According to conventional wisdom, capital flows are fickle. They are fickle more or less independent of time and place. But different flows exhibit different degrees of volatility: FDI is least volatile, while bank-intermediated flows are most volatile. Other portfolio capital flows rank in between, and within this intermediate category debt flows are more volatile than equity-based flows.
If you’ve opened a bank account in the last few years, you likely had to answer a bunch of more or less intrusive questions about yourself, your background and why you wanted to open the account. Annoying, but part and parcel of Anti-Money Laundering/Combating the Financing of Terrorism (“AML/CFT”) rules that all banks, in all parts of the world, are subject to.
The ostensible purpose is to enable banks to prevent bad actors using the financial system to launder their funds and, where bad actors are not identified at entry, to detect any suspicious financial activity and provide appropriate background to competent authorities. (Whether they are successful in this endeavour is another question.)
More recently large international banks have been upping the ante and have started to disengage altogether from clients from certain geographical regions or certain sectors because they consider the AML/CFT risks too great- a development known as “de-risking”. Often the business lines or countries exited are those that aren’t particularly profitable; the argument being that only a substantial profit margin justifies taking a larger than average risk. The amount of due diligence to be conducted on a customer cuts into that profit margin and the higher the perceived risk of that customer, the more the due diligence, the lower the profit.
One of the sectors particularly affected are non-profit organizations (NPOs). This is an unfortunate consequence of the mistaken and remarkably persistent idea that all NPOs pose a high AML/CFT risk. According to a report published earlier this month by the Charity and Security Network, two-thirds of U.S.-based NPOs working abroad are facing problems accessing financial services. Apart from account closures and account refusals, these also include delays in wire transfers and increased fees.
As a result of these delays, they are sometimes forced to move money through less transparent, traceable, and safe channels. The prevalence and types of problems vary by program area, with NPOs working in peace operations/peacebuilding, public health, development/ poverty reduction, human rights/ democracy building, and humanitarian relief reporting the greatest difficulties. One NPO was prevented from sending immediate relief to the persecuted Rohingya minority in Myanmar in the midst of a dire humanitarian crisis. Timely transmittal of those funds might have saved lives, the charity’s director explained.
We economists did not see the 2008 global financial crisis coming.
Nor did we anticipate, predict or, at least, warn people about the current wave of anti-trade, anti-immigration, and populism!?
To be fair, some economists were sounding alarms in the lead-up to the financial crisis. And even with the current backlash, although we may have missed the chance to predict it, many had warned that we were understating the impacts of global trade and that distributional tensions - the result of an unequal impact of globalization, technological change, and aging on certain groups - were mounting.
It seems very important – especially when considering the ongoing fierce rhetoric with which some policy proposals and decisions are described – to remain cool-headed, carefully analyze data, stay engaged and support reforms that are backed by solid evidence.
After spending 27 years at the World Bank, I retired at the end of January. I ended my career as Senior Director for the Finance and Markets Global Practice. My career at the Bank spanned diverse roles – from country and financial economist to equity portfolio manager in the World Bank treasury, senior advisor in the Italian executive director’s office, manager and then director leading IBRD's financial products innovation work, advisor for the first CFO and then for a managing director, to country director.
In this post, I reflect on my career and argue why it continues to be important for young people to be passionate about international development.
It’s now been about a month since the Trade & Competitiveness Global Practice of the World Bank Group launched TCdata360, our new platform for open trade and competitiveness data from the Bank and external sources. The initial response has been overwhelmingly positive, and it has included a mixture of the anticipated and the unexpected.
Egypt has been the most popular country page during this period, the indicator on the number of days to start a business has been the second most visited page (though it seems to be ceding its spot to the page on venture capital availability) and we have been struck by the number of people that have searched for information on countries that have laws against sexual harassment in the work place (it’s steadily been one of the top 10 most visited pages on the site). Our data stories have attracted attention as well, especially in social media and there has been consistent interest in the API.
The question now is: Where should we take TCdata360 from here? How does a platform grow after the initial excitement around its release has dissipated? How can you or your organization contribute to the growth of the platform?
Here are a few of our ideas at the moment:
- More data – we have a growing inventory of new datasets.
- Better user experience – we are tweaking several things, while keeping what people like (which is most of the site).
- More analytics – we have experimented with Datascoper, a tool to uncover hidden patterns in data, but work remains to make these tools more usable and meaningful.
- Better engagement with our users – we want to show off your work on the site. Tell us about the insightful work you do using our data; we will share it with all our users. And we are all ears about your ideas for other ways to collaborate.
- Continue contributing to the open data community – we plan to offer data literacy and other support; stay tuned for greater emphasis on applied data; we are working to make this and other data truly useful in an applied sense to governments, the private sector, and others.
- Better linkages with the open source world – we built the site on open source and want to share our work with the community; we are constantly looking for tools that we can either integrate into the site or that we should be using. Tell us about them.
As World Bank staff working on financial inclusion, our days revolve around a critical question: what are the most promising ways to improve access to and usage of appropriate financial products for the underserved? A big part of our job is to track the wide range of experiences and learnings from around the world and incorporate them into our work advising policymakers and regulators. We thought it would be useful to share our current thinking, distilled into a list of the top eight approaches to accelerate financial inclusion. This list is from a policymaker perspective, and takes into account the fact that policymakers play a multi-faceted role in financial inclusion, balancing promotion, protection and stability.
First, two caveats. This is subjective list, drawn from our experience. We expect reasonable people to disagree with some of our choices and that’s OK – in fact, debate is welcome.
Second, country context plays a critical role in formulating appropriate approaches to financial inclusion. This list is meant as a general guide for what is impactful in most countries, most of the time.
Geographical location, important seaports, and airports are factors facilitating international trade in the Arab Republic of Egypt. The country’s natural access to sea routes through the Mediterranean and Red Seas offers considerable potential for increasing export participation. As a result, Egypt outperforms the average score of the Logistic Performance Index (LPI) of the developing world (Figure 1).
Figure 1: Overall Logistic Performance Index in 2012 (1=low to 5=high)
Cross-border banking has grown dramatically in recent decades through financial liberalization, consolidation, and integration around the world. In the pursuit of higher profitability and diversification, many banks extended their activities beyond their home countries, opening branches or subsidiaries abroad and making the global banking landscape more international. The share of foreign banks in host countries increased from around 25% in 2000 to 33% in 2007. Even though the share of assets owned by foreign banks declined from 13% in 2007 to 10% in 2013, the share of foreign banks as the total number of banks was still 36% in 2013 (Claessens and Van Horen, 2015).
Investment growth in emerging market and developing economies has tumbled from 10 percent in 2010 to 3.4 percent in 2015 and was below its long-term average in nearly 70 percent of emerging an developing economies in 2015. This slowing trend is expected to persist, and is occurring despite large unmet investment needs, including substantial gaps in infrastructure, education, and health systems.
Countries with large nonrenewable resources can benefit significantly from them, but reliance on revenues from these sources poses major challenges for policy makers. If you are a senior ministry of finance official in a resource-rich country, what are the challenges that you would face and Consider some of the issues that you would likely encounter:
For many resource abundant countries, large and unpredictable fluctuations in fiscal revenues are a fact of life. Resource revenues are highly volatile and subject to uncertainty. Fiscal policies will need to be framed to support macroeconomic stability and sustainable growth, while sensibly managing fiscal risks. Also, there is a question of how to decouple public spending (which should be relatively stable) from the short-run volatility of resource prices.