Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Financing development The strategic role of development banks (and the case of BNDES) IPD/JICA Task Force on Industrial Policy and Transformation Meeting in Jordan, 5-6 June 2014 João Carlos Ferraz Executive Director Guide Development and development financing The awakening of the Sleeping Beauty: Development Banks are back to the game BNDES contribution to Brazilian development Reflections about the future of development institutions: missions, assets, capabilities As a way of introduction // 3 Market based financing can be relied only partially for development purposes, especially for the financing of industrial policies where uncertainty prevails Development institutions are strategic instruments to support sustainable development in every country, at any stage of development Each development bank is a singular institution. No role model exists Analytical references Market failure Uncertainty Finance scarcity Market failures and/or incomplete financial systems are only partial justifications for an active role for development banks. Even more important is the prevalence of and the need to tackle uncertainty (technical change, climate change, growth cyclicality, etc) by patient, mission oriented institutions. Development and development financing The awakening of the Sleeping Beauty: Development Banks are back to the game BNDES contribution to Brazilian development Reflections about the future of development institutions: missions, assets, capabilities Development Institutions: common but very relevant institutions // 6 A very common institution: OECD: institutions providing long term financing that are beyond the capacity or the willingness of others to do so. BDC (2009): 235 DIs in 92 countries. International Benchmark Study on Development Institutions. Business Development Canada, 2009 WB (2012): 90 DIs in 61 countries. Global Survey of Development Banks. Policy Research Working Paper, n. 5969. Washington: World Bank, 2012. Different types of Development Institutions: Development Banks, Specialized Agencies (Credit, Guarantee or Equity), Development Financing Institutions (usually multilateral) The awakening of the Sleeping Beauty? // 7 “An Infrastructure Bank (IB) … There are good theoretical reasons for the creation of such a bank. (LSE Growth Commission, 2013) “Once a financial crisis hits, it is too late… institutions must already exist, with a clear mandate, experienced professional staff, and the financial capacity to respond to the financial needs when the private market fails.” (Conference Board of Canada, 2010) New Institutions…. in Developed Countries….. BPI France 2012. Merger of three existing institutions Korea Development Bank (KDB) Current government: The Korea Finance Corporation will be merged with KDB. Only subsidiaries not related with development activities will be privatized. Japan Finance Corporation (JFC) 2008. Merger of existing institutions. JFC funds other banks (with fiscal resources) during crisis, natural disasters and fosters national priorities (sustainability and innovation). Green Bank UK 2012: Foster environmental and energy efficiency investments Development Institutions: not one alike // 8 Not a homogeneous group, differing in: Ownership structure (fully vs. partially owned by government) Target sectors and clients (narrow vs. wide focus) Lending models (first-tier vs. second-tier) Credit conditions (subsidized vs. market interest rates) Regulation and supervision (special regime vs regime applicable to all banks) Corporate governance (independent vs. government controlled boards) Size (absolute and relative), loan portfolio, performance indicators… Economic relevance // 9 Assets/GDP - 2012 19.4% 16.3% 14.5% 12.7% 11.2% 8.3% 5.9% 4.7% 2.6% KfW - BNDES Germany Brazil CDB China KDB Korea* ICO - JFC + JBIC DBs Spain - Japan Mexico* VEB Russia BPI France* 1.7% DBSA South Africa 2012 total assets: US$ 3.2 trillion Source: Annual reports and IMF. * KDB – Korea: The new government of South Korea is reversing the previous government’s plan for KDB’s privatization. DBs Mexico: NAFINSA (SMEs), BANOBRAS (Infrastructure) and BANCOMEXT (Exim). BPI France: The institution was created in December 31th, 2012. Don’t include the CDC enterprises, merged in June, 2013. Scale and scope matters Number of segments supported X number of instruments and asset size: Select International Development Finance Club (IDFC ) members (2012) Source: Annual reports. Each and every priority requires specific expertise, financing instruments and compatible funding Anti-cyclical role // 11 Annual growth (%) of credit portfolio of selected development banks CDB - China 30 25 20 15 10 5 0 2005 Source: Annual reports. 