NDB fo­cuses on green growth

New in­sti­tu­tion, with ini­tial cap­i­tal of $100b, to is­sue bonds in lo­cal cur­ren­cies

China Daily (USA) - - BUSINESS - By XIN­HUA in Goa, In­dia

China was a strong driv­ing force be­hind the set­ting up of the New De­vel­op­ment Bank, or NDB, which was es­tab­lished by the BRICS na­tions last year, its Pres­i­dent K. V. Ka­math said.

Ka­math, speak­ing on the side­lines of the 8th BRICS Sum­mit­inGoa over the week­end, also said that the bank would con­tinue to ex­plore op­por­tu­ni­ties to is­sue bonds in lo­cal cur­ren­cies of its mem­ber coun­tries.

The NDB, jointly founded by theBRICS­coun­tries ofChina, Rus­sia, Brazil, In­dia and South Africa, was opened in July 2015 in Shang­hai with an ini­tial au­tho­rized cap­i­tal of $100 bil­lion.

In its first year, the foun­da­tion of the bank has been laid and poli­cies set, and its first loans have been ap­proved, Ka­math added.

The bank’s board has ap­proved five in­vest­ment projects, one in each mem­ber coun­try, for a to­tal cap­i­tal out­lay of more than $900 mil­lion.

Ac­cord­ing to the bank, all the projects are co­her­ent with the bank’s core fo­cus on en­vi­ron­men­tally friendly en­ergy gen­er­a­tion and in­fra­struc­ture de­vel­op­ment. They will sup­port the cre­ation of 1,250 megawatts of re­new­able en­ergy ca­pac­ity and will re­sult in es­ti­mated re­duc­tion of green­house gas emis­sions of nearly 4 mil­lion­metric tons per year.

The bank’s pres­i­dent said K. V. Ka­math, clean en­ergy and trans­porta­tion would con­tinue to be the fo­cus of the bank.

Ka­math said there was a gen­eral aware­ness now that harm to the en­vi­ron­ment needed to be avoided by fol­low­ing cer­tain paths to growth, so al­most all the mem­ber coun­tries were now talk­ing about green in­vest­ment in terms of en­ergy.

Trans­porta­tion had also be­come area of keen in­ter­est as mem­ber coun­tries grew, he said.

“Whether it is ur­ban trans­porta­tion... rail and rapid tran­sit links... or high­ways... th­ese seem to be the key ar­eas where there is in­ter­est for gov­ern­ments to put in­vest­ment in.”

The NDB pres­i­dent also high­lighted the bank’s en­deav­ors to gar­ner funds in lo­cal cur­ren­cies. In July 2016, the bank is­sued its de­but bond in China. The five-year green bonds, de­nom­i­nated in yuan, are worth 3 bil­lion yuan ($450 mil­lion).

Ka­math said the bond is­suance had been very well-re­ceived and “well-de­ployed” in de­vel­op­ing coun­tries and that lend­ing in their lo­cal cur­ren­cies was bet­ter than lend­ing in hard cur­ren­cies like the dol­lar.

“Though the in­ter­est rates may look very at­trac­tive inUS dol­lars, when you take the ex­change de­pre­ci­a­tion that hap­pens plus the in­ter­est rate... it is more than the cost of bor­row­ing in the lo­cal cur­rency,” he said.

The bank was now seek­ing to is­sue ru­pee-de­nom­i­nated bonds in the offshore In­dian ru­pee mar­ket, and was ex­pect­ing to raise $250 mil­lion to $500 mil­lion byMarch 2017, Ka­math said, adding that work in rais­ing lo­cal cur­rency bonds in South Africa and Rus­sia had si­mul­ta­ne­ously started.

“Clearly we see that the road for­ward as be­ing a blend of lo­cal cur­ren­cies (fund­ing) and­maybe some lim­ited hard cur­ren­cies... so that we bring down the cost of fund­ing for our mem­ber coun­tries,” he said.

The re­cent fall in crude oil and com­mod­ity prices has taken a heavy toll on the economies of Rus­sia, Brazil and South Africa and China’s growth has been slow­ing down. The BRICS economies have not been per­form­ing very well re­cently, giv­ing rise to some gloomy as­ser­tions that the shine is fad­ing for the “BRICS of gold,” he said.

Dis­miss­ing that kind of pes­simism, Ka­math said all mem­ber coun­tries were go­ing to show pos­i­tive eco­nomic de­vel­op­ment in the next 5-10 years.

He said a lot of ini­tia­tives were be­ing taken in China to make sure that its eco­nomic growth was sus­tain­able, he added. Mean­while, higher growth could be ex­pected in In­dia given fa­vor­able fac­tors such as the re­cent pass­ing of the Goods and Ser­vices Tax bill, as well as de­creas­ing in­ter­est rates as a re­sult of fall­ing in­fla­tion.

“What­ever hap­pens... it re­mains a fact that the BRICS coun­tries ac­count for more than half of GDP global growth. That is not go­ing to change. We are go­ing to be the main driver of global GDP growth for at least the next 10 years,” Ka­math said.

The bank’s pres­i­dent also com­mended China, which hosts the head­quar­ters of the bank, for its ef­forts in turn­ing the NDB into a real­ity.

Ka­math said China was a strong driv­ing force be­hind the es­tab­lish­ment up of new in­sti­tu­tions, and had been ex­tremely sup­port­ive in set­ting up the NDB in terms of pro­vid­ing ini­tial space, a sup­port sys­tem and staffing, he said.

We are go­ing to be the main driver of global GDP growth for at least the next 10 years.” pres­i­dent of the New De­vel­op­ment Bank of the BRICS coun­tries, head­quar­tered in Shang­hai

BLOOMBERG

The Honda Mo­tor Co Acura NSX su­per­car on dis­play at an in­ter­na­tional auto show in Bei­jing.

XIN­HUA

K. V. Ka­math, pres­i­dent of the New De­vel­op­ment Bank.

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