Author: Nurhisham Hussein, Economics Malaysia

An interesting experiment is going on in Malaysia. The administration of Prime Minister Najib Razak has embarked on an economic transformation plan that marks a clear departure from the development plans of Malaysia’s past.

In years past Malaysia’s development plans, while ostensibly focusing on economic growth and structural changes, had been in actuality little more than budget priorities for the federal government. Read more…

Author: John D. Conroy, ANU and FDC

The removal of Muhammad Yunus as Managing Director of Grameen Bank now seems irrevocable.

The Bangladesh Finance Ministry is reported to have prepared a ‘14 point plan’ that will ‘transform the Nobel winning micro-lender into another state-owned bank’, with the government likely looking to increase its equity stake in Grameen (currently less than 4 per cent of paid capital) to restructure the board and ‘establish control over its lucrative sister firms’. Read more…

Author: Yang Yao, Peking University

China’s exports have resumed their robust growth since last year. The World Bank predicts a 3.5 per cent growth rate for the world economy this year, and most analysts also predict that the US economy will grow at a similar rate.

As a result, external demand for China’s exports will be strong. Read more…

Author: Barry Eichengreen, Berkeley

The big financial news in the run-up to Chinese President Hu Jintao’s recently concluded visit to the United States was Beijing’s decision to allow the state-controlled Bank of China to offer renminbi-denominated bank accounts and currency conversion services in New York.

Some observers hailed this as an important step in positioning the renminbi to become a true international currency. Others dismissed it as a mere publicity stunt designed to deflect attention away from China’s refusal to let its currency appreciate against the dollar. Read more…

Author: Savita Shankar and Mukul G. Asher, NUS

The recent developments in the Indian microfinance sector, particularly in Andhra Pradesh (AP), have been disconcerting. Within a relatively short period, a sector heralded as representing a commercially viable solution to the problems of financial inclusion, poverty reduction and female empowerment is now being accused of various improprieties. Microfinance institutions (MFIs) are now being criticised as detrimental to improving the lives of low income individuals.

Recent developments involve some of the borrowers from MFIs being over-extended, resulting in repayment problems; including coercive collection methods in some cases. Read more…

Author: Andrew Sheng, University of Malaya and Tsinghua University

There are a lot of global architecture, theoretical, and micro-institutional incentives issues that Asia must address in the wake of the GFC.

Conventional wisdom is not helping to solve the dilemma of a global market that is still regulated at national levels. Read more…

Author: Takatoshi Ito, Graduate School of Economics, University of Tokyo

The G20 includes more Asian countries than any other global grouping, and it is expected to be a good forum for Asian countries to press their agenda.

The G20 Summit was created out of the chaos of the global financial crisis. After Lehman Brothers  collapsed in September 2008, global financial markets went into a tailspin. Securities markets were frozen as buyers disappeared. Read more…

Author: Ashima Goyal, IGIDR

Change is afoot in the area of Indian financial regulation. A Delhi-based body (the proposed Financial Stability and Development Council) is set to supplant existing the existing regulator, the High-Level Coordination Committee. This follows a series of committee reports that sought to shift power away from Reserve Bank of India (the RBI) towards market development.

These twin shifts are a mistake. They ignore the performance of the RBI during the global financial crisis. They also place greater power in the hands of elected officials, which is problematic. Read more…

Author: Ayesha Zara Naeem, Lahore University of Management Sciences

Low-income earners in Pakistan have been offered financing opportunities for the first time, thanks to a recent surge in the activity of microfinance institutions (MFIs).

