A new $100 billion bank floated by BRICS nations, including India, as an alternative to the World Bank and International Monetary Fund to boost infrastructure funding in the emerging economies and offer them tailor-made services was launched in Shanghai on Tuesday.
The opening ceremony of the New Development Bank was held in China’s financial capital, Rediff reported.
Chinese Finance Minister Lou Jiwei, Shanghai Mayor Yang Xiong and the bank’s President Kundapur Vaman Kamath attended the opening ceremony.
Kamath, 67, who will be the bank’s president for the first five years, said he was confident of delivering on people’s expectation of the new bank.
“Countries should closely cooperate,” Kamath, a former executive with India’s largest private bank ICICI Bank, said. “We will listen carefully to our members and try to offer tailor-made services for them.”
The NDB will collaborate with the AIIB, including setting up a hotline with the other lender, NDB President Kamath said. 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,” 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?”
The biggest emerging economies opened their New Development Bank, strengthening China’s ability to offer developing nations the support traditionally given by the US and Japan through organizations 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, Chinese 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 a long time 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 one-quarter of global economic output, they and their neighbors have long depended on loans from the US-led World Bank and the Japan-steered Asian Development Bank.
China has sought to build its own influence, with its role in the NDB as well as leading the creation of the $100 billion Asian Infrastructure Investment Bank.
The NDB will have an initial capital of $50 billion with plans to raise that to $100 billion over time. In the AIIB, China will hold a veto power and is the biggest shareholder.
BRICS members launched the multi-billion dollar development bank at the 7th BRICS summit held in the Russian city of Ufa on July 8 amid efforts to finance infrastructure projects, mainly in member countries.
Each BRICS member will contribute an equal share in establishing a startup capital. BRICS nations, with 42.6% of the world’s total population and roughly one third of the world’s land area, have a combined gross domestic product accounting for about one fifth of the world total.
Each nation will have an equal say in the bank’s management, regardless of GDP size, according its officials.
The World Bank welcomed the opening of the NDB.