2006 2007 2008 2009 2010 2011 2012 Development and development financing The awakening of the Sleeping Beauty: Development Banks are back to the game BNDES contribution to Brazilian development Reflections about the future of development institutions: missions, assets, capabilities Brazilian financial markets: robust but shallow // 13 Credit and corporate bonds , % of GDP, 2011 SPAIN 200 NETHERLANDS USA JAPAN 150 Credit/GDP CHINA 100 KOREA 50 BRAZIL MEXICO - 5 Source: BIS and World Bank, 2011 10 15 20 Corporate Bonds/GDP 25 30 35 40 Outstanding Loans/GDP and Outstanding Loans/Total Credit Selected Development Banks, 2012 21,0 Role of BNDES due to limitations of Brazilian credit market? 15,5 11,3 12,7 12,4 8,0 7,4 4,6 KDB Source: Annual reports, BNDES BNDES Outstanding Loans/GDP CDB Outstanding Loans/Total Credit KfW BNDES scope and priorities // 14 2/3 of long term loans in Brazil (US$ 85 billion, avrg Priorities annual disbursements) Instruments Direct Operations Indirect Operations MSME (financing and guarantee) Exports Project finance Grants Investment bank Equity Portfolio Source: BNDES Infrastructure Competitiveness inclusion Estimated market value (US $ b.) 45.4 Nº firms with direct support Nº Investment Funds Productive 203 44 BNDES relative performance and funding // 15 Funding By Constitution, 40% of proceedings from Workers’ Assistance Fund (FAT), a public fund financed by a levy on wage bills to provide unemployment benefits and retraining. No amortization schedule exists. Since 2008, very long term loans from Treasury adding up to US$ 200 billion 2012 (US$ billion) BNDES Assets Outstanding Loans Net Profit KFW CDB 367.8 657.3 1,191.6 254.0 526.4 1,016.9 3.0 3.1 9.9 ROE (%) 12.5 11.5 13.4 NPL (%) 0.06 0.21 0.30 Source: Banks' balance sheets. Sources of funding for annual budget Market 11.5% FAT 2.8% Treasury 8.3% Return on operations 77.4% Source: BNDES Largely, funding and financing is referenced to the “TJLP”, Long-Term Interest Rate which is lower than the market based short term rate BNDES contribution to investment // 16 Disbursements 2004-2014 (US$ billion) Disbursements 2011 2012 89.9 2010 88.3 2009 79.8 2008 82.9 95.7 2007 68.4 23.6 2006 49.5 19.3 2005 Source: BNDES 33.3 13.6 2004 2013 2014* *12 months, up to February/2014 Asset growth in 3,000 industrial firms, 2010: Firms supported x non-supported by BNDES Jobs created and/or maintained during the investment phase of a project (direct, indirect and income effects Non-Supported firms 21% Supported firms 10% 23% 0% 5% 10% 15% Investment without BNDES Sources: Seasa and BNDES 20% 25% Induced by BNDES 30% 35% BNDES contribution to policy priorities (1/2) // 17 Disbursements according to industrial policy priorities US$ billion Priorities are fine-tuned to policy priorities Active contribution to the formulation and implementation of public policies, especially in the domains of industry, innovation and infrastructure Provider of technical expertise for the modeling of complex projects Activity Unit Hydropower MW Small Hydro MW Windpower MW Termal power plants MW Automobile 1.000 cars Bioethanol million tons Pulp 1.000 ton/year Total Projects Installed projects supporte capacity 2007d by % 2007 (A) 2013 (B) (B/A) BNDES BNDES 74.937 12.253 16% 11.893 97% 1.820 3.260 179% 1.994 61% 247 1.997 809% 1.093 55% 21.229 23.418 110% 5.400 23% 3.500 1.000 29% 465 47% 385 235 61% 75 32% 7.530 6.205 82% 5.515 89% Source: ANEEL, EPE, ANFAVEA, BRACELPA, BNDES. All energies: 2007 capacity based on EPE estimate based on integrated system Source: BNDES BNDES contribution to policy priorities (2/2) // 18 Support for MSME: disbursements + number of firms 32 350 300 23 250 100 8 261 55,0 275 11 12 41 53 2007 2008 45,0 35,0 172 25,0 15,0 104 50 0 25 231 200 150 25 65,0 5,0 2009 Number of MSME, 1,000 2010 2011 2012 Disbursements, US$ billion) 2013 -5,0 // 19 Development and development financing The awakening of the Sleeping Beauty: Development Banks are back to the game BNDES contribution to Brazilian development Reflections about the future of development institutions: missions, assets, capabilities Missions: inclusive, sustainable, competitive development // 20 Directives Patiently face and deal with uncertainty Support policy development and long term planning Finance expansion of capacity, capabilities and learning; fill gaps; fix failures; induce externalities. Foster a long term financing industry Contribute to systemic stability (anti-cyclical role) Appropriate and distribute (to society, via the State) returns of (financial) investment decisions Assets and capabilities // 21 Tenacious pursuer of priorities defined at the political domain and by challenges associated with the stage of development of a country Mandate enforced at the highest political level Servant of public interest must pursue efficiency and effectiveness Stable funding for financial sustainability Flexible competences to mobilize resources and instruments adequate to mandates and to country's needs Development Institutions: not the vanguard nor the rearguard … the co-guard of development Financing development The strategic role of development banks (and the case of BNDES) IPD/JICA Task Force on Industrial Policy and Transformation Meeting in Jordan, 5-6 June 2014 João Carlos Ferraz Executive Director