In 2025 SCO members approved the creation of a new SCO development bank, with further steps towards its institutionalization expected in 2026, including during the SCO summit in Bishkek scheduled for August 31-September 1, 2026. The decision to create a regional development bank for the Shanghai Cooperation Organization is a step towards widening the array of available instruments for the economies of the Global South in the Eurasian region. At the same time, it also raises a number of questions regarding the future of regional development institutions in Eurasia and across the developing world. In particular, with the number of such development organizations rising, there is an increasing need for greater coordination and platform building among such institutions – something that appears to be lacking in the framework of regional development institutions of emerging markets thus far.
Overall, the current priorities related to the launching of the new SCO development bank could be summarized as follows:
- From quantity to quality: a platform for regional development institutions in Eurasia. The rise in the number of development institutions calls for greater coordination among MDBs (multilateral development banks)/RDBs (regional development banks) – thus far there is no horizontal platform that would bring together the regional development institutions from Eurasia and across the Global South. One such potential platform could be based on a BRICS+/NDB+ format in which the NDB plays a soft coordination role for regional development banks of the Global South – within NDB there is already a formal partnership belt of national development banks of country-members of the BRICS bloc – there may be scope to create a similar platform/partnership belt for the regional development institutions.
- Co-financing operations. The creation of a platform for regional development institutions that includes the SCO bank would facilitate co-financing operations: in the case of SCO bank the key partners in Eurasia should include the New Development Bank, AIIB as well as the Eurasian Development Bank (EDB). The NDB has already adopted an approach based on close operational coordination with the respective regional development banks; in particular, the Eurasian Development Bank (EDB) has accumulated significant expertise of coordinating and financing such projects with NDB.
- Sectoral priorities. Across sectors and areas of focus there may be a need for the SCO Bank to target those areas that are complementary to those of the already established regional banks such as NDB/EDB. There is no way of avoiding transportation connectivity of course given the centrality of this area for the operation of the SCO in the economic sphere in the long term. At the same, critical sectors that are not as actively covered by established institutions such as housing construction (across Eurasia’s part of BRICS+) as well as human capital development (education, health care) may be a niche for the SCO development bank to fill gaps in the existing framework. Without due consideration to these issues of complementarity among the emerging RDBs there may be a rising risk of “crowding out” in project portfolios of regional development institutions in Eurasia.
- Financing of SCO Development Bank operations: there may be a role/niche that the SCO development bank could play to boost settlements in national currencies of SCO economies. This relates to the possibility of employing the rising role of the Chinese yuan in expanding the array of operational currencies, including via measures to raise the liquidity of the main currency pairs across the largest economies of SCO. The experience accumulated by the Eurasian Development Bank and NDB in boosting the use of national currencies in financing operations will be instrumental for the first stages of the operation of the SCO development bank.
- Regional centers: the geography of emerging development institutions driven by Global South economies can be a potent force supporting the creation and fostering of new international financial centers. In this respect, it may be expedient for the SCO development bank to create a network of regional development centers in line with the pattern observed in NDB. These regional centers may be in a position to work closely with the regional Eurasian centers of NDB as well as with the headquarters and the regional offices of EDB.
Overall, there is scope for the SCO development bank to play a constructive role in the widening ensemble of regional development institutions of the Global South. This, however, will depend among many factors on the ability for the Bank to identify key opportunity/complementarity areas in terms of priority sectors as well as the ability of NDB and other development institutions to build common co-financing platforms that are predicated on harmonized/standardized approaches to project financing. The SCO development bank will also need to explore the opportunities inherent in the growing economic cooperation of BRICS and SCO with ASEAN, particularly given the absence of a core regional development bank in ASEAN proper. In this area, there may be a need for the SCO development bank to work with EDB on strengthening the emerging EDB-SCO-ASEAN as well as the BRICS-SCO-EAEU-ASEAN cooperation frameworks, with the free trade agreements of ASEAN with SCO members serving as one of the reference points in forming the Bank’s future project portfolio.
Yaroslav Lissovolik, Founder, BRICS+ Analytics
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