China’s presidency in the Shanghai Cooperation Organization (SCO) this year has been accompanied by an acceleration in the progress made by this Eurasian bloc towards creating a common SCO Bank. While the idea has been in discussion for almost a decade, the recent meeting of Finance Ministers and Heads of Central Banks of SCO economies held in June has further advanced the creation of a common financial institution for SCO economies, with the meeting’s participants endorsing its creation[1]. If launched in the near-term, the new regional development bank would deliver an impetus to South-South trade, investment and infrastructural connectivity, providing support for such institutions as the BRICS New Development Bank (NDB) and the Eurasian Development Bank (EDB).
There are important benefits to the creation of the SCO Bank for SCO members, their regional partners and the Global South. Firstly, given the scale of connectivity challenges across Eurasia – most notably distance from the coastlines and vast swathes of landlocked territories across Central Asia (the largest landlocked economy in the world by territory is Kazakhstan (core member)) – the creation of such a financial institution would address the high financing needs for infrastructural projects in the region. For SCO economies in Central Asia the creation of such a financial institution raises the optionality of sources of financing, complementing the provision of investment from the Global South institutions such as NDB and the Bretton Woods organizations such as the World Bank.
For SCO as a regional organization, the creation of a common Bank would further shift the center of gravity in its activities towards economic policy issues, making it a more credible economic entity in the dynamics within Eurasia and the Global South. Another important regional dimension in this respect is that the SCO Bank could potentially revitalize the efforts to build partnerships in Eurasia across regional integration arrangements (integration of integrations) – in particular within the frameworks of the “EAEU-SCO-ASEAN” and “Greater Eurasia” partnerships. Finally, on a scale of the entire Global South, the creation of the SCO Bank introduces additional financial mechanisms of economic cooperation between China and India – something that is crucial for the success of BRICS and the Global South projects.
While initially membership in the SCO Bank is likely to focus on core member economies, with time there may be scope to open the possibilities for membership for economies with observer status and dialogue partners. Furthermore, in line with the experience of the New Development Bank, membership in the SCO Bank could be made accessible to the regional partners of SCO members as well as members of Eurasia’s regional integration blocs, such as ASEAN. A wider array of members of the SCO Bank that goes beyond core SCO membership would also be beneficial in building stronger financial linkages with the affluent and dynamic regions of the Global South such as GCC (Kuwait, Qatar, UAE, Saudi Arabia, Bahrain are partners in dialogue) as well as with ASEAN (Myanmar and Cambodia are partners in dialogue).
With respect to potential alliances, the SCO Bank could create a circle of partnerships along the lines of what NDB did with the national development banks of BRICS core members. In this respect, one of the core partnership belts for the SCO Bank is likely to be built around the already existing SCO Interbank Consortium that brings together the national development banks and institutions of SCO core members. The circle of alliances, however, could be cast wider to include regional development institutions of SCO members (such as the Eurasian Development Bank (EDB)) and development funds created to support the advancement of FTAs and economic cooperation across Eurasia – one example of such a fund being the China-ASEAN Investment Cooperation Fund.
The establishment of what may become an anchor development bank for Eurasia could be replicated across other main regions of the Global South. In Latin America, a pan-continental project to create a regional development bank – Banco del Sur – has been dormant in recent periods, but may see more progress in the coming years as South-South economic cooperation gathers steam. The creation of pan-continental regional development institutions across the main regions of the Global South – Latin America, Eurasia and Africa – would provide a crucial layer of South-South cooperation in the financial/economic sphere and would support the operation of NDB across the entire developing world.
In terms of the emerging framework for the regional development banks of the Global South, one could thus conceive of a layer of sub-regional/sub-continental banks/funds such as the Eurasian Development Bank or the FOCEM fund in Latin America that is followed by the layer of pan-continental development institutions such as the SCO Bank in Eurasia and the layer of the entire Global South represented by institutions such as NDB. Platforms across these layers and the formation of a macro-platform for such institutions across the development world (with NDB having a coordination role) has been among our key policy proposals since 2017[2].
The final decisions on the creation of the SCO Bank are likely to be unveiled at the SCO summit that is to take place in China’s Tianjin on August 31-September 1, 2025. The creation of this regional bank would widen the circle of multilateral/regional development institutions across the Global South and would add co-financing options for banks such as the New Development Bank (NDB). All these factors taken further add weight to calls for the creation of a common platform for regional development institutions of Eurasia and the Global South.
[1] https://e-cis.info/news/568/128068/
Yaroslav Lissovolik, Founder, BRICS+ Analytics
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