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1. COVID-19’s reality shock for external-funding dependent emerging economies

Author:
Alicia Garcia-Herrero and Elina Ribakova
Publication Date:
05-2020
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
COVID-19 is by far the biggest challenge policymakers in emerging economies have had to deal with in recent history. Beyond the potentially large negative impact on these countries’ fiscal accounts, and the related solvency issues, worsening conditions for these countries’ external funding are a major challenge.
Topic:
Monetary Policy, Regulation, Finance, Economy, Central Bank, and COVID-19
Political Geography:
Europe, Asia, and Latin America

2. Unlocking the Potential of Private Financing for Low-carbon Energy Transition: Ideas and Solutions from ASEAN Markets

Author:
Venkatachalam Anbumozhi
Publication Date:
01-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Under the Paris Agreement in 2015, the opportunities for the ASEAN Member States (AMS) to maximise low-carbon energy sources to achieve the Nationally Determined Contributions (NDC) target in reducing carbon emission levels have expanded. In order to move towards a low-carbon energy transition, private sector actors must work together with governments to implement strategies to invest in the low-carbon economy. However, major barriers such as insufficient enabling policy environment, availability of technologies and access to funding somehow impede the implementation. It is believed that unlocking the potentials of private sector would accelerate the transition of low-carbon energy. This paper, based on a market survey, which aimed to identify barriers and risks that private sectors face in accelerating the low-carbon investments. The survey respondents are divided into two categories, Lenders and Borrowers. Analysing 110 total respondents helped to identify the perceived and actual barriers as well as risks underlying to the access to financing and generated potential solution for policymakers to overcome these barriers. The survey results indicate that the main obstacles faced by private sectors are incoherent policies that created a high-risk environment for investment, a lack of access to de-risking mechanisms, and insufficient capacity to communicate the opportunities amongst financial institutions and project developers. To bare these risks, this paper suggests four interdependent solutions – establishment of a low-carbon transition fund, government warranty programme, broadening of de-risking mechanisms, and capacity building programme to accelerate the low-carbon energy transition across ASEAN.
Topic:
Energy Policy, Finance, Renewable Energy, and Private Sector
Political Geography:
Asia and Southeast Asia

3. The Effects of Financial Inclusion on Development Outcomes: New Insights from ASEAN and East Asian Countries

Author:
Rajabrata Banerjee, Ronald Donato, and Admasu Afsaw Maruta
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study empirically examines the effects of financial inclusion on economic development, – economic growth, education, health, and income inequality – in 20 Asian countries in the period 2004-2015. The financial inclusion index at an aggregate level is constructed using a hybrid methodology (reported in the previous paper) and we empirically examine its relationship with particular development outcomes. We then disaggregate the index into the three dimensions of financial inclusions – access, usage, and quality – and further into the top two indicators from each dimension based on principal component analysis scores (reported in the previous paper), to examine whether specific dimensions or indicators are more strongly associated with particular development outcomes than with others. Our results show that aggregate financial inclusion has a strong positive effect on all development outcomes and this effect improves for countries with lower political risk. At the dimension level, while usage is the only dimension impacting on economic growth, and access is the only dimension impacting on health outcomes, both usage and access influence education and income inequality. Moreover, the top ranked indicators in each dimension exert a far greater positive influence on development outcomes than the second highest ranked indicators. Our findings show that adopting a single blanket policy may not be appropriate to realise the full potential of financial inclusion in a less developed country. Policy prescriptions should therefore target specific dimension and indicators of financial inclusion to maximise the positive effect on development outcomes.
Topic:
Development, Health, Finance, and Fiscal Policy
Political Geography:
Asia

4. The Composition of Financial Inclusion in ASEAN and East Asia: A New Hybrid Index and Some Stylised FactsThe paper provides an overview of the existing measures of financial inclusion and critically evaluates the two widely used existing methodologies to measure the dimensions – the principal component analysis (PCA) method and the Distance method, respectively. We subsequently propose a new hybrid financial inclusion index, which draws on the strengths of existing measures. We propose four key stylised facts by critically evaluating three dimensions of financial inclusion – access, usage, and quality in 22 Asian countries in the period 2004-2015. Utilising PCA scores, we identify the top two indicators under each dimension and by country, which are directly relevant for policy perspectives. An important finding is that the top five and the bottom five countries are the same under all three methodologies. There is a pattern across countries in adopting usage, access, and quality dimensions of financial inclusion over time. We also find that the top two indicators appear to play a significant role across all developing countries in the sample.

