The New Development Bank: Few member countries, lots of project financing

In 2014, Brazil, Russia, India, China, and South Africa, known collectively as BRICS, formed the New Development Bank with the aim of financing infrastructure and sustainable development projects in the group of countries, as well as in other emerging and developing markets. With $100 billion in initial capital, the bank in 2016 started to finance projects in infrastructure, sustainable development, and other priority sectors such as health and energy. While NDB continues to strengthen its partnership with other development and multilateral organizations, it has yet to expand its membership to other countries. Currently, NDB’s membership and operations remain limited to its five founding member countries. In its General Strategy for 2017-2021, NDB reiterated its focus on sustainable infrastructure development projects, dedicating two-thirds of its financing commitments in its first five years to the area. However, this priority seemed to shift with COVID-19, as most of the top-funded projects were pandemic responses — such as direct health response, social services, and economic recovery. NDB’s total approved projects from 2016 to 2020 across BRICS countries amount to $24 billion. That’s $2 billion more than the $22 billion in total financing that the Asian Infrastructure Investment Bank, another emerging multilateral development bank, approved across its 28 member countries in the five-year period. Devex tracked almost 300 procurement notices related to these projects since 2016, most of which were consulting services, ranging from project management to audits and corporate services needed by the bank. A recent example is a tender notice for financial planning, procurement, and other related tasks to implement the Integrated Green Transport Development Project in Yinchuan, China. Here, Devex looks into NDB’s $24 billion allocation — for 71 approved projects, according to the bank’s website — and explores how it distributed its resources across the five member countries. Trajectory of NDB’s investments in the past 5 years There is an uncontestable upward trend in the bank’s investments from 2016 to 2020. Beginning with five projects worth $1.2 billion, it increased investments by 680% to reach $9.3 billion for 19 projects in 2020. Half of the total allocation in 2016 — $600 million — went to renewable energy and major district road projects in India. The rest was split across the three other founding countries, excluding only Brazil. In 2017, there were a total of $2.2 billion in project approvals. India received $815 million for two water supply and restructuring projects, with a partnership including the governments of Rajasthan and Madhya Pradesh. The bank also approved $300 million for a renewable energy project supporting the Brazilian Development Bank, or BNDES, in Brazil. The number of approved projects skyrocketed in 2018, with 17 projects worth $4.8 billion. This trend continued in 2019, with 23 projects worth $6.8 billion. In comparative terms, AIIB-approved project finance was at least 30% less than that of NDB in both 2018 and 2019. Although the number of projects dropped by 17% in 2020 to a total of 19, the financing increased by 37% to reach $9.3 billion. This was due to COVID-19 emergency projects, which were heavily funded and prioritized. Where NDB invests Almost a third of NDB’s total funding from 2016 to 2020 — $7.2 billion for 19 projects — went to India. Transport projects saw 42%, or $3 billion, of the country’s funding. The Andhra Pradesh Road Sector Project, which will upgrade highways and district roads in the state, was one of the largest projects, with $646 million from NDB and $278 million from the government of Andhra Pradesh. China was the second-most funded country with $5.5 billion for 15 projects, which ranged from transport to clean and renewable energy. Approved in 2018, the construction of a new airport in Hohhot, the capital of Inner Mongolia, was the largest non-COVID-19 project in the country. NDB contributed 19% of the total financing, while 31% came from commercial banks and 50% was provided in the form of equity from the government. On the other hand, 13 projects worth $5 billion were approved in Brazil. The Sustainable Infrastructure Project, which aims to provide loans to public and private sectors, was the most funded in the country, with a $1.2 billion loan from NDB and $300 million from BNDES. Energy was the priority sector in South Africa, receiving $960 million for four projects, or 29% of the $3.3 billion in total approved funding for nine projects in the country. The Battery Energy Storage Project was the top among these, with a $400 million loan from the bank to increase electricity supply and promote clean energy. Finally, Russia got $3.1 billion for 15 projects, including $290 million for five projects related to transport. In terms of total financing, the biggest project went to education, with a $500 million loan to establish advanced engineering schools, aiming to increase the highly skilled workforce in the country. What sectors does NDB invest in? Over a quarter of approved NDB funding over this time period went to transport, amounting to $6.6 billion for 25 projects. These ranged from rail and road infrastructure to seaport rehabilitation. Public health and social safety came next, with four COVID-19 health projects worth $4.1 billion. Clean and renewable energy was also a priority, receiving $3.7 billion across 15 projects. There were a total of six COVID-19 projects approved in 2020: four related to health and two to economic recovery. These were worth $6.1 billion — more than half of NDB’s $10 billion target for COVID-19 financing. The top-funded project was the Emergency Assistance Program in Combating COVID-19 in China, with 7 billion yuan to finance public health expenditures in the provinces most affected by the pandemic. The five other projects, located in India, Brazil, and South Africa, received $1 billion each in financing. NDB programs in preparation are being tracked on the Devex Funding Platform. For access to in-depth analysis, insights, and funding opportunities from over 850 sources — combined with Devex Pro news content — sign up to a Pro Funding subscription online today or get in touch to learn about our Pro Funding group options.