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Financial Sector

“Grow Now Clean Up Later” No Longer an Option for India

Muthukumara Mani's picture

India’s stellar economic performance during the past decade has brought immense benefits to the people. Emmployment opportunities have increased, enabling millions to emerge from poverty.

But rapid growth has been clouded by a degrading environment and a growing scarcity of natural resources. Today, India ranks 155th among 178 countries accounting for all measurable environmental indicators, and almost dead last in terms of air pollution. What’s more, more than half of the most polluted cities in the G-20 countries are in India. The deteriorating environment is taking its toll on the people’s health and productivity – and costing the economy a staggering Rs. 3.75 trillion each year (US$80 billion) - or 5.7 percent of GDP. So, does growth – so essential for development – have to come at the price of worsened air quality and other environmental degradation? Fortunately, India does not have to choose between growth and the environment.

How to Fix Fragile States? The OECD Reckons it’s All Down to Tax Systems.

Duncan Green's picture

‘Over-generous tax exemptions awarded to multinational enterprises often deprive fragile states of potential revenues that could be used to fund their most pressing needs.’ Another broadside from rent-a-mob? Nope, it’s the ultra respectable OECD in its Fragile States 2014 report.

After years of growth, aid to fragile states started to fall in 2011, so the report centres around an urgent call for OECD member states to help their more fragile cousins find a post-aid arrangement that funds essential state functions and builds the ‘social contract’ with citizens.

The key is a shift from aid dependence to ‘domestic resource mobilization’ (taxes and natural resource royalties), currently averaging a feeble 14% of GDP across fragile states and far too dependent on royalties from oil, gas and mineral extraction. Foreign direct investment (factories, farms etc) is generally low in volume and volatile.

Weekly Wire: The Global Forum

Roxanne Bauer's picture
These are some of the views and reports relevant to our readers that caught our attention this week.
 

The Mobile-Finance Revolution
Foreign Affairs
The roughly 2.5 billion people in the world who live on less than $2 a day are not destined to remain in a state of chronic poverty. Every few years, somewhere between ten and 30 percent of the world’s poorest households manage to escape poverty, typically by finding steady employment or through entrepreneurial activities such as growing a business or improving agricultural harvests. During that same period, however, roughly an equal number of households slip below the poverty line. Health-related emergencies are the most common cause, but there are many more: crop failures, livestock deaths, farming-equipment breakdowns, even wedding expenses.  In many such situations, the most important buffers against crippling setbacks are financial tools such as personal savings, insurance, credit, or cash transfers from family and friends. Yet these are rarely available because most of the world’s poor lack access to even the most basic banking services.


Mozilla plans '$25 smartphone' for emerging markets
BBC Technology
Mozilla has shown off a prototype for a $25 (£15) smartphone that is aimed at the developing world. The company, which is famed mostly for its Firefox browser, has partnered with Chinese low-cost chip maker Spreadtrum. While not as powerful as more expensive models, the device will run apps and make use of mobile internet. It would appeal to the sorts of people who currently buy cheap "feature" phones, analysts said. Feature phones are highly popular in the developing world as a halfway point between "dumb" phones - just voice calls and other basic functions - and fully-fledged smartphones.

Quote of the Week: Helle Thorning-Schmidt

Sina Odugbemi's picture

"It’s still true that the market is a lousy master but a good servant, and that means that we still have to have a market economy but we have to control it and regulate it to the benefit of everyone. That’s still my line and that’s still how I feel about social democracy.” 

- Helle Thorning-Schmidt, a Danish politician serving as the Prime Minister of Denmark since 3 October 2011 and the Leader of the Social Democrats since 12 April 2005. She is the first woman to hold either post.

This Week in #SouthAsiaDev

Liana Pistell's picture
We've rounded up 15 Tweets, posts, links, and +1's on South Asia-related development news, innovation, and social good that caught our eye this week. Countries included: Bhutan, Bangladesh, India, Nepal, Pakistan, Sri Lanka. For regular #SouthAsiaDev updates, follow us on Facebook and Twitter

Dialogue with Central Asian countries

Laura Tuck's picture

Bishkek, Kyrgyz Republic – Laura Tuck, the vice president for the World Bank’s Europe and Central Asia unit, talks about her trip to Kazakhstan, the Kyrgyz Republic, Tajikistan and Uzbekistan and important issues related to the economic growth of the region that she discussed in these Central Asian countries.


 

Islamic Finance: A Quest for Publically Available Bank-level Data

Amin Mohseni-Cheraghlou's picture

Attend a seminar or read a report on Islamic finance and chances are you will come across a figure between $1 trillion and $1.6 trillion, referring to the estimated size of the global Islamic assets. While these aggregate global figures are frequently mentioned, publically available bank-level data have been much harder to come by.

