Zhu Xian, Vice Chairman of IFF and Vice President of the BRICS New Development Bank ("New Development Bank") pointed out at the meeting that infrastructure plays an important role in economic globalization. If the problem of insufficient infrastructure investment is not resolved in time. Will hinder the sustainable economic growth of emerging markets and developing countries.
The main drivers behind globalization are reducing trade, investment barriers, transportation costs, and information technology costs, which enable economies to participate effectively in international production chains.
He revealed that this year the New Development Bank has approved 13 investment projects with a loan amount of more than $3.1 billion. Up to now, the New Development Bank has accumulated a total of 25 investment projects, with total loans exceeding US$6.2 billion.
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1. Infrastructure is truly playing an important role in economic globalization. The evolving globalization process, with development of infrastructure, has turned many traditionally non-tradable goods to tradable goods, thus integrated them into the global supply chains and enhanced cooperation and productivity. Major infrastructures, such as roads, railways, ports, airports, canals, telephone lines, mobile networks, pipelines, and electricity grids, form a physical network. These networks have played a significant role in the globalization process. The principal driving forces behind the globalization are lower barriers to trade and investment, lower transport costs, and lower information technology costs. The noticeable reduction in the transportation and communication costs has facilitated the division of the productive process, allowing participation by a larger number of geographical locations according to the advantages that each one contributes to the value-added chain. This fact has broadened the opportunities, so the individual economies can participate more efficiently in the international production networks.
2. Underinvestment in infrastructure, if not timely addressed, may present a major obstacle particularly for sustainable economic growth of emerging market and developing countries (EMDCs) thus hamper the economic globalization. Projects on railways, roads, ports, energy, resources, telecommunications etc. are highly capital-intensive, and require long term patient capital, while investment returns are prone to fluctuations or, in some cases, by nature low in their market expectations. Policy, regulatory and market environments in some countries or sometimes in all countries are unstable, making private capitals reluctant to participate in infrastructure sector.
3. We shall not treat infrastructure financing as one homogeneous block, and shall take differentiated approaches to tackle financing bottlenecks of different types of infrastructure projects:
(1) for commercially viable projects, improving business and market regulatory environment, crowding in private capital by introducing PPP;
(2) for projects with strong externality but insufficient financial returns, providing some public fiscal support as leverage to enable private sector participation;
(3) public finance for pure public goods and services but paying attention to debt sustainability and quality of services.
4. Multilateral Development Banks (MDBs) should endeavour to work together to turn those largely but not yet fully bankable projects into fully bankable ones, rather than only looking for readily bankable projects under sovereign terms.
5. MDBs should play a leading role in market failures in effectively mobilizing more resources from all sorts of development partners and private sectors.
6. To effectively leverage more resources particularly from private sectors, MDBs should develop more innovative new products including guarantees, equity instruments, funds, etc., and may overtime shift from primary lenders to risk mitigators.
7. Local currency financing shall be promoted as effective and important means for infrastructure financing, by reducing clients’ exposure to foreign exchange risks and cultivating local capital markets.
8. NDB’s mandate: “Mobilising resources for infrastructure and sustainable development projects in BRICS and other emerging economies and developing countries, complementing the existing efforts of multilateral and regional financial institutions for global growth and development.”
9. As the first MDB established initially by emerging market and developing countries, NDB highly respect national sovereignty, and member countries’ domestic policies and procedures over any external impositions and restrictions.
10. Currently there are 25 projects in NDB’s portfolio with loans aggregating over USD 6.2 billion. All of these projects focused on improving key infrastructures and sustainability and addressed some of the critical developmental needs of our member countries. This year, so far 13 projects aggregating over USD 3.1 billion have been approved.
11. NDB successfully opened the first regional office -- the Africa Regional Centre – last year and making progress to open the Americas Regional Office in Brazil. The Americas Regional Office will increase operational capabilities of the NDB and facilitate identification and preparation of bankable projects in Brazil. Together with the Africa Regional Center in South Africa, the Americas Regional Office will progressively support a growing range of the Bank’s operations.
12. So far NDB has focused mostly on the traditional physical infrastructures as its priority support. However, NDB also likes to explore innovative ways of supporting new types of infrastructures along with technological changes in the world economy and aiming also at enhancing efficiency and productivity in infrastructure development.
