Report of the President On the status of the New Development Bank
The XI BRICS Summit, Brasilia, Federative Republic of Brazil, November 2019
I Executive Summary
Excellencies, I am honored to report to you on the progress made by the New Development Bank since it began operations four years ago. A strong foundation for the Bank has been built. It is now reaching a steady state of operations.
II Key Achievements
Thus far, the NDB has approved 46 projects for USD 12.8 billion in our member countries. By the end of this year, we expect the approvals to reach about USD 15 billion. In 2020, we are targeting approvals of USD 8-10 billion. Our non-sovereign operations cover all countries except China. We expect to make our first two equity investments, in Brazil and India, this year.
We are measuring the impact of our work through our contributions to the achievement of the Sustainable Development Goals that our members have committed to.
We are also supporting projects that address some of the core developmental needs in our member countries, as articulated in their development agendas. For eg: In Brazil, we are supporting improved physical connectivity of remote areas to logistical hubs while simultaneously laying the infrastructure for enhanced digital connectivity. In Russia, in addition to financing infrastructure that will conserve and improve accessibility to historic and cultural centers, we are moving into new areas such as bringing digital technologies to the judicial system, expanding higher education and supporting railway sector. In India, we are investing in improving connectivity of rural areas to markets and opportunities, as well as in better management of water resources. In China, we are contributing to the rehabilitation and restoration of environmental assets that were adversely impacted during the phases of rapid growth and lending for innovative green technologies. In South Africa, we are assisting energy and water projects, two areas that are at the heart of the country’s economic and social challenges.
B Key differentiators of the Bank’s operations
Three key aspects differentiate the Bank from most of its peers.
First, we have delivered on our commitment to lend in local currency. Nearly 40 per cent of our South Africa portfolio is in Rand. There is also increasing demand for lending in RMB to Chinese projects. We are now focusing on expanding this to our other members.
Second, we have delivered on our promise to do things at speed, while not compromising quality. The average time taken for project preparation is below the 6-month target that we had set for ourselves.
Third, we have demonstrated that using country systems for environmental and social aspects of projects as well as procurement is feasible and a positive contribution to successful project implementation.
NDB has thus far received USD5.6 billion in capital, including advance payments of the fifth instalment by China and Russia. We expect to receive the balance USD900 million of the fifth instalment from our other three members by January 2020.
D Regional Centers
The Bank’s Africa Regional Center in Johannesburg has proved that on-the-ground presence makes a big difference to our work. Our Brazil office is already staffed and ready to open and we await completion of necessary formalities. Preparations for our office in Moscow are at an advanced stage and we will open this office early next year. We will follow that up with our Delhi office in the first half of 2020.
E Credit Rating
The Bank has received international AA+ credit ratings rom Fitch and Standard and Poor’s and an international AAA rating from the Japan Credit Rating Agency. These ratings are the highest that any multilateral development bank, whose members are all developing countries, has achieved. It clearly demonstrates the wisdom of our founders. While our funding costs are marginally higher than those of AAA rated peers, we continue to have highly competitive lending rates, because of our unwavering focus on keeping operational costs low.
The Bank is appropriately staffed and we now have fewer challenges in recruitment from across our member countries. We have 162 staff on board at present. We expect to have about 170 staff by this year-end, and about 200 staff next year.
G Fund raising
On the funding side, we continue our RMB-bond program and have initiated a Euro Commercial Paper program. We plan to raise funds in Rand and Ruble early next year to be followed by issuances in Rupee and Real. We are broadening the scope of our hard-currency lending to include the Euro, in line with increasing interest from our members. We will always endeavor to deliver the best possible financing solutions to our members and clients.
III Looking Forward
Excellencies, as this is very likely my last update to you as President of the Bank, given the forthcoming transition in July 2020, I would like to take this opportunity to share my thoughts on what I see as a possible future for the Bank.
The NDB is now a full-fledged operating Bank in terms of people, processes, products, and platforms. We now stand proudly shoulder-to-shoulder with our peer multilateral development banks. You would be pleased to know that in terms of annual lending volume, the Bank has achieved in four years, what many of its peers took several decades to achieve.
Going forward, the Bank is capable of sustaining between USD8-10 billion of annual lending. With the initial USD10 billion of capital that has been provided to it by the founding members, by 2027, the Bank can achieve a total asset book of about USD50 billion.
As and when the decision is taken to admit new members to the Bank, and capital from these new members is received, the Bank can grow further. Under this scenario, it can achieve a total asset book of about USD90 billion by 2027.
There are interesting financial innovations that can be adopted by the Bank to mobilize equity-like instruments from the markets. This will require, most critically, the support of our members. I believe that adoption of these innovations can help the Bank grow to a size of nearly USD120 billion with just the USD10 billion of initial capital provided by the founding members. This would place the Bank in the top tier of multilateral development banks globally and, I believe, could be a vision of the Bank for the future.
Excellencies, the NDB is testament to the ability of developing countries to stand on their own feet. It is also a demonstration of the ability of developing countries to meet the growing aspirations of their citizens, through establishing institutions that can bring finance, technology, and knowledge to bear on key development challenges. We will continue to work with our members for the benefit of their citizens and the world.
Thank you for your attention and continued support.