The "One Belt, One Road" Initiative and the New Development Bank

and the New Development Bank The “One Belt, One Road” Initiative NEA Development Cooperation Forum 2016

NDB and 'Belt 'Belt andNDB Road'.pptxand Oct 28, 2016 28, Oct Suzhou

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Snapshot of OBOR The One Belt, One Road (OBOR) Initiative encompasses around 65 countries – almost 30% of world’s total GDP and more than 60% of global population

Share of OBOR economies in global GDP Share of OBOR countries in global population

OBOR OBOR

28.4% 37.6% Others

62.4% 71.6% Others

China has invested more than $160 billion in OBOR countries, about 20% of China’s overseas investment

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Snapshot of OBOR Although OBOR countries enjoy a more rapid economic growth rate than developed economies, in terms of per capita GDP, OBOR’s average is only 46.4% of world’s average

Economic growth of OBOR countries in recent Per capita GDP of 27 less developed OBOR five years [%] countries against regional/world average [%]

4.7 39.4

1.2 18.3

-0.5

OBOR EU US OBOR World

27 OBOR countries with less than $2,000 in per capita GDP have a total population of 2.5 billion people

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Snapshot of OBOR Although share of trade in GDP keeps increasing in OBOR economies as a whole, the ratio for the rest of OBOR countries is still below world average if China is taken out

OBOR countries’ share of trade in GDP [%] Comparison of share of trade in GDP [%]

47.0

32.6 33.9 34.5 24.3 22.0

2000 2010 2012 China Other OBOR World average

There is still a long way to go for many OBOR countries to further integrate into the global supply chain

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Lack of capital – cost of funding Due to high interest rates both domestically and internationally, many OBOR countries face high financing costs in funding development initiatives, especially infrastructure

Interest rate of selected OBOR countries [%] Credit rating of selected OBOR countries [%]

15.00 15.00

12.50 61

10.00 48 46 43 40 36 6.75 6.25

India Bangladesh Russia Kazakhstan Mongolia Afghanistan India Bangladesh Russia Kazakhstan Mongolia Indonesia

Without sufficient infrastructure, it is difficult to utilize factors even with comparative advantage

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Lack of capital – ODA/MDB slowdown The growth of ODA is slowing down globally, leading to ODA’s diminishing share in GNI in the developing world; MDBs can merely support 10% of developing world’s infrastructure spending

China [%] Sub-Saharan Africa [%]

0.8 7 6 0.6 5 0.4 4

0.2 3 2 0.0 1 -0.2 0 1988 1996 2004 2013 1988 1996 2004 2013

In the least developed countries, ODA was only 5.89% of GNI in 2013, compared with 11.28% in 1990

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Lack of capital – risk appetite In a stagnant global infrastructure market, infrastructure investment is shying away from developing economies also due to risk aversion reasons

Infrastructure investment in developing Global infrastructure investment [$ billion] economies [%]

Developing economies +0.3% 13% 308 309

Others 87% 2014 2015

Lack of capital and infrastructure is keeping many OBOR countries away from integrating into the global economy

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The OBOR Initiative will contribute to global economic development in the following three ways

Global Governance Reform

1 OBOR is a development and economic integration strategy initiated by the developing world Comparative Advantage Utilization

2 With enough support in infrastructure development, developing OBOR countries will enjoy improved access to the global market and can better leverage comparative advantages Market Demand Creation

3 Sustainable growth in OBOR economies will create market demand and contribute to global development

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NDB introduction NDB milestones in preparation and full operations

Acquisition of “AAA” Expected Establishment domestic credit rating international credit takes effect Formal announcement of rating the decision to set up a Opens in Headquarters Target first loan development bank Shanghai agreement disbursements

signed

2012 2013 2014 1Q 2015 2Q 2015 3Q 2015 4Q 2015 1Q 2016 2Q 2016 3Q 2016 4Q 2016

Articles of First paid-in First green Agreement signed capital received bond issued Fourth BRICS summit in New Delhi: decision to Senior First batch of establish a new management projects development bank team appointed approved

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NDB introduction NDB overview

Description 20% • First multilateral development bank (MDB) established by emerging countries: Brazil, China, India, Russia 20% 20% and South Africa • Mandated to finance infrastructure and sustainable development projects • Headquartered in Shanghai • Customer-oriented lending approach aimed at timely and efficiently addressing infrastructure and sustainable development needs 20% 20% • Website: www.ndb.int

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NDB introduction First batch of projects from NDB totaling $911 million

. BNDES, Brazil  600 MW renewable energy capacity – wind power  Amount: USD 300 million . Shanghai Lingang Hongbo New Energy Development Co., China  100 MW of rooftop solar power capacity  Amount: local currency equivalent of USD 81 million

. Canara Bank, India  500 MW renewable energy capacity – solar power  Amount: USD 250 million

. Nord-Hydro, Russia  50 MW renewable energy capacity – hydro power  Amount: USD 100 million

. Escom, South Africa  Transmission lines to evacuate 670 MW generation and transformation of 500 MW of renewable energy  Amount: USD 180 million

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Thank you for your attention!

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