![]() |
|
![]() |
|
Abbreviation | NDB, or NDB BRICS |
---|---|
Formation | July 2014 (Treaty signed) July 2015 (Treaty in force) |
Type | International Financial Institution |
Legal status | Treaty |
Headquarters | Shanghai, China |
Membership
|
![]() ![]() ![]() ![]() ![]() |
President
|
K.V. Kamath |
Website | www |
The New Development Bank (NDB), formerly referred to as the BRICS Development Bank, is a multilateral development bank established by the BRICS states (Brazil, Russia, India, China and South Africa) to "mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries."[1] According to the Agreement on the NDB, "the Bank shall support public or private projects through loans, guarantees, equity participation and other financial instruments." Moreover, the NDB "shall cooperate with international organizations and other financial entities, and provide technical assistance for projects to be supported by the Bank."[1]
The initial authorized capital of the bank is $100 bln divided into 1 mln shares having a par value of $100,000 each. The initial subscribed capital of the NDB is $50 bln divided into paid-in shares ($10 bln) and callable shares ($40 bln). The initial subscribed capital of the bank was equally distributed among the founding members. The Agreement on the NDB specifies that the voting power of each member will be equal to the number of its subscribed shares in the capital stock of the bank.[1]
The bank is headquartered in Shanghai, China.[2] The first regional office of the NDB will be opened in Johannesburg, South Africa.[3]
Contents
- 1 History
- 2 Structure and Objectives
- 3 Membership
- 4 Shareholding Structure
- 5 The Logo
- 6 Projects
- 7 First issue of the NDB bonds
- 8 The NDB and the AIIB
- 9 Other Multilateral Development Institutions and the NDB
- 10 Remarks by the President of the New Development Bank
- 11 Reception
- 12 See also
- 13 References
- 14 External links
History
The idea for setting up the bank was proposed by India at the 4th BRICS summit in 2012 held in Delhi. The creation of a new development bank was the main theme of the meeting.[4] BRICS leaders agreed to set up a Development bank at the 5th BRICS summit held in Durban, South Africa on 27 March 2013.[5]
On 15 July 2014, the first day of the 6th BRICS summit held in Fortaleza, Brazil, the BRICS states signed the Agreement on the New Development Bank, which makes provisions for the legal basis of the bank.[1] In a separate agreement, a reserve currency pool worth $100 bln was setup by BRICS nations.[6] Documents on cooperation between BRICS export credit agencies and an agreement of cooperation on innovation were also signed.[7]
On 11 May 2015, K. V. Kamath was appointed as the President of the bank.[8]
The 7th BRICS summit in July 2015 marked the entry into force of the Agreement on the New Development Bank.
"The NDB is broadly on track to achieve the objectives set after the start of its operation in July 2015," said the Bank in a press release circulated in late February, 2016. According to it, most of the NDB policies and procedures for all functional areas were approved at the Board of Directors meeting in January 2016.[9]
In March 2016, the New Development Bank announced that it is planning to recruit 100 staff from BRICS countries by the end of 2016.[10]
Structure and Objectives
Corporate Governance
According to the Articles of Agreement, the main organs of the bank are:
- Board of Governors
- Board of Directors
- President and Vice-Presidents
At the moment, the members of NDB Board of Governors are as follows:
- Nelson Henrique Barbosa Filho, Brazil's Minister of Finance
- Anton Siluanov, Russia's Minister of Finance; Chairman of the Board of Governors
- Arun Jaitley, Minister of Finance, Corporate Affairs and Information & Broadcasting; Vice-Chairman of the Board of Governors
- Lou Jiwei, China's Minister of Finance
- Pravin Jamnadas Gordhan, South Africa's Minister of Finance
The NDB President will be elected on a rotational basis from one of the founding members, and there will be at least one Vice President from each of the other four founding members.[11]
