SHANGHAI • The biggest emerging economies opened their New Development Bank yesterday, strengthening China's ability to offer developing nations the support traditionally given by the US and Japan through organisations like the World Bank.
The NDB - or Brics Bank as it is known after sponsors Brazil, Russia, India, China and South Africa - will help with the recovery and development of emerging economies, China's Finance Minister Lou Jiwei said at the lender's opening ceremony in Shanghai. It can promote cooperation among developing nations without undermining the roles of existing institutions like the World Bank, he said.
"NDB's support for infrastructure construction will effectively ease the bottleneck that has constrained emerging and developing nations for long and will offer support for their economies' upgrade and growth," the minister said. "NDB is a new member and partner to the global development system."
While the Brics nations account for about a quarter of global economic output, they and their neighbours have long depended on loans from the US-led World Bank and the Japan- steered Asian Development Bank (ADB). China has sought to build its own influence, with its role in the NDB as well as leading the creation of the US$100 billion (S$137 billion) Asian Infrastructure Investment Bank (AIIB).
The NDB will collaborate with the AIIB, including setting up a hotline with the other lender, NDB president Kundapur Vaman Kamath said yesterday. It is looking at local funding solutions, such as tapping financial and capital markets in Brics nations, he said.
"We will have an open mind in terms of the instruments we will use for funding projects," Mr Kamath said. "Should we approach the financial markets, the capital markets in five Brics countries to raise local-currency funds so that in a way we break the challenge and the cost of dealing in hard currencies where the exchange rate continues to impact you for a long, long time? Could we start by making substantially large bond issuance in the domestic market?"
Operations would begin late this year or early next year, added Mr Kamath, formerly a private banker in India. The Brics nations, which represent 40 per cent of the world's population, formally agreed to establish the bank at a meeting in Brazil in July last year.
The NDB will have initial capital of US$50 billion with plans to raise that to US$100 billion over time. China has pledged to contribute US$41 billion to NDB, giving it the largest share of voting rights at 39.5 per cent. Brazil, India and Russia will each contribute US$18 billion, while South Africa will contribute US$5 billion.
The World Bank said it hopes to work with the newcomer. "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," World Bank president Jim Yong Kim said in a statement.
The regionally focused ADB also said it would "look forward" to working with the NDB.
BLOOMBERG, AGENCE FRANCE-PRESSE