Leaders of emerging countries in Africa and Asia have pushed for the establishment of a new development bank to rival the World Bank.
The new bank idea was discussed during the 60th commemoration of the Asia-Africa conference last month in Jakarta, Indonesia.
The leaders agreed that, to succeed, the bank must be totally separated from the World Bank and the International Monetary Fund (IMF) because the two could no longer be trusted to fully fund development infrastructure projects.
President Robert Mugabe, who spoke at the conference in his capacity as the African Union (AU) leader and the Southern African Development Community (Sadc) chairperson, said policies fostered by the IMF and the World Bank had led to deindustrialisation and declining income in sub-Saharan Africa.
Mugabe criticised both institutions for “failing to deliver solutions” to alleviate poverty, distribute wealth and close the inequality gap in developing countries.
He said the two Bretton Woods institutions were based on “Western doctrine and exploitation” and, as such, developing countries needed to look for alternatives to secure their place in global affairs.
“We see this by the decision taken by Brics [Brazil, Russia, India, China and South Africa] countries in establishing a development bank and the establishing of Asia Infrastructure Investment Bank championed by China. This is how we must forge ahead if the voice of the South is going to matter in international affairs,” said Mugabe.
Last year Brics launched a development bank. Its main objective is to mobilize resources for infrastructure and sustainable development projects for developing countries. The bank will, among other things, support public or private projects through loans, guarantees, equity participation and other financial instruments.
Mugabe said the development of these banks would usher in a new world economic order that would focus on South-South co-operation and make developing countries self-sufficient.
Indonesian President Joko Widodo shared the same sentiments, saying African and Asian countries felt a global injustice because the developed world is reluctant to change the status quo.
“The view that the world economic problems can only be solved by the World Bank and the International Monetary Fund is an outdated view. I am of the view that the management of the global economy cannot be left only to these international financial institutions. We must build a new global economic order that is open to new emerging economic powers,” Widodo said.
He said the rich nations, which house only 20% of the world’s population, consume more than 70% of resources and hundreds enjoy the lives of the super-rich, yet more than 1,2 billion people in the southern hemisphere struggled and lived on less than $2 a day.
Widodo lauded China for establishing the Asia Infrastructure Investment Bank, the headquarters of which will be in Beijing, China. It will finance transport, water, energy and infrastructure projects in that region.
Kenneth Creamer, an economist at the School of Economic and Business Sciences at the University of Witwatersrand, said there had been some resistance from the United States to the establishment of the bank. He said it was an initiative to be applauded and that time would tell whether it would rise to the challenge.
Creamer said the Asia Infrastructure Investment Bank could play a crucial role in financing much-needed infrastructure investments in both continents. He said, if the bank was to work effectively in assisting Africa to overcome its shortage of social and economic infrastructure, it would have to combine Asia’s financial muscle with the skills and experience that were already on the continent, such as those of the African Development Bank and the Development Bank of Southern Africa.