Author:
Rajabrata Banerjee and Ronald Donato
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
The paper provides an overview of the existing measures of financial inclusion and critically evaluates the two widely used existing methodologies to measure the dimensions – the principal component analysis (PCA) method and the Distance method, respectively. We subsequently propose a new hybrid financial inclusion index, which draws on the strengths of existing measures. We propose four key stylised facts by critically evaluating three dimensions of financial inclusion – access, usage, and quality in 22 Asian countries in the period 2004-2015. Utilising PCA scores, we identify the top two indicators under each dimension and by country, which are directly relevant for policy perspectives. An important finding is that the top five and the bottom five countries are the same under all three methodologies. There is a pattern across countries in adopting usage, access, and quality dimensions of financial inclusion over time. We also find that the top two indicators appear to play a significant role across all developing countries in the sample.
Topic:
Finance
Political Geography:
Asia

5. The Poverty-Reducing Effects of Financial Inclusion: Evidence from Cambodia

Author:
Kimty Seng
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
This study analyses the effects of financial inclusion on poverty in terms of household income per capita in Cambodia, with data from the FinScope Survey carried out in 2015. The analysis describes the effects via financial literacy, accounting for endogenous selection bias resulting from unobserved confounders and for structural differences between users and non-users of financial services in terms of income functions. The findings suggest that the use of financial services is very likely to make a great contribution to reducing household budget deficits and poverty if the users, female in particular, have at least basic financial knowledge.
Topic:
Poverty, Inequality, Finance, and Financial Services
Political Geography:
Asia and Cambodia

6. Financial Inclusion, Active Bank Accounts and Poverty Reduction in India

Author:
Tony Cavoli, Ilke Onur, and Patricia Sourdin
Publication Date:
09-2020
Content Type:
Working Paper
Institution:
Economic Research Institute for ASEAN and East Asia (ERIA)
Abstract:
Using the World Bank’s Global Findex data, this research first shows that the efforts by the Indian Government and the Reserve Bank have been successful in providing access to formal banking services, especially in the rural areas of the country. Similarly, financial account ownership gap has been eliminated in terms of gender and income. Further analysis, using the Financial Inclusion Insights dataset, shows that financial inclusion has a positive and significant effect on reducing poverty in India. A closer look at the utilisation of the financial accounts shows that active usage of these accounts would lead to further reductions in poverty levels in India. Therefore, targeted programmes, such as offering financial education both in and outside schools, with the aim of improving financial literacy, could lead to further poverty reduction in India.
Topic:
Education, Poverty, Finance, and Banks
Political Geography:
India and Asia

7. Exposing the Financial Footprints of North Korea’s Hackers

Author:
Jason Bartlett
Publication Date:
11-2020
Content Type:
Special Report
Institution:
Center for a New American Security
Abstract:
North Korea conducts intricate and sweeping cyberattacks against the United States and its allies to acquire funds to support its illicit nuclear proliferation efforts. Unlike more economically advanced nuclear states possessing domestic research, development, and deployment capacities to establish weapon of mass destruction (WMD) programs, the Democratic People’s Republic of Korea (DPRK) must seek financial resources, assistance, and institutional knowledge, at least initially, from overseas. It has developed its cyber capabilities in order to circumvent financial sanctions and global safeguards, conducting elaborate online bank heists and hacking attacks; stealing funds through fraudulent bank transfers, Society for Worldwide Interbank Financial Telecommunications (SWIFT) transactions, and ATM cash-outs; launching ransomware attacks demanding payment in cryptocurrency; and hacking cryptocurrency exchanges. The scale and sophistication of these innovative sanctions evasion tactics create a challenge that calls for stronger measures to confront them. In addition to providing policy recommendations for U.S. leadership and financial institutions, this report will outline the ways North Korea supports, expands, and utilizes cyber operations to acquire funds for its nuclear weapons program.
Topic:
Science and Technology, Cybersecurity, and Finance
Political Geography:
Asia, North Korea, North America, and United States of America

