Opening Remarks by President K. V. Kamath at the Second Annual Meeting of the New Development Bank, New Delhi, India
Your Excellencies, the Minister of Finance of India Mr. Arun Jaitley, the Minister of Finance of the People’s Republic of China Mr. Xiao Jie, Distinguished Board Members, Fellow Presidents of MDBs, Ladies and Gentlemen,
On behalf of the New Development Bank, it is a privilege to welcome all of you to our Second Annual Meeting in New Delhi. Thank you all for being here with us.
I would like to touch upon three areas on which I will share my thoughts with you. First, a brief recap of the past year. Second, my views on the current context in which we are operating. And third, how I see the Bank evolving in the future, taking into account progress thus far and the current context.
The Past Year
We began operating in July 2015. Since then, the NDB has come a long way. We have focused on building the foundations of NDB and have progressively put in place the necessary policy and administrative structures to support our founders’ vision and our commitment to green and environmentally friendly projects.
Seven projects with loans aggregating over USD 1.5 billion have been approved in the last year. Six of these are for renewable energy projects while the other finances improvement of transport connectivity. We signed our first loan agreement for a project in China which will be funded in RMB, beginning the process of providing local currency lending which we believe is important for all our member countries. We have signed our second loan for a project in India earlier this week.
We have received our first two rounds of capital on time and in some instances ahead of schedule, signifying the great support of shareholders. Out of an approval to raise RMB 10 billion we raised RMB 3 billion (equivalent to USD 445 million approximately) in our maiden bond issue in the Chinese interbank green bond market, making NDB the first multilateral financial institution to tap this market. We are grateful for the support of the government of China and the Ministry of Finance in particular.
We have begun our recruitment process based on the principles of meritocracy and gender equality. Regular staff at all levels have started joining and NDB is currently 75 strong, including all categories of staff.
The Current Context
Today, we operate in a context that is changing extremely rapidly. Technology is disrupting our landscape constantly, with rapid obsolescence and dynamic cost structures. Take the case of solar power. Each time the world’s solar power panel production doubles, the cost of panels falls by 26%. Since 2008, the cost of solar panels has fallen by 80%, which in turn has led to an exponential fall in renewable energy prices. The cost of generating electricity through renewable energy is now on par with generating energy from fossil fuels. The energy landscape is changing fast and adoption of renewable energy technologies even faster. For example, India has tripled its solar capacity in less than three years. China is the world’s leading renewable energy producer with more than double the renewable energy capacity of the second largest producer, the United States. It has nearly 400 GW of renewable energy capacity, including hydro. Its solar panel production has increased 100- fold in the decade to 2014, and renewables now supply nearly a quarter of its electricity.
Technology is also changing the speed of innovation, speed of adoption, speed of disruption and changing the business environment we operate in. For example, to reach 100 million users across the globe, it took 75 years for the telephone, 7 years for the internet, and 4 years for Facebook.
In the coming years, artificial intelligence and machine learning will soon be embedded in our everyday life. Autonomous cars, hyperloop transportation systems, and 3D printing will all impact us. The Fourth Industrial Revolution caused by the combination of digital and physical systems is already upon us. Unlike the previous three industrial revolutions, the fourth is unfolding at an exponential rather than a linear pace. Developing countries are already seeing the beginnings of this revolution, and they will both influence and be impacted by its disruption.
So we need to ask ourselves, how do we align to these disruptions? How do we redesign traditional business models and operations for this new world, so that we remain relevant? And while doing this, how do we build a green architecture?
The infrastructure requirements of our members, over the next decade, are well documented – with trillions of dollars of investment needed. This infrastructure needs to be green, sustainable, and climate resilient with reduced vulnerability to economic and environmental shocks. The infrastructure that we build today needs to enhance the economic, social, and environmental well-being of our citizens. The requirements are huge and, to meet these, we need all institutions – public and private, multilateral and bilateral, global and national to work together.
What does all this mean for the Bank?
The world that NDB will operate in, going forward, is clearly set for dramatic change. As the President of the Bank, I ask myself, how do we meet our mandate of funding infrastructure and sustainable development in this new world?
We would like to be an integral part of the solution to some of the key infrastructure development challenges facing our member countries. The fact that infrastructure has a tremendous impact on economic growth and the economic well-being of the poor has been well established. With better infrastructure availability and connectivity, the poor have improved access to economic opportunities, education and health facilities.
To find evidence of how much of a positive role infrastructure plays in poverty reduction, we need look no further than the Bank’s host country, China. Over the last past 25 years globally, an average of 137,000 people were lifted from extreme poverty each day, with China leading this remarkable transformation. The key element that underpins the China story is the development of massive infrastructure. We will work with our member countries to support technology driven solutions that help develop infrastructure that contribute to sustainable development.
In the coming year, we will further consolidate and strengthen our foundation. Our activities will be firmly guided by our founders’ vision and our commitment to finance green and environmentally friendly projects. During 2017, NDB plans to present to the Board about 15 projects for a total of about USD 2.5 to 3 billion across all our member countries. We will expand our suite of products from sovereign and sovereign guaranteed loans to include non-sovereign and private sector lending.
We will innovate in terms of funding and lending. We will continue to explore fund raising opportunities in the local capital markets of our members as well as global capital markets. We will ensure that we maintain a conservative leverage ratio so as to obtain the highest possible credit rating and the best possible financing terms for our members.
We will be a lean multilateral financial institution that leverages capabilities from various institutions while having relevant core expertise in-house. We will continue our recruitment process aimed at hiring bright, talented individuals, with an emphasis on youth. We will also continue to build capacity and skills in the institution, and keep them current, through investments in training and on-the-job learning.
I am well aware that the new opportunities that come up in the new context that we face, will call for new thinking, new institutional structures, new products, new services, and new partner ecosystems. We will therefore partner with multilateral development banks, national institutions, and the private sector to leverage their knowledge flows and explore co-financing opportunities. We will listen, we will partner, and we will learn.
Speed, agility, and innovative thinking will be needed to succeed and meet aspirations, in a world where rapid change is a given. These will be our mantras. Leveraging human capital and leveraging technology in everything we do will be critical.