Shape of new bank slowly be­gins to emerge

China Daily (Canada) - - FRONT PAGE -

sunye@chi­nadaily.com.cn

The New Devel­op­ment Bank’s re­cent ap­point­ment of In­dian banker KV Kamath as its first pres­i­dent will pro­vide the fa­cil­ity with for­ward mo­men­tum. Set up by the BRICS coun­tries Brazil, Rus­sia, In­dia, China and South Africa, the bank plans to start work­ing as early as the end of this year; this will see the in­sti­tu­tion sort out cru­cial de­tails in the next sev­eral months.

The bank will be op­er­a­tional by early next year at the lat­est, Shi Yaobin, vice-min­is­ter of China’s Min­istry of Fi­nance, an­nounced ear­lier on the min­istry web­site. He also said membership would ex­tend to in­clude any United Na­tions mem­bers as long as the board of gov­er­nors agrees to their in­clu­sion.

The estab­lish­ment of the NDB was an­nounced last July at the sixth BRICS sum­mit in For­taleza, Brazil. Its cre­ation is in­tended “to mo­bi­lize re­sources for in­fra­struc­ture and sus­tain­able devel­op­ment projects in BRICS and other emerg­ing economies and de­vel­op­ing coun­tries”, ac­cord­ing to the terms of the agree­ment the mem­ber coun­tries signed.

NDB is also seen as a force to re­shape the West­ern-dom­i­nated in­ter­na­tional fi­nan­cial sys­tem.

Kamath, 67, a vet­eran pri­vate sec­tor banker, is cur­rently non-ex­ec­u­tive chair­man of ICICI, In­dia’s largest pri­vate sec­tor lender. He was CEO of the bank from 1996 to 2009, over­see­ing its rapid ex­pan­sion and mod­ern­iza­tion.

En­roll­ment cri­te­ria aside, it is NDB’s fu­ture role com­pared with that of the Asian In­fra­struc­ture In­vest­ment Bank, which is also set to open by the end of this year, that catches the most at­ten­tion.

Shi said the two banks are com­ple­men­tary and will work to­gether.

“Both NDB and AIIB are im­por­tant steps in fi­nanc­ing in­fra­struc­ture, sus­tain­able devel­op­ment and pro­pel­ling in­ter­na­tional eco­nomic gov­er­nance,” he said.

“NDB, AIIB as well as other multi­na­tional devel­op­ment banks should all work to­gether, com­ple­ment each other and boost the col­lec­tive fi­nan­cial power.”

Ni Jian­jun, deputy direc­tor of the World Econ­omy Re­search Cen­ter, part of the China In­sti­tutes of Con­tem­po­rary In­ter­na­tional Re­la­tions, said: “China is em­ploy­ing a multi-lay­ered, multi-path strat­egy in fi­nanc­ing in­ter­na­tional devel­op­ment.”

Ni said NDB has its fo­cus on the five BRICS coun­tries, while other in­sti­tu­tions are fo­cus­ing on oth­ers.

“To­gether they can pair up to solve prob­lems at dif­fer­ent lev­els, and by let­ting dif­fer­ent in­sti­tu­tions an­swer dif­fer­ent needs, such com­po­si­tion of forces could dis­play max­i­mum ef­fi­ciency and ef­fect.”

In cer­tain re­spects, the NDB and the AIIB will over­lap, said Sun Lijian, deputy direc­tor of the School of Eco­nomics at Fu­dan Uni­ver­sity. “But they also have clear-cut em­pha­sis: NDB will pro­pel BRICS and their ad­ja­cent coun­tries, while AIIB will mainly serve the Belt and Road re­gion,” he said, re­fer­ring to the One Belt, One Road ini­tia­tive.

The BRICS bank will start sketch­ing out de­tailed op­er­a­tional poli­cies once its man­age­ment is es­tab­lished af­ter its first gov­er­nors’ coun­cil meet­ing, sched­uled for Rus­sia next month.

Zhu Xian, vice-pres­i­dent and chief ethics of­fi­cer of the World Bank, and for­merly with China’s Min­istry of Fi­nance and the Asian Devel­op­ment Bank, has been ap­pointed vice-pres­i­dent of NDB for China. Brazil, Rus­sia and South Africa will also each ap­point a vice-pres­i­dent soon. Their first term will be for six years.

Ac­cord­ing to the ini­tial BRICS agree­ment, the next NDB pres­i­dent af­ter Kamath will be a Brazil­ian, fol­lowed by a Rus­sian.

China is the big­gest con­trib­u­tor to NDB’s $100 bil­lion con­tin­gency re­serve ar­range­ment, at 41 per­cent. The CRA is dif­fer­ent from the pool of con­trib­uted cap­i­tal to the bank, which is equally shared among the five coun­tries, at $10 bil­lion each.

As the big­gest econ­omy among the five found­ing mem­bers, China will host the NDB head­quar­ters in Shang­hai. It is only nat­u­ral that China’s en­gage­ment should be un­der the spot­light.

“We hope BRICS will learn the lessons from other multi­na­tional banks and de­sign well its gov­er­nance struc­ture, its poli­cies to­ward en­vi­ron­ment and so­cial wel­fare projects,” said Shi, the vice-min­is­ter.

“We hope NDB will be­come a highly ef­fi­cient, trans­par­ent and pro­fes­sional plat­form that boosts emerg­ing economies’ growth.

“China will do its best to fa­cil­i­tate NDB’s op­er­a­tion here (in Shang­hai). We will work with other BRICS coun­tries, match our work to the high­est stan­dard and set the bank to work as early as pos­si­ble.”

Tak­ing past lessons and ef­forts at es­tab­lish­ing ef­fec­tive fi­nanc­ing in­sti­tu­tions into ac­count, Ni of the World Econ­omy Re­search Cen­ter sug­gests that the big­gest les­son of all is to have a lead­ing party in the mul­ti­lat­eral regime.

“For a devel­op­ment multi­na­tional bank to work, it has to have a core power,” Ni said. “A lead­ing com­pany should cham­pion, push and fol­low the projects closely. That will make op­er­a­tions smooth and fruit­ful.”

China has am­ple ex­pe­ri­ence in push­ing for­ward in­ter­na­tional co­op­er­a­tion, and this will show in the NDB, he said. “At the same time, coun­tries like Rus­sia are ea­ger to ad­vance the NDB en­ter­prise. So the bank should run quite ef­fi­ciently.”

Ni also said that the NDB, as a longterm plat­form, should take care when it comes to emer­gency res­cue projects that only aim at short-term out­comes and could be rife with con­tin­gency prob­lems.

“This is also a les­son drawn from past in­ter­na­tional fi­nanc­ing ef­forts.”

KV Kamath, newly ap­pointed head of the New Devel­op­ment Bank

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