22
Jul
While a development bank could be good news for Brics nations, a local economist is concerned of the financial burden for South Africa.
The new bank was opened in Shanghai on Tuesday in a bid to strengthen China’s ability to offer developing countries further economic support.
Through the institution, Brazil, Russia, India, China and South Africa will help with the development of other emerging nations.
But economist Mike Schussler says it’s unclear to what extent South Africa will benefit.
“One is just a bit concerned that we already have a Development Bank of Southern Africa and we have to commit $10 billion to this bank, so I’m not quite sure how much money we’re going to get out of it.”
The ceremony on Tuesday concluded a lengthy wait since the NDB was first proposed in 2012.
Disagreements over the bank’s funding, management and headquarters had slowed its launch.
“Our objective is not to challenge the existing system as it is but to improve and complement the system in our own way,” NDB President Kundapur Vaman Kamath said.
He added that after a meeting with the AIIB in Beijing, the NDB had decided to set up a “hotline” with the AIIB to discuss issues, and to forge closer ties between “new institutions coming together with a completely different approach.”
The bank is considering raising funds by issuing a “substantial” amount of bonds in member markets to help mitigate costs arising from exchange rate fluctuations, he said.
Chinese Finance Minister Lou Jiwei said the NDB’s support of infrastructure projects will help “ease long-running bottlenecks faced by emerging and developing countries, and help them speed up, adjust and upgrade economic development.”
The ceremony, held in Shanghai where the NDB’s headquarters are located, was relatively low-key in comparison to a June signing of the articles of agreement for the AIIB in Beijing, which was attended by delegates from 57 countries and President Xi Jinping.
“From our standpoint we are really looking forward to cooperating with the new institutions…the needs (for infrastructure) are huge,” said Karin Finkelston, a vice president at the World Bank, adding that the World Bank had been helping the AIIB and NDB on issues such as human resources.
The Japan-led Asian Development Bank, in a statement quoting its president Takehiko Nakao, said it hoped to explore opportunities to co-finance projects with the NDB.
The NDB will have an initial capital of $50 billion to be equally funded by the five members who will have equal voting rights. The capital will be expanded to $100 billion within the next couple of years.
The members will also establish a reserve currency pool worth over another $100 billion. China has pledged to contribute $41 billion, Brazil, India and Russia will each contribute $18 billion, while South Africa will contribute $5 billion.
Kamath, a former executive with India’s largest private bank ICICI Bank, told Reuters earlier this month that the NDB plans to issue its first loans in April next year.
Source: http://ewn.co.za/2015/07/22/Concerns-raised-about-Brics-new-bank