Your Excellency, Vice Premier, Honorable Governors, Directors, invited guests, representatives of governments, friends in the media, ladies and gentlemen. Welcome to the first annual meeting of the New Development Bank. It is indeed a privilege to have you all here today – an important milestone in the history of the NDB.
I. NDB’s first year
The NDB was established almost exactly a year ago. In this one year, we have put in place all the major operational policies and procedures of the Bank. The Board has approved the first set of projects with a total commitment of US $811 million and another project for another $100 million is currently under consideration. All of these projects are broadly in the area of renewable energy. Through its first set of loans, the Bank has begun the process of establishing its credentials as an institution that supports green and sustainable infrastructure.
Our shareholders have demonstrated their commitment to NDB by ensuring that the necessary capital was paid in on time. Yesterday we successfully closed the first onshore bond issue in China for an amount of 3 billion RMB – about US $450 million equivalent - at very competitive rates.
We believe that in order to provide the best possible products and services to our members, partnerships with key national and global institutions are essential. The NDB has established several of these in the first year.
Getting staff in place has been a priority. We are at an advanced stage of recruiting and plan to reach a staff strength of about 100 by the end of this calendar year and about 300-350 by the end of the third year of its operations.
The Africa Regional Center in Johannesburg is part of the vision of the founders of NDB. We are working closely with the Government of South Africa and we expect that the center will open later this year.
Two weeks ago we moved to our new offices. I would like to place on record my sincere thanks to the Chinese Central Government as well as the Shanghai Municipal Government for their support and commitment to NDB. We will now operate from this new location for the next four years, by which time we expect that our permanent headquarters will be ready.
We started operations with people seconded from member governments, national and global financial institutions, consultants, and a modest number of staff that we hired directly. My sincere thanks to the governments and institutions that provided us the services of these staff. My thanks particularly to the individuals – who demonstrated enormous commitment, passion, and energy to get the NDB off the ground.
I would also like to thank our governors, Alternate Governors, Directors, Alternate Directors, and other representatives of Governments, markets, and financial institutions who have supported us throughout this first year. The strength of your commitment to the NDB and the depth of your conviction of its role in supporting development is evident.
II. Looking ahead – tectonic shifts occurring in the global economy
Looking ahead, the NDB will operate in a very different world from that in which existing multilateral financial institutions operated when they were set up.
Conventional infrastructure – energy, transportation, urbanization – would continue to be critical to our member countries and demand will be driven by the rate of economic growth, per capita income, demographics, and urbanization – what I call linear trends.
But conventional infrastructure is changing. A non-linear trend has begun where this infrastructure is becoming “green” at an exponential rate. Take energy for example. Costs of solar have reached parity with fossil fuel based energy in many countries. Solar is now economically viable and a commercial necessity, and the trend is bound to accelerate as more and more countries commit to renewables and this pushes costs down. Green energy is the present – not the future.
The world in which NDB will operate will see a lot more non-linear trends beyond green, and it is important to understand these to help position NDB and maximize its development impact.
It used to be that productivity enhancements meant vast investments in new plant and machinery. No longer. Uber is the world's largest taxi company, but owns no vehicles. Airbnb is the biggest accommodation provider, but owns no property. Alibaba is the biggest retailer, but holds no inventory. All of these are aimed at making optimal use of existing capacity and are leading to enormous productivity gains.
Mobile, electronic, and internet banking are revolutionizing access to opportunity. Many other disruptive technologies will also fundamentally change the way the world will evolve. Infrastructure needs of the future will change in line with these disruptions.
How do we work in a non-linear world? How do we best structure our organizations internally? How do we deal with rapid technological obsolescence and evolving cost structures? How ready are we to innovate in everything we do? We need answers and viable paths forward. We need to work on this in the years ahead.
III. What do these mean for the NDB?
We would need to come up with new financial instruments, including local currency financing and lending, new collaborations with public and private sector, local and global institutions, banks and other institutions, a new set of human resource skills – people who are unafraid to innovate in this non-linear world, an appropriate organizational structure that ensures that the entire institution works as one, a new mindset of partnership with our members, and with a new emphasis on speed of project preparation and delivery, of course, without compromising quality.
We will learn as we go along and make changes as necessary based on experience.
IV. Challenges facing NDB
Briefly, the challenges.
First, we are in a difficult global environment with global growth estimates being continuously downgraded. Each of our member countries faces different economic trajectories, opportunities, and challenges. The combined impact of the global and domestic realities will require hard economic choices in some of our member countries.
Second, as global risk aversion rises, demand for financing from multilaterals – including the NDB – will increase. In order to meet this demand, NDB should ideally be able to leverage itself – appropriately and prudently – to raise the financing necessary. However, current global credit rating systems make it excessively difficult for an institution of the south such as the NDB to achieve reasonable levels of leverage. We will need to engage with the global rating agencies on this aspect.
To operate in this difficult environment, we seek the continued support of our member governments.
Ladies and gentlemen, it is an exciting time to be a young multilateral development bank. One with a global mandate; one that has been established by members with a growing role in the global economy; one that looks to support sustainable development in its member countries; one that is keen to focus on the beneficial aspects of technology for development; one that looks to innovate in everything it does; one that seeks to question conventional wisdom and try new approaches; and one that looks ahead optimistically. The NDB combines the energy of youth with the wisdom of experience of all the institutions that have preceded it.
We will listen, we will learn, we will innovate, we will collaborate and we will contribute. We will strive to make a positive difference quickly and effectively.