German Study Embraces Hamiltonian Understanding of BRICS Infrastructure Investments
Oct. 19, 2016 (EIRNS)—A 2015 study by the German Development Institute, "Financing Global Development: The BRICS New Development Bank," concluded that,
"with proper management of its lending, and by partnering with other multi-lateral development funds, NDB alone can provide as much as $34 billion a year in development loans in a short number of years."
That is a more-than-ten-fold increase over the $2.5 billion in lending that has been announced for 2017 at the just-concluded BRICS summit in Goa, India. This would put the NDB on a par with the European Investment Bank, which is otherwise the largest regional development bank in the world, with $32 billion in infrastructure investment in 2012.
The German study contained a number of caveats and guidelines for the NDB to achieve those goals:
"The scale of lending of the BRICS bank needs to be large enough to make a meaningful impact, given the significant level of needs identified. The impact of a BRICS bank must also be measured in terms of its capacity to enact leverage through its co-financing of projects in the private and public sectors."
The study recognized a core Hamiltonian concept: "State credit is the best means of building an infrastructure platform for productive growth: National and regional development banks, as well as the World Bank, will be natural partners. Indeed, the creation of the NDB and the AIIB also reflects a shift toward a greater emphasis on public development banks, regionally as well as nationally.
"There is a growing consensus that well-run public development banks can play a positive role in funding the real economy, especially in light of the limitations of the private financial system in doing so. This is the case in particular in certain sectors, such as infrastructure, where long-term finance is required before investments become profitable, often beyond the maturity dates that the private banks are willing to lend for, especially in poorer countries."