Opening address by President K. V. Kamath at the Third Annual Meeting of The New development bank, Shanghai, China
Your Excellency – Mr. Liu Kun- Minister of Finance, People’s Republic of China
Your Excellency – Mr. Nene Nhlanhla – Minister of Finance, Republic of South Africa
Distinguished Members of the Boards of Governors and Directors,
Ladies and Gentlemen,
It is a privilege to welcome you all to our Third Annual Meeting in Shanghai.
I would like to extend our most sincere gratitude and appreciation to the Ministry of Finance, China and the Shanghai Municipal Government for their enormous support and excellent arrangements for this Annual Meeting.
We came here in 2015. And since then, the Shanghai Municipal Government has considered NDB one of its own. My colleagues and I have been received with great warmth and have transitioned to the city seamlessly. All of us at NDB are now Shanghainese and we are proud to call Shanghai our home.
I would also like to thank our governors, alternate governors, directors, alternate directors, and other representatives of government, markets and financial institutions who have supported us throughout last year and have contributed immensely to the progress of the NDB.
In my remarks today, I will touch upon three broad areas
- Our achievements during the last year.
- The opportunities and challenges that I foresee in our operating environment.
- And lastly, how I see the Bank shaping up in the coming year.
The past year
Last year, we continued to build strong momentum in our operations and have continued to strengthen our institutional foundations in all functional areas.
Six projects aggregating over USD 1.8 billion were approved by the Board in 2017. The total amount approved since inception was $ 3.4 billion as at the end of 2017. In addition, certain projects of about USD 900 million were appraised but were not put up for Board consideration, as we await necessary government approvals. All of these projects focused on improving sustainability and addressed some of the critical developmental needs of our member countries.
These projects go beyond the core renewable energy sectors that we earlier focused on into areas such as ecosystem restoration, water supply, irrigation system restructuring, and energy conservation, reflecting our ability to appraise increasingly complex projects as we continue to move up the learning curve.
The Africa Regional Center opened for business last year. The ARC will be lean and initially tasked with project identification and project preparation for the Bank. It will serve as the Bank’s interface for Governments, Private Sector entities, Financial Institutions and project preparation agencies as we scale up our operations in South Africa. The ARC will serve as a focal point for the Bank in Africa and gradually help expand the Bank’s footprint in the continent.
In September last year, we formalized the Project Preparation Fund (PPF). The PPF is a contributory multi-country-fund that will enable infrastructure and sustainable development projects to be better prepared, so that they can attract financing more easily. The PPF will enhance the project preparation capacity of member countries, facilitate feasibility studies where necessary, and support improved project implementation. The emphasis will be on leveraging local expertise.
Our members continue to demonstrate strong support for NDB by timely, and in some cases, advance payment of equity capital. As of today, we have received USD 4.1 billion in capital contributions, with Russia and China already having paid in their 2019 commitments.
In September last year, we had the ground breaking ceremony of our Permanent Headquarters. The construction of the building is now in full swing. We expect to move in by 2021. In line with the Bank’s sustainability mandate, the building has been designed to be environmentally friendly, ensure a healthy working space for its occupants, and involve low maintenance costs. Our new headquarters will contribute to Shanghai’s emphasis on green buildings, while also contributing architecturally to the skyline of Shanghai.
The current development context
We stand today at the dawn of a new industrial revolution where technology-led disruption is transforming the way we perceive products, services, and our physical space.
At the same time, the benefits of an infrastructure-investment-led growth model on job creation and poverty alleviation are well documented. But the scope of this infrastructure investment is changing fast, with technology disrupting infrastructure design.
Take for example bike-sharing. Bike-sharing provides convenience to its customers by offering “the perfect last -kilometer solution”. Such solutions combined with ride-hailing technologies reduce overall trips, as fewer people individually drive to work. Reduced overall trips means less road and parking space is required. Additional urban space opens up, including, possibly for green belts.
Another example of a disruptive technology is that of autonomous vehicles. Autonomous vehicles can be on the road longer, travel further, and, potentially, more safely. In a few years’ time, as more cars become autonomous, public transport networks may need to be realigned to this new pattern of transportation. This will fundamentally change the way roads, bridges, and parking systems are designed and built.
Smart-grids, green buildings, large-scale off-grid systems, hyper-loops, and underground roadways have the potential to advance rapidly in conjunction with the ongoing innovations in network connectivity and bandwidth. These developments will have a material impact on how we perceive and think about infrastructure. The infrastructure that we need to build today, for use over the next several decades, is fundamentally different from what we built in the past.
It is also becoming increasingly apparent that the impact of technology from artificial intelligence (AI) to block-chain to fifth generation (5G) networks will completely revolutionize approaches to economic development and service delivery. Early signs of this emerging trend are visible in Shanghai, where technology is transforming the city into a smarter, greener, and even more sustainable city. “Conventional wisdom” clearly needs to be re-defined.
The coming year
We, at NDB, are conscious of these ongoing transformations and we will align our activities and processes taking these shifts into account. We will act swiftly, be agile, and leverage technology in everything we do. NDB is determined to go beyond a short-term, purely economics-based focus for infrastructure development to a longer-term, broader assessment of its economic, environmental, social, and climate change impact. NDB’s first batch of projects were all in the renewable energy sector. This was more than a symbolic gesture; it conveyed the message of the founders that we are committed to a better and more sustainable future for our member countries. We are now focusing not only on renewables, but also on projects which aim at undoing the damage done to the environment during earlier growth phases of some of our members. Sustainable infrastructure will make up about two-thirds of NDB’s total projects.
In 2018, so far we have approved projects aggregating over USD 1.7 billion out of our target of USD 4 to 4.5 billion for the year. We are striving to have a balanced portfolio across our member countries. By the end of this year, our project approval book should be about USD 7.5 – 8.0 billion.
Besides the traditional set of lending products, we will also begin offering non-fund based financial products like guarantees and credit enhancements.
We will increase the scale and scope of our Africa Regional Center and operationalize the Americas Regional Office in Brazil and the Project Preparation Fund.
On the funding side, we will continue to explore opportunities in the local capital markets of our members as well as global capital markets. We will strive to maintain a balance between pursuing a conservative approach to institutional growth so as to obtain and maintain the highest possible credit rating and addressing our borrowers’ needs, both in local and foreign currency.
Since the beginning, getting the right staff in place has been a priority for us. Our recruitment strategy is based on the principles of meritocracy and gender-neutrality and takes into consideration the landscape we operate in. Our current staff strength is about 115 professionals, which is estimated to increase to 210 by this year end. We believe that blending the energy and vigor of youth with the wisdom of seasoned professionals is the correct approach in keeping the organization agile and nimble in the dynamic global development landscape.
The biggest economic opportunity today is that we can invest in a new generation of smart, sustainable technologies to meet our infrastructure requirements. We will leverage these transformations and promote knowledge flows to support appropriate and effective solutions in our member countries. By doing so, we will contribute to sustainable development and poverty alleviation. As we do so, we at NDB will continue to listen, to learn, and to innovate.