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Bangkok Post
29-07-2025
- Business
- Bangkok Post
Global banking rules need review
In an era of shrinking resources for development finance, global policymakers must shift their focus to making better use of existing funds. Identifying and removing regulatory barriers that hinder the efficient deployment of capital to emerging markets and developing economies (EMDEs) is a good place to start. The Basel III framework, developed in response to the 2008 global financial crisis, has played a crucial role in preventing another systemic collapse. But it has also inadvertently discouraged banks from financing infrastructure projects in EMDEs. At the same time, advanced economies, with debt-to-GDP ratios at historic highs, face mounting fiscal pressures. Servicing these debts consumes a growing share of public budgets just as governments must ramp up defence spending and boost economic competitiveness, resulting in cuts to foreign aid. Together, these pressures underscore the urgent need to mobilise more private capital for investment in EMDEs. Building resilient and sustainable economies will require transformational investments across the developing world in infrastructure, technology, health, and education. According to the United Nations Conference on Trade and Development (UNCTAD), EMDEs must raise more than $3 trillion annually beyond what they can raise through public revenues to meet critical development and climate targets. Amid these challenges, prudential regulation impedes the ability of EMDEs to raise private capital. This issue can be traced back to the global financial crisis, which wiped out $15 trillion in global GDP between 2008 and 2011. Since the crisis stemmed from weak capital and liquidity controls, as well as the unchecked growth of innovative and opaque financial products, Basel III was designed to close regulatory loopholes and bolster oversight, particularly in response to the rise of the non-bank financial sector. While the revised framework addresses the vulnerabilities that triggered the 2008 crisis, its focus on advanced economies and systemically important financial institutions inadvertently imposes several requirements that restrict capital flows to EMDEs. For example, Basel III requires banks to hold disproportionately high levels of capital to cover the perceived risks of financing infrastructure projects in EMDEs. But these risks are often overestimated. In fact, the data suggest that by year five, the marginal default rates for development loans are lower than those for corporate loans extended to investment-grade borrowers. But despite the lower risk profile, banks are required to hold more capital against development-finance loans than they do against loans to unrated companies over the life of the project. Insurers encounter similar regulatory barriers. Under the European Union's Solvency II framework, an insurer investing in an EMDE infrastructure project faces a capital charge of 49% -- nearly double the 25% required for a comparable project in an OECD country. Historical data show that infrastructure loans in EMDEs perform just as well as those in advanced economies. The significantly higher capital costs that banks incur when making infrastructure loans to EMDEs deter them from supporting transformative, high-impact projects, steering capital toward safer, low-impact investments. Multilateral Development Banks (MDBs) -- international financial institutions, backed by guarantees from developed-economy shareholders and AAA credit ratings, can help reduce capital costs by co-financing EMDE projects and providing lenders with additional assurances. But even when MDBs share the risk, the resulting exposures often remain subject to a 100% capital charge, undermining the very benefits that multilateral engagement is meant to provide. To be sure, Basel III's foundational principles are sound. Capital buffers and liquidity ratios that reflect institutional risk profiles are essential for maintaining financial stability. But several rules within the otherwise well-designed Basel III framework limit EMDEs' ability to pursue sustainable development while doing little to mitigate systemic risk. To improve the regulatory framework for EMDEs, the G20 must take four key actions, using this week's meeting of G20 finance ministers and central-bank governors in Durban, South Africa as a platform for cooperative leadership. First, recalibrate capital requirements for infrastructure project finance to reflect real-world default performance, particularly in the post-construction phase. Second, expand the list of MDBs eligible for 0% risk-weighting under Basel III to include high-performing regional institutions, such as the Africa Finance Corporation, that have investment-grade ratings. Third, clarify the definition of "unconditional guarantees" so that more MDB-backed risk-sharing instruments can qualify for favourable regulatory treatment. And lastly, introduce capital-charge discounts for blended finance structures co-financed by A-rated institutions, with the level of discount varying by rating. These reforms do not require new taxpayer commitments; they simply align regulation with actual risk. Implementing them would crowd in more private investment, reduce borrowing costs for developing countries, and accelerate progress toward transformative development that creates much-needed jobs. The G20 must address these regulatory roadblocks so that capital can flow to where it delivers the greatest value. Reaching consensus on how to lower capital costs for emerging-market economies is one of the top priorities at the meeting of G20 finance chiefs. Reforming the Basel III framework would be a relatively low-cost, high-impact way to mobilise investment, drive job creation, and support sustainable growth in emerging markets. ©2025 Project Syndicate. Vera Songwe, is a non-resident senior fellow at the Brookings Institution. Jendayi Frazer, is a visiting fellow at the Hoover Institution. Peter Blair Henry is the Class of 1984 Senior Fellow at the Hoover Institution.