K. V. Kamath, from India, is the first elected president of the NDB.
The first chair of the Board of Governors will be from Russia and the first chair of the Board of Directors will be from Brazil.[12]
Development capital
The bank's primary focus of lending will be infrastructure and sustained development projects [13][14] with authorized lending of up to $34 bln annually.[14] The bank will have starting capital of $50 bln, with capital increased to $100 bln over time.[15] Brazil, Russia, India, China and South Africa will initially contribute $10 bln each to bring the total to $50 bln.[15][16] Each member cannot increase its share of capital without all other four members agreeing. This was a primary requirement of India.[17][18] The bank will allow new members to join but the BRICS capital share cannot fall below 55%.[15]
Objectives
As stated in its official documents, the NDB was established to mobilize resources for infrastructure and sustainable development projects in BRICS and other emerging market economies and developing countries. By doing this, the bank aims to contribute to development plans established nationally through projects that are socially, environmentally and economically sustainable. Taking this into account, main objectives of the NDB can be summarized as follows:
- Promote infrastructure and sustainable development projects with a significant development impact in member countries.
- Establish an extensive network of global partnerships with other multilateral development institutions and national development banks.
- Build a balanced project portfolio giving a proper respect to their geographic location, financing requirements and other factors.
Membership
The Agreement on the New Development Bank entered into force in July 2015, with the ratification of all five states that have signed it.
Founding Members
Country/Region | Date of Accession |
---|---|
![]() |
2015 |
![]() |
2015 |
![]() |
2015 |
![]() |
2015 |
![]() |
2015 |
According to the Agreement on the New Development Bank, its membership is open to all "members of the United Nations." Moreover, the document specifies that the membership "shall be open to borrowing and non-borrowing members."
In February 2016, K. V. Kamath said in an interview that "As we go along, we will clearly look at membership on a wider framework."[19]
"We… agree that the bank can be expanded and enlarged, but the initial priority will be on the member states," explained Anton Siluanov, Finance Minister of the Russian Federation and the chairman of the Board of Governors of the NDB.[20]
According to Articles of Agreement of the New Development Bank, the initial authorized capital of the bank is divided into 1 mln shares, having a par value of $100,000. The value of one share is also the minimum amount to be subscribed for participation by a single country. Attachment 1 to this document states that each founding member of the bank will initially subscribe 100,000 shares, in a total of $10 bln, of which 20,000 shares correspond to paid-in capital, in a total of $2 bln and 80,000 shares correspond to callable capital, in a total of $8 bln.[1]
The current distribution of shares between NDB member countries is presented in the following table.
Country | Number of Shares |
Shareholding (% of Total) |
Voting Rights (% of Total) |
Authorised Capital (bln USD) |
---|---|---|---|---|
![]() |
100,000 | 20 | 20 | 10 |
![]() |
100,000 | 20 | 20 | 10 |
![]() |
100,000 | 20 | 20 | 10 |
![]() |
100,000 | 20 | 20 | 10 |
![]() |
100,000 | 20 | 20 | 10 |
Unallocated Shares | 500,000 | - | - | 50 |
Grand Total | 1,000,000 | 100 | 100 | 100 |
The Logo
The logo of the New Development Bank borrows from the mathematical concept of a Mobius strip that symbolizes the idea of continuous transformation. Its nature is not to disrupt but drive change in the existing system from within.[21][22]
The logo consists of a triangle in motion at one end signifying balanced evolution. The other end, moving in the opposite direction, is a propeller that represents speed and dynamism. These two entities are held together by a wireframe, the skeletal basic of infrastructure. The logo is rendered in gradient of green that symbolizes sustainability. This constant motion symbolizes the values that the bank strives to live by – agility, innovation and continuous transformation.[23]
Projects
The BRICS New Development Bank is planning to give a priority to projects aimed at developing renewable energy sources. According to the NDB Vice President Leslie Maasdorp, "The mandate of the Bank as set out in our Articles of Agreement is to be an institution that focuses on accelerating the pace towards the transition to the 'green economy.'" As it was stated by the NDB Vice President, the Bank wants to cooperate with other institutions in accelerating ‘green’ financing expansion and promoting environment protection. He also pointed out that the NDB is planning to finance one project from each member state with the money raised via its first bond issue.[24]
First issue of the NDB bonds
In March 2016, the NDB announced that it will do a bond issue in China to raise funding domestically on the Chinese market. The bond issue is likely to happen in the second quarter of the year 2016, said the NDB Vice President Leslie Maasdorp. He added the bank is starting to finalize the exact size of this bond issue.[24]
According to media reports, the China’s bond market is bigger than the ones in other BRICS countries and theoretically more accommodating for the bank because it obtained a triple-A credit rating in the country, which should allow it to borrow cheaply.[25]
