competitor.  Indonesia has a strong commodity business to build economic strength and Thailand’s manufacturing sector continues to expand.

Beyond the potential new stars of emerging markets are several economies that have the ability to follow behind in the coming years. Nations like  Nigeria, Saudi Arabia, Kenya, Vietnam, and Sri Lanka are beginning steps towards economic reform. According to Sharma, the winners of one decade are rarely winners in the next, but the emerging markets continue to be a strong factor in the global economy and a strong place for foreign investment. It will be a fascinating story to watch as the decade unfolds.

– Amanda Kloeppel
Source: Wall Street Journal
Photo: Avid Investor Group