A number of regional banking institutions like the New Development Bank (NDB), BRICS Contingency Reserve Arrangement (CRA), Asian Development Bank (ADB) and Asia Infrastructure Investment Bank (AIIB) have emerged, all of which India has been a part of. There has been a growing perception that the emergence of these institutions is a consequence of the failure of the Bretton Woods Institutions (BWI) and thus, these institutions would eventually undermine and possibly even replace the BWIs of World Bank and IMF.
There is no iota of doubt that the BWIs, driven by the western vested interests, have largely failed to accommodate the aspirations of the developing and less developed economies of the world. For example, these institutions have failed to implement reforms like the IMF quota reforms, which will increase the voice of emerging nations in the functioning of the BWIs. Despite making several appeals by the G20 nations these reforms are yet to see the light. Also, there is a growing belief that the assistance provided by the BWIs comes with several strings attached so as to play the assisted economies to the tunes of the western interests. For example, a bailout package of IMF comes with severe austerity measures which will benefit the free market forces. Since the developed economies are more competitive, they will be benefited by these free market forces. It is also interesting to note that the Ukraine crisis had began over the question of Ukraine signing an agreement with EU that would provide a bailout package by IMF.
Under these circumstances, the emerging nations of the world have come up with several regional financial institutions like the ones mentioned earlier. But it would be unwise to arrive at a conclusion that the disguised agenda behind them is to undermine and ultimately replace the BWIs. BWIs have a membership of over 180 nations. Compare this to the NDB (and CRA) whose membership is just 5 (Brazil, Russia, India, China and South Africa); AIIB whose membership is a little over 20, and can at best grow close to 30. The scope of these regional institutions is also very narrow. For example, NDB and AIIB only provide funding for infrastructure projects, while BWIs would in addition provide funding for development activities, bailout packages for nations facing balance of payments (BoP) crises etc. Also the capital of these regional institutions (Ex: AIIB – capital of $100 billion) is too weak to undermine the BWIs.
The emergence of these regional institutions must be considered in the light of the changing global dynamics. In this era of “Asian Century” these new institutions aim to meet the specific developmental needs of the Asian and emerging economies. They would diversify the sources of funding which will reduce the burden on the BWIs. Also, the emerging nations can now use these new institutions as new platforms to build consensus between them and act together to push for the long pending reforms of BWIs. Thus, their role is complementary and not contradictory to that of BWIs.
The 21st Century thus does not mark the dusk of BWIs, but mark the dawn of reformed BWIs.