The NDB and the AIIB
In April, 2015, the head of the Central Bank of Russia Elvira Nabiullina said that the BRICS New Development Bank and the Asian Infrastructure Investment Bank (AIIB) will not compete, but rather complement each other.[26]
The NDB and the Asian Infrastructure Investment Bank (AIIB) are sister institutions in many respects, said the NDB Vice President Leslie Maasdorp. These two banks have complimentary mandates and a different geographic focus, with the NDB being more focused on BRICS countries. At the same time, there is a certain overlapping between mandates of the NDB and the AIIB, as both of them are aimed at developing infrastructure and have a focus on sustainable development. However, due to the fact that current financing and investment patterns are inadequate in meeting investment needs, there is "space for newcomers", he said.[27]
"I would not say that we are competitors at all," stressed Maasdorp. He further explained that the NDB has specific instructions from its founders to ensure that the bank is "working in complement" with other institutions.[27]
Other Multilateral Development Institutions and the NDB
According to media reports, other multilateral development institutions, including the World Bank Group (WBG), have expressed intent to work together with the NDB. "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," Jim Yong Kim, WBG president, said in a statement in July, 2015.[28]
Remarks by the President of the New Development Bank
Financing bankable Projects
NDB Bank President, Kundapur Vaman Kamath, stated that one of the key strategies of the bank will be financing profitable projects (bankable) with return on capital.[29][30] He said in an interview, "We need to understand what all multilateral banks have been doing, try to see what we can do now, given the challenges, and then put forth our own agenda. We need not repeat the mistakes done in the past. Unless you are able to recover money in time you cannot go on for a long time."[31][32]
South-South Cooperation
In February 2016 K. V. Kamath explained the idea behind the creation of the NDB in an interview as follows. "To put it another way, it is the rise of the South, and so we are talking about countries of the South coming together and very humbly saying that we can set up an institution on our own and thereafter we (can) take it forward."[19]
Project lending in 2016
According to K. V. Kamath, the NDB aims to lend up to $2 billion in the year 2016. "For this year, if we can approve one-and-a-half to two billion dollars I will be happy. We are six months into setting up the bank. We do not want to take steps which are too fast," he told PTI reporter in an interview in February 2016. "The projects we are looking at are all green projects. They are primarily in solar," K. V. Kamath added.[33]
AIIB Cooperation
In February 2016 the President of the NDB dismissed concerns over overlapping of interests of China-backed Asian Infrastructure Investment Bank (AIIB) and the NDB. "The developmental needs are many. More authoritative report talks of $1 trillion of investment needs every year or for the next 10 years. All the developmental banks put together they are raising one-tenth of that. So the answer is to collaborate and cooperate and there is no competition really," he explained.[33]
Reception
Prominent Scholars
In July 2014, Nobel Prize winning economist Joseph Stiglitz said the NDB marks a "fundamental change in global economic and political power." In his opinion, "The existing institutions just don’t have enough resources." "They have enough for 2, 3, 4 percent. So, this is adding to the flow of money that will go to finance infrastructure, adaptation to climate change—all the needs that are so evident in the poorest countries," he explained. "What I hear now is the developing countries, emerging markets, China and the other countries, saying, 'We're paying the tune. We're the big players now. We have the resources. We're where the reserves are. And yet, you don't want to let us play even a fair share in the role, reflecting the size of our contributions in the economy, in trade,'" Stiglitz said. "So, this new institution reflects the disparity and the democratic deficiency in the global governance and is trying to restart, to rethink that," he added.[34]
Officials
Chinese Premier Li Keqiang called the opening of the NDB an "important step forward" in cooperation among BRICS countries. "This is great progress in financial cooperation among developing countries and emerging economies, as well as a helpful supplement to the global financial system," Li Keqiang said at a meeting with K. V. Kamath in Beijing in July, 2015.[35]
China Finance Minister Lou Jiwei said that the establishment of the NDB and the Beijing-led AIIB will encourage existing multilateral institutions to do better. At a news conference at the conclusion of the G20 meeting of finance ministers and central bank governors in Shanghai he added that the New Development Bank could help drive aggregate global demand.[36]
Bankers
8 July 2015, VTB CEO Andrey Kostin said that the NDB is "important because it’s a first institution created by the BRICS countries." "Actually we are talking about the institutionalization of the BRICS process, and that’s quite important I think. It’s a permanent working instrument which will be working every day and which will be in the heart of BRICS cooperation," he added.
