22nd July, 2015
The New Development Bank (NDB) has opened in Shanghai to finance infrastructure projects, mainly in BRICS countries.
BRICS countries namely, Brazil, Russia, India, China and South Africa are the world’s major emerging economies.
BRICS leaders signed an agreement to establish the bank during their 6th summit of the organisation in Brazil in July, 2014.
The BRICS first chair of the board of governors would be from Russia, the first chair of the directors from Brazil, and the first president from India.
Chinese Finance Minister Lou Jiwei, Shanghai Mayor, Yang Xiong and NDB President K.V. Kamath from India attended the opening ceremony held in Shanghai.
“The NDB will supplement the existing international financial system in a healthy way and explore innovations in governance models,” Lou said at a seminar following the ceremony.
Jim Kim, President, World Bank Group, said on Wednesday in a statement that the bank would start operations at the end of 2015 or early in 2016.
He said the New Development Bank has joined a growing number of multilateral institutions, including the Asian Infrastructure Investment Bank (AIIB), that were working to address the world’s huge infrastructure needs.
“The emerging markets and low-income countries face an annual gap of 1 trillion to 1.5 trillion dollars in infrastructure spending.
“We are committed to working closely with the New Development Bank and other multilateral institutions, offering to share our knowledge and to co-finance infrastructure projects.
“These types of partnerships will be essential to reach our common goals to end extreme poverty by 2030, boost shared prosperity, and to reduce inequalities,’’ he said.
Kim said NDB and AIIB would complement each other, as they were different in membership and have different directions.
Xu Xiujun, a researcher with the Institute of World Economy and Politics, China Academy of Social Sciences, said NDB would have an initial authorised capital of 100 billion dollars.
He said it would also have initial subscribed capital of 50 billion dollars equally shared among the five founders.
He said the equal shares among the five members would ensure equal dialogue and serve as a model for innovation to global governance.
Xu said the BRICS countries account for 42.6 per cent of world’s population, 21 per cent of the world’s economy and nearly half of its forex reserves, but were marginalised in the global financial landscape.
“For example, in the World Bank, the five have a total of only 13 per cent of voting rights, while the U.S. alone holds 15 per cent.
“A similar picture can be seen at the International Monetary Fund (IMF),’’ he said.
Xiujun said the IMF agreed in 2010 to give emerging economies greater vote in decision-making but the reform has been blocked by the U.S., in spite of the fact that no fewer than 140 countries have approved it.
“Other regional development banks are mainly dominated by developed countries”, he said.
Shen Yi, an expert on BRICS countries with the Fudan University in Shanghai, said developing countries complained that loans from institutions such as the World Bank always come with stringent strings attached.
He said the demand for new infrastructure was climbing across the world but some rich countries were increasingly hesitant to lend.
He said through improved infrastructure the NDB could make the sustainable growth of developing countries a reality, adding China could share its experience, infrastructure production capacity and funds with other BRICS member-countries.