Considering the rapid growth of Islamic finance, its growing popularity in both Muslim and non-Muslim countries, and its emerging role in global financial industry, especially after the recent global financial crisis, it is imperative to have up-to-date and reliable bank-level data on  Islamic financial institutions from around the globe.

To date, there is a surprising lack of publically available, consistent and up-to-date data on the size of Islamic assets on a bank-by-bank basis. In fairness, some subscription-based datasets, such Bureau Van Dijk’s Bankscope, do include annual financial data on some of the world’s leading Islamic financial institutions. Bank-level data are also compiled by The Banker’s Top Islamic Financial Institutions Report and Ernst & Young’s World Islamic Banking Competitiveness Report, but these are not publically available and require subscription premiums, making it difficult for many researchers and experts to access. As a result, data on Islamic financial institutions are associated with some level of opaqueness, creating obstacles and challenges for empirical research on Islamic finance.

Quote of the Week: Philip Stephens

Sina Odugbemi's picture

 "It is time to admit defeat. The bankers have got away with it. They have seen off politicians, regulators and angry citizens alike to stroll triumphant from the ruins of the great crash.”

- Philip Stephens, associate editor and chief political commentator of  the Financial Times.
 

Assessing the Assessors: From Form to Substance

Jean Pesme's picture



How good are the experts at evaluating countries’ anti-money-laundering and combating the financing of terrorism (AML/CFT) systems? That was the central question in a new report released last week by the Center on Law and Globalization. The report takes a critical look at the IMF’s evaluations of the AML/CFT systems of 150 countries from 2004 to 2013. Although we may differ on some of the analysis and recommendations, the report provides ample food for thought and raises issues that need to be addressed and, in certain instances, corrected.

It isn’t possible here to provide a full overview of all the points raised in the report, but a few key messages stand out:

The report finds that assessors were too focused on formal compliance (“rules on the books”) and did not, in any systematic fashion, try to ascertain the real impact of a country’s entire AML/CFT regime in practice. In the words of the report, “Reliance (by assessors) was placed on the prima facie plausibility of the claim that adherence to the [international AML] standards would help reduce money laundering and the financing of terrorism.” This criticism goes to a wider point: that evaluations were conducted without a clear articulation of the objectives to be achieved by AML/CFT measures. If you don’t know what a system is meant to accomplish, how can you evaluate it?

These are valid points and they hold true, not just for IMF evaluations, but also for others (including the World Bank) who carried out assessments using the same internationally agreed methodology. However, the report fails to take due account of the considerable work that has been undertaken in recent years to address and correct those shortcomings.

Since 2010, an intensive process of revision has been underway to improve the AML/CFT standards and the assessment methodology. There has been a long and vigorous debate within the Financial Action Task Force (FATF), the global standard-setter on these issues, and between the FATF and other bodies, about the best way to remedy the system’s deficiencies to make assessment reports more useful. Both the Bank and the Fund have played a very active role in this discussion.

As a result of this process, the new standards approved in 2012, along with a new methodology approved in 2013, provide a framework to address those concerns: Countries’ AML/CFT systems are to be judged based upon an assessment of their effectiveness in addressing a country’s ML/FT risks. Are government interventions commensurate to the risks faced? For example, a country with a negligible financial sector and a high use of cash should probably not spend too much money and manpower on policing its securities sector. Conversely, a sophisticated financial center providing easily usable incorporation services should probably keep a close eye on company registration. As a participant in this process, the World Bank has been a strong proponent of this pivot toward risk and effectiveness. In our view, only such an approach can help countries make meaningful decisions regarding their priorities and their strategies.

Weekly Wire: the Global Forum

Roxanne Bauer's picture

These are some of the views and reports relevant to our readers that caught our attention this week.

How Information Flows During Emergencies
MIT Technology Review
Mobile phones have changed the way scientists study humanity. The electronic records of these calls provide an unprecedented insight into the nature of human behaviour revealing patterns of travel, human reproductive strategies and even the distribution of wealth in sub-Saharan Africa. All of this involves humans acting in ordinary situations that they have experienced many times before. But what of the way humans behave in extraordinary conditions, such as during earthquakes, armed conflicts or terrorist incidents? READ MORE.

‘Fragile Five’ Is the Latest Club of Emerging Nations in Turmoil
The New York Times
The long-running boom in emerging markets came to be identified, if not propped up, by wide acceptance of the term BRICs, shorthand for the fast-growing countries Brazil, Russia, India and China. Recent turmoil in these and similar markets has produced a rival expression: the Fragile Five. The new name, as coined by a little-known research analyst at Morgan Stanley last summer, identifies Turkey, Brazil, India, South Africa and Indonesia as economies that have become too dependent on skittish foreign investment to finance their growth ambitions. The term has caught on in large degree because it highlights the strains that occur when countries place too much emphasis on stoking fast rates of economic growth. READ MORE.


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