Contributing Writers: Azad Ali, Tangerine Clarke,
George Alleyne, Nelson King,
Vinette K. Pryce, Bert Wilkinson
GENERAL INFORMATION (718) 260-2500
Caribbean Life, S 10 eptember 20-26, 2019 BQ
By Jomo Kwame
Sundaram and Michael
Lim Mah Hui
KUALA LUMPUR and
PENANG, Sept. 17 2019
(IPS) - Rapid financial globalization
is due not only
to financial innovations,
but also to choices made by
national policymakers, often
with naïve expectations,
trusting promoters’ promises
of steady net inflows of
financial resources.
Rapid financialization
has involved fund or asset
investment managers operating
internationally, managing
assets for transnational
institutional and retail
investors and investing a
growing share of transnational
financial assets. Even
retail investors are attracted
by such fund managers
offering attractive alternatives
for investing in various
asset markets, including
index funds.
To attract foreign institutional
investments interested
in capturing more rents,
they demand more favourable
terms and conditions,
thus changing national
financial systems. Successfully
attracting transnational
finance thus limits ‘emerging
market’ economies’ ‘policy
space’ to develop their
economies.
Facilitating
financialization
The enabling environment
to attract capital inflows typically
allows them to circumvent
regulations and other
institutional constraints.
Deepening national capital
markets by relying on transnational
finance typically
involves ‘subordinate’ or
‘dependent’ financialization.
This typically requires
modifying national financial
systems to better serve transnational
finance and transitioning
from traditional
banking to financial asset
markets. Thus, developing
countries, that open their
capital accounts or encourage
transnational portfolio
investments, become especially
vulnerable.
In the early 2000s, after
the 1997-1998 Asian financial
crises, the Group of 8
(G8) major economies, supported
by the World Bank,
International Monetary
Fund (IMF) and Germany’s
Bundesbank, promoted local
currency bond markets.
Soon, local currency bond
markets in Asia (ex-Japan)
rose ten-fold from US$836
billion in 2000 to US$8.3
trillion in 2015.
Subordinate
securitization
It was claimed that deeper
national securities markets,
especially local currency
bond markets, would redress
both currency and maturity
mismatches of short-term
foreign currency borrowings
by local banks and corporations.
Such markets were
expected to reduce global
imbalances as countries with
surpluses would no longer
need to recycle savings in US
financial markets.
However, an UNCTADSouth
Centre study argued
that local currency bond
markets are ‘double-edged’,
addressing the risks of currency
mismatches for individual
borrowers, while exacerbating
the systemic risks
associated with the nation’s
currency. When developing
economies’ equity and bonds
are largely foreign-held, their
currencies are more vulnerable.
New vulnerabilities
Increasing transnational
integration of national currency,
financial and other
asset markets has transformed
global finance and
its dynamics, including the
roles, relations and room
for manoeuvre for emerging
market and other developing
economies:
• currency markets
are now less influenced by
international trade flows,
but increasingly by capital
flows, and when substantial
enough, by the ‘carry trade’
of those borrowing in lowinterest
rate currencies to
invest in high-interest rate
currency assets, taking on
exchange rate risk to gain
from interest rate arbitrage;
• inter-bank money
markets no longer only
reflect the demand for
and supply of central bank
reserves, but also the effects
of central bank interventions
in currency markets to prevent
excessive appreciation
or depreciation of national
currencies due to market
perceptions of erratic capital
flows;
• with domestic financial
conditions linked to the
By Cameron Diver
Cameron Diver is deputy
director-general, the Pacific
Community (SPC)
New Caledonia, Sept 13,
2019 (IPS) - In less than 10
days, countries from around
the planet will come together
in New York for the United
Nations Secretary General’s
Climate Action Summit. I
look forward to representing
the Pacific Community (SPC)
at this important event, and
throughout “Action Week”
during the upcoming UN General
Assembly.
The interconnections and
synergies between major
issues of global concern and
the key role multilateralism
and international cooperation
can play in helping
tackle these challenges are
illustrated by the agenda of
the week from Sept. 23 to 27.
Underpinned by the Sustainable
Development Goals, each
of the high-level summits will
focus on commitments to
accelerate action across climate
change, enhance efforts
to secure healthy, peaceful
and prosperous lives for all,
mobilise sufficient financing
to realise the 2030 Agenda and
address the specific issues and
vulnerabilities of small island
developing states.
The week of summits
kicks off with a focus on climate
action. And this is, in
my mind, highly appropriate.
The multiplier effect of
climate change undermines
our efforts to achieve the sustainable
development goals,
it increases the challenges of
biodiversity conservation and
sustainable use, it intensifies
competition and the potential
for conflict around natural
resources and it poses
the single greatest existential
threat to the lives and livelihoods
of millions of people
around the globe. From where
I stand, the science on climate
change is clear. To take only
these examples, the IPCC Special
Reports on the impacts of
global warming of 1.5° above
pre-industrial levels and climate
change, desertification,
land degradation, sustainable
land management, food
security and greenhouse gas
fluxes in terrestrial ecosystems
provide us with the most
robust, high quality evidence
base to understand the significant
negative impact climate
change is already having
on our natural environment,
on the wellbeing of people,
ecosystems, flora and fauna
and the massive and poten-
OP-EDS
Increasing
transnational
integration of
national currency,
financial and other
asset markets
has transformed
global finance
and its dynamics,
including the roles,
relations and room
for manoeuvre
for emerging
market and
other developing
economies:
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Continued on Page 11
Continued on Page 11
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Developing economies’
subordinate financialization
Translating ambition
to action: High
hopes for United
Nations Action Week
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