First day of BRICS summit in Ufa highlighted by creation of New Development Bank

UFA, July 8. /TASS/. The first working day of two summits in UFA - BRICS and the Shanghai Cooperation Organisation /SCO/ - was dominated by business headlines. Representatives of the business community held a number of meetings, which witnessed the New Development Bank being created by BRICS states for financing infrastructure projects, taking shape, as well as agreed an investment declaration aimed at improving business climate in BRICS member-states. On Tuesday finance ministers of BRICS states held a meeting of the Managing Council of the New Development Bank with capital totaling $100 bln in Moscow, which was considered as its actual launch. On Wednesday, the bank’s participants unveiled details of the work of the newly created financial institution, which will be headquartered in Shanghai. The bank’s first President Kundapur Vaman Kamath said it is ready to finance projects in currencies of member-states as local markets are already providing the possibility of funding in local currencies. "We think local markets have opportunities for funding, he said. As much local currency we have so are we able to finance in it, and if we face such a demand this will be done in local currencies," he added. New Development Bank will not only provide debt financing but also enter companies’ capital. "We haven’t defined the proportions yet. We do not have any limitations regarding the volume of debt financing or investment into capital," he said. Financial experts say the creation of New Development Bank may if not dethrone the dollar from the stand of the world’s main reserve currency but at least substantially challenge it. "I don’t think that the dollar will lose its leading position, but we think it will be challenged," CEO of Russia’s second-biggest lender VTB Andrey Kostin said. "The BRICS countries are currently playing a significant role in the global economy. It is certainly one of the elements of creating new financial infrastructure. Obviously we will see the growth of payments not in dollars and not even in euro. It will certainly be yuan, rubles to some extent," Kostin added, noting that "the process is already under way and it cannot be stopped." According to Professor at the School of International Studies of Jawaharlal Nehru University in New Delhi Arun Mohanty, new BRICS institutions will help its founders "neutralize the effect and pressures of the current financial structures that work to the detriment of interests of sovereign countries." "The latest projects suggest that BRICS would overtake G-7 by the year 2017 in terms of total GDP size. Moreover, BRICS today accounts for 43% of global population, 25% of territory, 26% of global GDP, 75% of foreign currency reserves, 20% of global trade turnover. All this makes it a strong grouping having the objective to play a significant role in global affairs," the expert said, adding that the projects for financing by the newly-founded bank will be selected by financial institutions of BRICS member-states, including Russia’s VEB development bank. Russia will offer participation in the high-speed railway Moscow-Kazan project to big investors, including the New Development Bank, according to Russia’s Finance Minister Anton Siluanov. "The project is quite expensive. Attracting new members, including the BRICS Bank, is obvious," Siluanov said. Russia’s national development banks, including VEB /Vnesheconombank/, will be selecting projects for BRICS New Development Bank when it starts work, VEB Chairman Vladimir Dmitriev said Wednesday. "Projects will be selected both by the New Development Bank and national development banks, which will present projects for consideration by the new development bank," he said, adding that VEB will also send a number of its employees to managing positions in the new bank. He added that the bank will start its work closer to the end of the current year while projects will start to be considered in spring 2016. "We assume the mechanism of this cooperation will be fully launched by the end of the year, the more so since tomorrow we’re signing a memorandum of understanding on cooperation between national banks with the new development bank. I think next spring we will come back to this question /of consideration the projects - TASS/," he said. BRICS is an association of five major emerging economies - Brazil, Russia, India, China and South Africa - founded in June 2006. The first official summit took place in June 2009 in Russia’s Yekaterinburg. Since then, meetings at the highest level are held annually in member-countries. The last summit took place in Brazil. On April 1, Russia accepted BRICS presidency. Read more