8. The Effect of Export Insurance and Guarantees on Export Performance: An Empirical Analysis for Korea

Author:
Kyunghun Kim and Hyelin Choi
Publication Date:
08-2019
Content Type:
Working Paper
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
There is a series of empirical papers (Kim and Lee 2004; Egger and Url, 2006; Moser, Nestmann, and Wedow, 2008; Baltensperger and Herger, 2009; Auboin and Engemann, 2014; Van der Veer. 2015) which show that trade finance is positively associated with export. Despite its positive impact on export, trade finance has been a contentious issue in international organizations such as the WTO and OECD in terms of implementing related policy measures. This is based on the argument that trade finance hurts fair international trade because it ultimately plays a role just like a subsidy. Regarding this contentious issue, in this paper we examine whether there is evidence supporting that trade finance is associated with an increase in export. We also investigate the channel through which the effect of the trade finance on export is working. To this end, we focus on a specific part of trade finance: short-term export insurance and export credit guarantee. This is because noble and ample data on these types of trade insurance are available. This confidential data is provided by the Korea Insurance Trade Corporation (henceforth K-SURE) exclusively. We conduct a panel regression using Korean sector-level export data covering from 2010Q1 to 2017Q4. This dataset enables us to control for destination country-, sector-, and time-fixed effects. Our empirical results show that the short-term export insurance and export credit guarantee have a positive impact on exports, and the main channel behind this is related to mitigating financial constraints of exporting firms. The trade finance effectively eliminates the risk of importers' payment, which helps export firms reduce the financial frictions. This ultimately leads to an increase in export. Since the main mechanism in which the trade insurance affects export is related to alleviating financial frictions, it becomes more definite that the way how trade insurance contributes to an increase in export is somewhat different from that of a subsidy. When we consider the fact that financial friction is an important factor for restraining international trade, which can partly explain the great collapse in international trade during the global financial crisis, the trade insurance policies would rather be a useful policy measure which can dampen negative impact on export during recession.
Topic:
Finance, Economic Policy, Exports, and Trade Policy
Political Geography:
Asia and South Korea

9. Financial Development in Myanmar and the Role of Japan

Author:
Tomoo Kikuchi and Takehiro Masutomo
Publication Date:
05-2019
Content Type:
Working Paper
Institution:
Centre for Non-Traditional Security Studies (NTS)
Abstract:
Since 2011, under the Thein Sein government, Myanmar has started to build financial institutions almost from scratch. Japan has played a leading role in this effort, writing off debt, opening the Yangon Stock Exchange, vying for the entry of Japanese banks, and laying out finance-related laws. Myanmar’s weak institutions present considerable challenges. By examining common features of financial markets in Southeast Asia, this paper identifies the preconditions for financial development to be a vehicle for Myanmar’s industrialisation as well as the rationale for Japan’s public and private involvement in Myanmar.
Topic:
Foreign Policy, Finance, Institutions, Private Sector, and Industrialization
Political Geography:
Japan, Asia, and Myanmar

10. Global E-Commerce Talks Stumble on Data Issues, Privacy, and More

Author:
Gary Clyde Hufbauer and Zhiyaou (Lucy) Lu
Publication Date:
10-2019
Content Type:
Policy Brief
Institution:
Peterson Institute for International Economics
Abstract:
In early 2019, several important members of the World Trade Organization (WTO) submitted noteworthy proposals in a realm of international commerce that has evolved faster than rules to govern it: e-commerce or digital trade. While countries agree on less controversial subjects like banning unsolicited commercial electronic messages, the three leading WTO members—China, the European Union, and the United States—have big differences in their approaches to more challenging issues: data flows, data localization, privacy invasions by data collectors, transfer of source code, imposition of customs duties and internet taxes, and internet censorship. Their differing viewpoints lead Hufbauer and Lu to conclude that the prospect of reaching a high-level WTO e-commerce agreement is not promising. To reach an agreement, either most of the contentious issues must be dropped or the number of participating countries must be sharply reduced. A WTO accord, even of low ambition, would have value if only to establish basic digital norms on matters such as banning unsolicited commercial messages and protecting online consumers from fraudulent practices. A more ambitious accord covering the controversial issues should be negotiated in bilateral and/or plurilateral/regional pacts rather than in the WTO.
Topic:
Economics, World Trade Organization, Finance, Privacy, and Data
Political Geography:
China, Europe, Asia, North America, United States of America, and European Union