Dmitry Pankin: The upgraded multilateral development bank's architecture opens new opportunities for economic growth in developing countries
Shanghai, 21 July 2016. - "Over the recent year, the financial architecture of multilateral development banks (MDBs) has changed significantly," Dmitry Pankin, Chairman of the Management Board at Eurasian Development Bank (EDB), said at the session Infrastructure and Sustainable Development: Strategic Aspects at the First Annual Meeting of the BRICS New Development Bank (BRICS Bank). The head of EDB emphasised that the emergence of the two new players, the BRICS Bank and the Asian Infrastructure Investment Bank (with a capital of over US $100 billion each), opens new opportunities for the international community in improving economic growth with the help of MDB instruments and by means of financing infrastructure projects in particular.
Dmitry Pankin stated that MDBs had several tools to influence infrastructure development. Large development banks with a capital from US $10 billion are catalysts for capital-intensive investments in mega projects such as motor and rail corridors and high-capacity hydropower plants. MDBs with a capital from US $1.5 billion finance related investment projects linked to major infrastructure initiatives. To achieve maximum effectiveness, this work should be based on cooperation and coordination between larger and smaller MDBs.
Dmitry Pankin cited a renewable energy project in Russia, which envisioned the construction of two small HPPs in Karelia, as an example of such cooperation between different-scale MDBs. He clarified that this cooperation was based on the synergy of EDB's accumulated experience and competencies in preparing and fulfilling infrastructure projects in Russia, on the one hand, and the BRICS Bank finance, on the other hand. In addition, the selected cooperation scheme helps to divide operational risks and financial obligations between all project participants.
The other way to mobilise the capacity of MDBs for infrastructure development in the region is to run targeted initiatives to prepare and structure new projects. This is usually done with technical assistance from MDBs founded by banks and donor countries. Experts estimate that technical assistance from MDBs approximates US $1 billion a year.
Therefore, MDBs can be an important source of finance and assist in the preparation and structuring of large infrastructure projects, thereby promoting economic growth in developing countries, the head of EDB emphasised.
The First Annual Meeting of the BRICS Bank is being held in Shanghai (China) these days. The BRICS Bank also held the meeting of its Board of Governors, which approved finance for the project to construct small HPPs in Karelia for a total of US $100 million. The Russian delegation is headed by Sergey Storchak, Deputy Finance Minister of Russia.
The New Development Bank was established by the BRICS countries in July 2014 and is headquartered in Shanghai. The Bank's maximum capital is US $100 billion. Its main objective is to finance infrastructure projects in the BRICS states and developing countries.
Additional Information:
Eurasian Development Bank (EDB) is an international financial institution founded by Russia and Kazakhstan in January 2006 with the mission to facilitate the development of market economies, sustainable economic growth, and the expansion of mutual trade and other economic ties in its member states. EDB's charter capital totals US $7 billion. The member states of the Bank are the Republic of Armenia, the Republic of Belarus, the Republic of Kazakhstan, the Kyrgyz Republic, the Russian Federation, and the Republic of Tajikistan.
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