According to Reserve Bank of India governor Raghuram Rajan, the NDB "Is a co-operative effort between all BRICS countries." "We have already reached contingency reserve agreement (CRA). This is second. Let’s see how it develops. Lots of hopes embedded in it for greater cooperation (among the) BRICS countries,” he told reporters in February 2016. “Next year, when China take the presidency we aim to work with other members of the BRICS countries to ensure economic and political cooperation. We believe that BRICS cooperation will continue to enjoy the lustre and will enjoy even better future,” he added.[37]
Other observers
In June 2015, Jim Rogers said that he does not see any current alternative to US dollar and that “The world needs something to compete with the US-dominated institutions, some of them - the World Bank and the IMF. So, if BRICS offer any new structures that can compete with these long-standing ... institutions, it will be very good.” [38]
According to some commentators, the establishment of the NDB and the AIIB is reflecting an intention of China "to play an increasingly bigger role" through them. For example, Bala Ramasamy, professor of economics at the China Europe International Business School in Shanghai, claimed that "the new institutions are going to break the monopoly of the World Bank." Under these circumstances, "developed countries like the United States and the United Kingdom will be forced to increase their roles, and review their relationship with the developing world."[39]
See also
- BRICS Contingent Reserve Arrangement
- Asian Infrastructure Investment Bank
- One Belt, One Road initiative
References
- ^ a b c d e "Agreement on the New Development Bank – Fortaleza, July 15" (PDF). NDB Official Website. 15 July 2014.
- ^ Lewis, Jeffrey; Trevisani, Paulo. "Brics Agree to Base Development Bank in Shanghai". The Wall Street Journal. Retrieved 16 July 2014.
- ^ "Brics Bank now hiring in Johannesburg". Times LIVE. 7 March 2016. Retrieved 13 March 2016.
- ^ "BRICS Summit 2012: A long Journey to cover; Overview, Outcomes and Expectations". The World Reporter. 31 March 2012. Retrieved 31 March 2012.
- ^ Powell, Anita. "BRICS Leaders Optimistic About New Development Bank". Voice of America. Retrieved 27 March 2013.
- ^ "Brics nations to create $100bn development bank". BBC.com. 15 July 2014
- ^ "BRICS establish $100bn bank and currency reserves to cut out Western dominance". RT.com. 15 July 2014
- ^ "K V Kamath, non-executive chairman of ICICI, is now BRICS Bank head". Hindustan Times (New Delhi). 11 May 2015. Retrieved 16 May 2015.
- ^ NDB Press Release entitled "Press Conference by NDB on the Eve of Signing Headquarters Agreement with Government of China" (http://www.ndb.int)
- ^ "Recruitment drive begins at BRICS Development Bank - SA News". www.sanews.gov.za. Retrieved 2016-04-07.
- ^ "Agreement on the New Development Bank". University of Toronto. BRICS Information Centre. 15 July 2014. Retrieved 16 March 2016.
- ^ Ebeling, Paul (20 March 2016). "BRICS New Development Bank Launched In Shanghai". Live trading news. Retrieved 21 March 2016.
