More than a decade of technological disruptions have created an environment where transport systems can be modernised without heavy capital expenditures. K V Kamath, president of the New Development Bank, explains how
Over the last four years, the New Development Bank has approved 30 projects totalling about $8 billion. For the coming year, we aim to build on this strong momentum and double our approval book to about $16 billion.
The bank’s lending covers projects that promote sustainable development and bring positive economic, social and environmental impacts in our member countries. It strives to be a reliable partner in implementing our members’ development strategies as we explore the avenues through which we can meaningfully contribute towards their commitments under the Sustainable Development Goals.
In our operating landscape, technology disruptions are altering the scope, size and complexities involved in projecting our infrastructure requirements. Take, for example, the requirements for efficient transport systems. The ongoing innovations in network connectivity, autonomous vehicles, along with widespread access to smartphones, cheap mobile data storage cost and unprecedented increase in the processing power of devices are changing the entire service, payments and delivery model.
Newer technologies such as predictive analysis, real-time vehicle tracking and control, virtual service aggregators, vehicle-to-vehicle communication, self-driving cars and vehicle pooling are challenging the norms and making transport systems safer, greener and more efficient.
Modernisation of transport systems is possible today without heavy capital expenditures. These newer systems have the potential to leapfrog existing structures as well as integrate quickly with them and, on the flip side, completely disrupt traditional business models such as auto insurance.
Mass adoption of smart grids, drones, 5G roll-outs and large off-grid systems can transform our traditional infrastructure requirements and disrupt legacy industries. Technology disruption is multifaceted and multidimensional. The rapid and imminent growth in digital infrastructure will present us with a distinctive opportunity to address many traditional infrastructure deficit areas. The Fourth Industrial Revolution has the potential to reduce the urban-rural divide, improve economic conditions in remote areas and offer the ability to start new businesses at low cost. By investing in digital infrastructure, countries can bring financial services to unbanked rural areas, improve health care to underprivileged communities, increase agricultural income and create a platform for quality education beyond cities. Going digital can have larger social and economic impacts and ensure community well-being. The road to achieving the SDGs involves investing in technologies that are driving 4IR.
If we fast forward to the future, one thing is clear – the way the multilateral development banks have operated thus far will be completely different from the way they will do so in the future. Technology-led disruption is manifesting itself in both opportunities and challenges.
The search for solutions calls for bold and innovative ways to catalyse the funding requirements for this new world. This would require the multilateral development banks to be lean and actively seek partnerships, both in the public and private sectors. We would need to jointly develop financial products with market players, work with regulators and rating agencies, and design solutions with governments that target these infrastructure gaps. Internally we need to be agile in our approach and correct the course as necessary as we go along.
Crowding in other investors, particularly in the private sector, is critical if we are to make a significant contribution. To achieve this, multilateral development banks need to design innovative financial products that are appropriate for a broad spectrum of investors. The creation of robust secondary markets in our member countries is imperative: they will help meet the current demand for projects that suit investors’ needs. Multilateral development banks could act as originators of projects, play their important role in minimising their risks and offer projects to private investors, thereby enabling better use of their capital with leaner balance sheets.
4IR will become mainstream in the coming years. Multilateral development banks need to rethink the way business is done and navigate through this next phase with an entirely new mindset about underlying infrastructure and our role in financing it. We have a collective responsibility to deliver on our mandate, which resonates with our members’ aspirations and improves the overall well-being of our future generations.
We, at NDB, look forward to partnering with other stakeholders in this exciting journey.