Shanghai Mayor Yang Xiong (R), Chinese Finance Minister Lou Jiwei (M) and K.V. Kamath, president of the New Development Bank(L), celebrate together as the New Development Bank, more commonly known as the BRICS Bank, was officially launched in Shanghai today. (Photo:Shanghai Daily/Wang Rongjiang)
The New Development Bank (NDB) opened in Shanghai on Tuesday to finance infrastructure projects, mainly in BRICS countries.
BRICS countries are the world's major emerging economies: Brazil, Russia, India, China and South Africa. BRICS leaders signed an agreement to establish the bank during their sixth summit in Brazil in July, 2014. The bank will start operations at the end of this year or early in 2016.
Chinese Finance Minister Lou Jiwei, Shanghai Mayor Yang Xiong and NDB President K.V. Kamath from India attended the opening ceremony.
The NDB will supplement the existing international financial system in a healthy way and explore innovations in governance models, Lou said at a seminar following the ceremony.
Jim Yong Kim, President of the World Bank Group, said in a statement, "the New Development Bank joins a growing number of multilateral institutions - including the Asian Infrastructure Investment Bank (AIIB) - that are working to address the world's huge infrastructure needs. Emerging markets and low-income countries face an annual gap of 1 trillion to 1.5 trillion U.S. dollars in infrastructure spending."
"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."
On the relations between the NDB and the AIIB, Lou said both the NDB, initiated by the five members of BRICS, and the AIIB proposed by China, showed how emerging economies could improve global infrastructure and reform global economic governance. The two will complement each other, as they are different in membership and have different directions. The global demand for infrastructure funding is huge, he said.
The NDB will have an initial authorized capital of 100 billion U.S. dollars, and initial subscribed capital of 50 billion U.S. dollars "equally shared" among the five founders.
Equal shares among the five members will ensure equal dialogue and serve as a model for innovation to global governance, said Xu Xiujun, a researcher with the Institute of World Economy and Politics of the Chinese Academy of Social Sciences.
The five BRICS countries are home to 42.6 percent of the global population, 21 percent of the world's economy and nearly half of the world's forex reserves, but have been marginalized in the global financial landscape. For example, in the World Bank, the five have a total of only 13 percent of voting rights, while the United States alone holds 15 percent. A similar picture can be seen at the International Monetary Fund (IMF).
The IMF agreed in 2010 to give emerging economies greater vote in decision-making, but the reform has been blocked by the United States, despite the fact that more than 140 countries have approved it.
Other regional development banks are mainly dominated by developed countries. Developing countries complain that loans from organizations like the World Bank always come with strings attached.
Demand for new infrastructure is climbing across the world, but some rich countries are increasingly hesitant to lend, said Shen Yi, an expert on BRICS countries with the Fudan University in Shanghai.
Through improved infrastructure the NDB can make the sustainable growth of developing countries a reality, and China can share its experience, infrastructure production capacity and funds with other members, according to Zha Xiaogang, an analyst with the Shanghai Institute for International Studies.
The first chair of the board of governors will be from Russia, the first chair of the directors from Brazil, and the first president from India. The bank was formerly set up at a meeting in Russia on July 7 this year with Kamath chosen as president.
Kamath is credited with turning ICICI Bank into one of India's largest private lenders during his 13 years as managing director and CEO. He spent several years at the Asian Development Bank and has served as non-executive chairman of both ICICI and Indian software giant Infosys.
