The nerdier parts of Washington DC have been riveted over the last week by a fight over one of the duller institutions in the city: the Exim Bank, the US’s export credit agency. The battle threatens the very existence, at least in its current form, of the agency that promotes US exports by insuring foreign buyers.
The battle is generally portrayed as a domestic ideological affair that pits true believers in unregulated markets (at least on this issue) against true believers in business. Yet the context inescapably includes other exporting economies, particularly in emerging markets. The stakes for the Exim Bank’s defenders have only been raised by the aggressive use of similar export credit agencies (ECAs) by emerging economies and most particularly China. It remains remarkable that the same US Congress that regularly inveighs against unfair Chinese export competition is also contemplating abolishing the agency that may help redress the balance.
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How do you bank the “unbankable”? The question could hardly be of more importance to small businesses in emerging markets, an estimated 200m of which are starved of the finance they need to grow.
One somewhat unlikely – but increasingly popular – answer is through psychometric tests. By yielding profiles of loan applicants’ honesty, intelligence, aptitude and beliefs, the tests facilitate lending to otherwise “unbankable” borrowers who do not possess a credit history, collateral or accounts.
Artful questions are key to the tests’ efficacy, say finance executives and industry experts. For example, if you want to assess a prospective borrowers’ honesty, it would be naïve to simply ask if they are honest, or if they prize integrity. Continue reading »
As a coordinated entity, the BRICS grouping of emerging markets has produced little except inspiring the name of a widely-read blog.
Next month, the five governments – Brazil, Russia, India, China and South Africa – are planning to erect an actual edifice amid the swirling mists of rhetoric with the launch of a development bank dedicated to filling some of the gigantic hole in the financing of infrastructure and growth in fast-growing emerging economies.
The BRICS are seeking to avoid some of what they say are the faults of the World Bank and regional development banks – too much rich country dominance and too many conditions attached to lending. But that leaves the exact function and operation of the BRICS bank open to a great deal of political jockeying and uncertainties over how it is run.
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Several big risks – including China’s cooling property market, instability in Ukraine and the prospect of tighter global financial conditions over time – still stalk emerging markets (EM) in spite of a reduction in overall risk levels compared to last year, the World Bank said in a report on Tuesday.
In the 154-page report, Global Economic Prospects, the World Bank trims its global GDP forecast for this year to 2.8 per cent year-on-year, down from 3.2 per cent previously. But, it adds; “Despite the early weakness, growth is expected to pick up speed as the year progresses and world GDP is projected to expand by 3.4 per cent in 2015 and 3.5 percent in 2016.” Continue reading »
The World Bank’s private sector lending arm has been very publicly rapped over the knuckles for its handling of an investment in Honduran palm oil company Corporación Dinant, which human rights groups allege has links with death squads and the killing and torture of peasant farmers who claim the land where it operates.
But if the shaming of the IFC in an independent audit by the Office of the Compliance Advisor/Ombudsman (CAO) were not bad enough, Peter Chowla, co-ordinator of the UK-based Bretton Woods Project, says: “Some of the most damaging findings from this case are yet to come.” Continue reading »
The World Bank’s ease of doing business indicators are very important. If you are, say, the Macedonian trade minister, you will know your country’s ranking – and you will cite it at every opportunity to boost foreign investment. (It’s 25, by the way.)
But behind the scenes is a conflict between several countries over how these rankings are compiled. To some, the methodology is biased in favour of outright deregulation. To others it takes no account of levels of corruption. China is trying hard – with little success so far – to influence the process. Continue reading »
The World Bank’s annual ease of doing business indicators were published on Tuesday – and they make a pleasant read for Russian policy makers.
In the last year, Russia has climbed 19 places to position 92, and is now the leading Bric nation. (That is, the country is 92nd out of 189 nations when it comes to the ease of doing business.) Ukraine – the country that has improved the most over the past year – rose 28 notches to 112. Continue reading »
The World Bank slashed its growth forecast for India on Thursday, predicting GDP for the current fiscal year at 4.7 per cent.
Back in April, the Bank was predicting economic growth of 6.1 per cent in the current fiscal year – but a lot has happened since April. Continue reading »
There is much worry among emerging market investors – and policy makers – that it is 1997 all over again. EM currencies have plunged since May. Investors have piled capital into these countries since 2008 and some now fear capital will rush the other way.
Is it 1997 redux? Not in East Asia, according to the World Bank’s East Asia And Pacific Economic Update: most economies here “are in a relatively strong position to face this shock, with significantly lower vulnerabilities than in the run-up to the 1997–98 Asian crises”. Continue reading »
What’s the bigger risk for emerging Asia, the US tapering its QE programme, or the fall-out from years of over-investment in China? In the World Bank’s East Asia And Pacific Economic Update, they get a chapter each in a section titled “Selected Emerging Issues”, which could be better titled “what we should be worried about”.
And the conclusion? Continue reading »
There was plenty of thinly-veiled gloom in the World Bank’s semi-annual update on the economies of East Asia. It expects the region to growth at 7.1 per cent this year, down from its projection of 7.8 per cent six months ago. Most of that is down to falling growth in China, though all the countries covered are experiencing problems of some sort.
All except one, that is: the Philippines. Continue reading »
The World Bank has followed the International Monetary Fund’s lead by slashing its economic growth forecasts for Indonesia and urging the country to carry out “deep reforms” if it is to avoid a prolonged slump.
Just three months since it last updated its predictions, the development lender cuts its GDP projection for this year from 5.9 per cent to 5.6 per cent and for next year from 6.2 per cent to 5.3 per cent. Continue reading »
It looks like another tough battle is in store for one more foreign utility owner fighting back against Bolivian nationalisation.
Red Eléctrica, the Spanish power grid operator, is to seek arbitration at ICSID, the World Bank’s investment dispute settlement agency, after Bolivian troops marched in to take over Transportadora de Electricidad, which handles about three quarters of electricity transmission in the Andrean country, in May last year. Continue reading »
When it comes to loans, Africa has a clear preference: lots from China, a little less from the World Bank please.
According to data compiled by rating agency Fitch, loans from China’s Exim bank to Africa in 2011 were double that of the World Bank, cementing a trend which started around 2005. Continue reading »
You know you’re in trouble when the World Bank counts on an election year to pull your economy out of the doldrums. Especially if you’re Kenya.
Thanks to “another difficult year” in 2012, the World Bank says Kenya will likely miss an earlier predicted growth rate of 5 per cent this year, managing only 4.3 per cent, a drop on the 4.4 per cent of 2011 and far too low to realise the country’s aim to become a middle-income country by 2020. Continue reading »