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NDB focuses on green growth

By Xin Hua In Goa, India (China Daily) Updated: 2016-10-19 07:54

 NDB focuses on green growth

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

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

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 Summit in Goa 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 the BRICS countries of China, 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 million metric tons per year.

The bank's president said 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 in US 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 by March 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) and maybe 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.

 

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