China driving force behind New Development Bank: bank's chief

GOA, India - China was a strong driving force behind the setting up of the New Development Bank, K. V. Kamath, the president of the bank, has told Xinhua in an exclusive interview.

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 member countries.

The New Development Bank (NDB), jointly founded by the BRICS countries of China, Russia, Brazil, India and South Africa, was officially opened in July, 2015 in Shanghai with an initial authorized capital of $100 billion.

Green projects, local currencies

In its first year, the foundation of the bank has been laid and policies set, and its first loans have been approved, said Kamath, the first president of the bank.

The Board of Directors of the bank has approved five investment projects, one in each member country for a total of over $900 million, a fact sheet provided by the bank has shown.

According to the bank, all projects are coherent with the bank's core focus on environmentally friendly energy generation and infrastructure development, supporting the creation of 1,250 MW of renewable energy capacity, and are estimated to result in the reduction of greenhouse gas emissions by nearly 4 million tons per year.

Clean energy and transportation will continue to be the focus of the bank, said the official. "It seems to be an awareness that we have to avoid the sort of challenges (to) the environment by following certain paths to growth, so almost all countries are talking about green investment in terms of energy."

Transportation becomes another area of keen interest as member countries grow.

"Whether it is urban transportation... it is rail and rapid transit links... or it is highways... these seem to be key areas where there is interest for governments to put investment in and transform."

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 the Chinese currency renminbi or yuan, are worth 3 billion yuan (around $450 million).

Terming the issuance as very "well-received" and "well-deployed," he said the bank believes that in developing countries, lending in their local currencies is better than lending in hard currency like the US dollar.

"Though the interest rates may look very attractive in US dollar, when you take the exchange depreciation that happens plus the interest rate... it is more than the cost of borrowing in local currency," he explained.

The bank is now seeking to issue rupee-denominated bond in the offshore Indian rupee market, and is expecting to raise $250 million to $500 million by March 2017, Kamath revealed, adding that work in raising local currency bonds in South Africa and Russia has simultaneously started.

"Clearly we see that the road forward would be a blend of local currency and may be some limited hard currencies... so that you bring down the cost of funding for our member countries," he said.

BRICS "positive group of growth"

With the recent fall in oil and commodity prices taking a heavy toll on the economies of Russia, Brazil and South Africa and China's growth slowing down, the BRICS economies have not been performing very well recently, giving rise to the gloomy assertion that "BRICS of gold is seeing a fading shine."

Dismissing the pessimism, Kamath said all member countries are going to come in positive group if put in the context of the next 5-10 years.

A lot of initiatives are being taken in China to make sure that its economic growth is sustainable, he said. Meanwhile, higher growth can be expected in India given favorable factors such as passing Goods and Services Tax bill and decreasing interest rates as a result of falling inflation.

As oil price is coming back and prices of commodities are bottoming out, the three other BRICS countries should also start doing well, he forecast.

"Whatever it is... it continues to be the fact that just 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 the global GDP growth chain as I say it for at least the next 10 years."

China "driving force" behind NDB

The official also commended China, which hosts the headquarters of the bank, for its efforts in turning the NDB into a reality.

China is a strong driving force behind setting up of new institutions, and has been extremely supportive in setting up the NDB in terms of providing initial space, a support system, staffing and so on, he said. "I could not expect anything more than we have gotten from China in terms of support in setting up the NDB."

Kamath said the bank has a multi-cultural staff from all BRICS member countries, and they have gathered in Shanghai to work together for a common goal.

"All it demonstrates is that working together in a multi-cultural environment to a common interest and a common goal is possible. And I would say that our member countries and the people in member countries have shown that it can be made a success."