- ^ "What the new bank of BRICS is all about". The Washington Post. 17 July 2014. Retrieved 20 July 2014.
- ^ a b "New BRICS Bank a Building Block of Alternative World Order". The Huffington Post. 18 July 2014. Retrieved 20 July 2014.
- ^ a b c "BRICS Bank ready for launch - Russian Finance Minister". Russia & India Report. 10 July 2014. Retrieved 20 July 2014.
- ^ "BRICS countries launch $100 billion developmental bank, currency pool". Russia & India Report. 16 July 2014. Retrieved 20 July 2014.
- ^ "Indian media: Brics bank 'a step in right direction'". BBC. 16 July 2014. Retrieved 20 July 2014.
- ^ "Victory for Modi, India as BRICS summit clears setting up of a new development bank". India Today. 16 July 2014. Retrieved 20 July 2014.
- ^ a b "New Development Bank an assertion of BRICS’ political sovereignty: Kamath". The Hindu. 2016-02-27. ISSN 0971-751X. Retrieved 2016-03-16.
- ^ "BRICS bank targets green energy - Global Times". www.globaltimes.cn. Retrieved 2016-03-18.
- ^ "DY Works bags integrated branding rights for BRICS bank". timesofindia-economictimes. Retrieved 2016-04-04.
- ^ "New Development Bank | DYWORKS". dyworks.in. Retrieved 2016-04-04.
- ^ "Our Identity | New Development Bank". www.ndb.int. Retrieved 2016-04-04.
- ^ a b "BRICS Bank to prioritize renewable energy projects — official". TASS. Retrieved 2016-03-24.
- ^ Areddy, James T. "Brics Development Bank Pins Hope on China Bond Sale". Wall Street Journal. ISSN 0099-9660. Retrieved 2016-03-24.
- ^ "BRICS Development Bank won’t rival China-led AIIB, but complement – CBR head". RT International. Retrieved 2016-03-30.
- ^ a b "5 Minutes with Leslie Maasdorp of the New Development Bank – Insight". Insight. Retrieved 2016-03-29.
- ^ "China Headlines NDB president says to work with AIIB, hails bloc's significance - Xinhua". news.xinhuanet.com. Retrieved 2016-03-30.
- ^ "BRICS set to create new financial architecture". Russia & India Report. 22 June 2015. Retrieved 27 March 2016.
- ^ "World Bank & IMF ‘corroded’ - Jim Rogers to RT". RT News. 18 June 2015. Retrieved 27 March 2016.
- ^ "BRICS set to create new financial architecture". Russia & India Report. 22 June 2015. Retrieved 27 March 2016.
- ^ "World Bank & IMF ‘corroded’ - Jim Rogers to RT". RT News. 18 June 2015. Retrieved 27 March 2016.
- ^ a b "First Brics bank loan to India likely for solar project: Kamath - Times of India". The Times of India. Retrieved 2016-03-18.
- ^ "Nobel Economist Joseph Stiglitz Hails New BRICS Bank Challenging U.S.-Dominated World Bank & IMF". Democracy Now!. Retrieved 2016-03-16.
- ^ "NDB president says to work with AIIB - China.org.cn". www.china.org.cn. Retrieved 2016-03-30.
- ^ "China finmin says establishment of NDB may help drive global demand". Reuters. 2016-02-27. Retrieved 2016-03-18.
- ^ "BRICS bank a ‘worthwhile venture’, off to good start: RBI guv Rajan". Hindustan Times. Retrieved 2016-03-18.
- ^ "World Bank & IMF ‘corroded’ – Jim Rogers to RT". Retrieved 11 September 2015.
- ^ "BRICS Bank Launches, Boosting China’s Influence". VOA. Retrieved 2016-03-18.
External links
- The official website of the New Development Bank
- Newsroom section on the official website of the New Development Bank
- BRICS announce $200B challenge to world financial order - Al Jazeera America
- What the BRICS are Building. The Harvard Crimson. 1 September 2014. Retrieved 3 September 2014.
- BRICS launch new bank and monetary fund - Deutsche Welle Akademie
|
|