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Annex IX Recommendations for the New Development Bank

The BRICS countries represent some of the fastest growing economic nations in the world, and have taken important positions both in import and export markets in the past decade. The economic weight, along with the high reserve accumulation of the five nations have empowered them to finance development internationally, and to ensure the inclusiveness of economic policies. Therefore, the establishment of the New Development Bank is an important move towards providing development focused on the developing world.

This paper presents recommendations for structuring the NDB, from the point of view of the Infrastructure, Financial Services, and Energy and Green Economy Working Groups. Baring in mind that additional development funds are required in the infrastructure and energy sectors, the three Working Groups considered important to give suggestions as future NDB clients.

It is expected that the NDB will be able to play a major role in alleviating poverty, and, simultaneously, in improving infrastructure development globally, by implementing the following recommendations:

  • Add to the NDB investment policy (prior to its ratification) a simplified procedure for project selection, including the possibility of providing financial means on the basis of project and/or corporate-wide principles, in order to reduce the timeframe of projects finalization and approval process;

  • Identify opportunities for generating economic growth, and foster, fund and insure governments to develop physical infrastructure for:
    • The introduction of new productive spaces;
    • The integration of economic spaces;
    • The irrigation of economically congested areas;

  • Finance early stage feasibility and engineering studies for the development of infrastructure projects that create regional development, giving special attention to the existing regional physical integration projects investigated by the Infrastructure Working Group, such as:
    • Programme for Infrastructure Development in Africa (PIDA);
    • Priority Project Agenda (API) in Latin America;
    • Belt and Road Initiative in Eurasia;
    • Trans-Eurasian Belt “Razvitie” in Eurasia;

  • Carry out pilot projects in key pre-identified sectors such as energy, higher education, space technology, and others, etc. in advance of institutionalization of the NDB, which would involve all five countries and

serve as an opportunity for cooperative learning and knowledge build up on issues around investment processes and project execution;

  • Provide finance for the long run all investments tied to any activity that contributes ethically, environmentally and socially to a better income distribution;

  • Develop mechanisms to provide Equity Financing for Infrastructure projects;

  • Extend financing and lending activities to least developed economies, in order to leverage the role of the bank as well as insure equitable distribution of savings and investments globally;

  • Have the role as or include a Guarantee Fund for sovereign risk to allow for greater use of Project Finance structures and access to wider range sources of funding (e. pension funds, commercial banks, etc.) for infrastructure development in the targeted regions of interest to the BRICS;

  • Permit the use of convertible assets, such as gold and silver, to provide guarantees for paid in capital in the case of countries that are not able to commit monetary assets due to currency appreciation;

  • Consider adopting the WB-IMF Debt Sustainability Framework (DSF) as the risk classification rating of the NDB for issuing guarante This framework empowers the NDB to:
    • Meet the specificities of the BRICS countries (e. the difficulties in presenting counter-guarantees);
    • Provide sound guarantees that meet the goals of the NDB and are also attractive to creditors and shareholders;
    • Monitor the economic situation of developing countries, especially the low-income ones (LIC);
    • Classifies countries according to the Country Institutional and Political Assessment (CPIA), which establishes public-debt thresholds that a country should not surpass in order to be considered debt sustainable;
    • Ensure the reliability of the rating to the shareholders of the Bank (countries) and to future external creditors of the Bank;
    • Use a rating model specifically designed to developing countries;
    • Cooperate with the Bretton Woods institutions, by using its criteria of risk analysis.

  • On projects of greater complexity or size, demand that financed parties (project sponsors) hire pre-qualified engineering consultants to assess construction budget, construction contract model, social and environmental vulnerabilities, as well as manage contract execution and intermediate commercial interactions between the sponsor and contracted party(ies) during construction;

  • On projects of greater complexity or size, consider the adoption of Dispute Resolution Boards (DRBs) as an alternative to arbitrage;

  • Detail guidelines and mechanisms to promote balance, transparency and certainty on the origins of materials and services procured by projects financed by the NDB;

  • Consider detailing concepts such as “sustainable development project” as to allow project sponsors and suppliers prepare for future eligibility requirements;

  • Consider functioning as a first-class assurance bank for trade among its members;

  • Consider financing green energy and encouraging new methods of financing like green bonds and credit enhancement;

  • Consider support with funding projects that can result in poverty alleviation; and

  • Consider funding projects in areas such as distributed solar and wind and off grid solutions, and energy and water efficienc

Adopted 8th July 2015, Ufa.