Microfinance theoretically involves the provision of loans or other financial services to lower-income-bracket borrowers, with little or no collateral required. These borrowers are able to take out small loans from MFIs to improve their businesses or living conditions. In Pakistan alone, the potential market for microfinance is an astounding US$27 million, with active borrowers and national gross loan portfolio size increasing in every financial quarter. Read more…

Author: Aurelia George Mulgan, UNSW@ADFA

One of the major criticisms of the Hatoyama administration’s postal reform plan has centred on the proposal to maintain more than a third of Japan Post Bank shares in government hands and to raise the cap on individual savings deposits from ¥10 million to ¥20 million. This will make it harder for private sector financial institutions, particularly small and medium-sized institutions in regional areas, such as regional banks and credit unions, to compete with Japan Post Bank because of the implicit government guarantee on postal deposits. Under these conditions, people will inevitably shift their savings into Japan Post Bank.

It is not often that Japan’s agricultural cooperative organisation (JA, or Japan Agriculture) is on the side of free and fair competition, but on this issue its message to the government has been loud and clear. Read more…

Author: Yiping Huang, Peking University and ANU

Policymakers have been contemplating the options for exiting from expansionary monetary policy since late 2009. It now looks that time is ripe for the People’s Bank of China (PBOC) to tighten monetary policy. Ideally, adjustments to both interest and exchange rates should take place simultaneously.

Economic data for the third quarter and March released by China’s National Bureau of Statistics (NBS) last week was largely in line with market expectations. Despite the ongoing debate among economists about overheating, current trends of accelerating growth and price increases are clear. Real GDP growth was 11.9 per cent during the first quarter, more than 1 percentage point higher than the growth rate in the fourth quarter of last year and nearly double the 6.1 per cent growth during the first quarter last year. Read more…

Author: Renu Kohli, New Delhi

Policy reform is invariably contextual; as is the announcement by the government of India during this year’s Budget, about setting up the Financial Stability and Development Council (FSDC). The council will ‘strengthen and institutionalise the mechanism for maintaining financial stability’, monitor ‘…macro-prudential supervision of the economy…functioning of large financial conglomerates, and…inter-regulatory coordination issues’. In other words, the new entity will be assigned tasks that have largely been the domain of the Reserve Bank of India (RBI).

The recent financial crisis has sparked off an interesting debate in which India has been cited as a remarkable success. Read more…

Author: Stephen Grenville, Lowy Institute

In his book ‘The Lexus and the Olive Tree,’ Thomas Friedman told us that globalisation would lead to a ‘Golden Straitjacket’, where countries would voluntarily adopt a fairly uniform set of global rules to facilitate their participation in international integration. When the Global Financial Crisis (GFC) demonstrated that substantial changes were needed in financial regulation, it was easy to put these changes in the context of the Golden Straitjacket. The G20 put supervision of financial sectors on its agenda, and any changes were to be implemented through the Financial Stability Board (FSB) and the Bank for International Settlements (BIS) in Basel.

But just how internationally uniform should these rules be?

Read more…

Author: Timo Henckel

The Australian bank guarantee (officially the ‘wholesale lending guarantee’)—effective since November 2008 to prevent local financial markets from following the rest of the world into a tailspin—is being withdrawn in April. In his announcement of the withdrawal earlier this year, Treasurer Wayne Swan argued that the need for further government guarantees had been overcome as Australian banks had successfully weathered the storm sweeping through the global credit markets.

The guarantee underwrote the large funds (well in excess of $100 billion) which Australian banks have routinely received from overseas capital and money markets and which enabled them to have loan/deposit ratios greater than 100 percent. Read more…

Author: GE Anderson, UCLA

Just when you think you have it all figured out. The Bank of China, one of China’s Big Four state-owned banks, has been busy funding auto companies this week.

The Bank announced this week that it has approved a 20 billion yuan ($2.9 billion) line of credit for Beijing Auto Industry Holding Corp (BAIC). Some are speculating that this money may be used by BAIC in its continued pursuit of an overseas purchase, most likely Saab, or at least some of its assets.

BAIC is owned by the local Beijing government, so the fact that Bank of China is providing funds should not come as a big surprise. Bank of China and BAIC are both state-owned.

But BAIC is not the only Chinese auto company to get funding from Bank of China this week.

Read more…