IOL News
16-07-2025
- Business
- IOL News
Singaporean firms seek deeper trade ties with South Africa as gateway to Asia
According to the United Nations Conference on Trade and Development (UNCTAD), Singapore ranks among the top 10 investors in Africa based on foreign direct investment stock, with Singaporean companies investing over $20 billion in the continent by the end of 2023. Singaporean companies have shown a keen interest in partnering with local businesses and State entities, signalling a strategic move to position the continent as a vibrant alternative for investors looking to extend their reach into Asia. This interest coincides with South Africa's government ramping up structural reforms through Phase 2 of Operation Vulindlela, which aims to modernise key sectors, including electricity, water, transport, and digital communications. The move towards liberalising the economy has opened the door for public-private partnerships (PPPs), allowing State-Owned Enterprises like Eskom and Transnet to explore previously sealed industries for domestic and international collaboration. Recently, Transnet inked a 10-year contract with United Manganese of Kalahari (UMK) for the rail transportation of manganese from its Northern Cape mine to export ports. Additionally, the company has engaged Filipino-based International Container Terminal Services (ICTSI) for a 25-year contract to operate and expand the Durban Container Terminal Pier 2, reflecting a newfound openness to international investment. Speaking with Business Report on Wednesday, Jean Ng, regional director for Southern Africa at Enterprise Singapore, said companies like PSA International were particularly keen on establishing a stronger footprint across the continent, seeing South Africa as a critical transport corridor. In Singapore, PSA operates the world's largest transshipment hub and had submitted a bid in the Transnet tender that was won by ICTSI. 'They definitely are interested to land a flag, I would say in terms of South Africa as a key critical transport corridor on that front. So it's just, I guess on that particular project they're just waiting to see what would be the final outcome and if there's a new tender then of course they would proceed to submit their needs accordingly,' Ng said. 'But generally across the continent, even for PSA and some of our other logistics companies, they're also looking at opportunities in which they can do a lot more. When I say do a lot more, traditionally if they're only port operators, they may not look at the logistics end. So now they're also looking into a complete integration to then basically bring more value on the ground when they come in to say I can do end-to-end for the customer. So it's not that different for PSA.' Singapore's strong bilateral relationship with Africa has evolved over the years, fuelled by shared interests in trade, investment, and technology. According to the United Nations Conference on Trade and Development (UNCTAD), Singapore ranks among the top 10 investors in Africa based on foreign direct investment stock, with Singaporean companies investing over $20 billion in the continent by the end of 2023. The he total trade value between Singapore and South Africa reached $1.4bn in 2024, nearly doubling since 2020. Rahul Ghosh, director for Middle East and Africa at Enterprise Singapore, said they were very bullish on the potential of Africa as a continent and see Africa as an opportunity for diversification for Singaporean companies. Ghosh said countries were trying to move away from being commodity-centric and were trying to build more industrial bases. 'So I think those are the fundamentals that we believe are going to enable Africa to kind of unlock the potential that Africa has. But also as an opportunity for diversification, there are Singapore companies who are very relevant to Africa because we've got companies who are very good in developing port facilities, logistics infrastructure, building trade corridors, but not just physical trade corridors, but also digital trade corridors,' Ghosh said. 'We think Asia and Singapore are actually also a good diversification opportunity for African companies, especially in today's context. There are trade and tariff wars happening and there's a lot of uncertainty in terms of geopolitics. The global supply chains are all being reordered. 'So all of this also means that Asia and Singapore can be a perfect bridge for South African companies, South Africa as a country, and Africa at large to diversify their own portfolio of trading partners and investment partners as well. So that's the first point on why Africa is important. It's really an opportunity for diversification.' BUSINESS REPORT
Mint
13-07-2025
- Business
- Mint
Rajrishi Singhal: India must probe the reasons behind rising outward FDI flows
Gift this article A general sense of despair pervades the universe of foreign direct investment (FDI), with flows from one country to another ebbing markedly in 2024. Three separate reports have independently lamented the sharp fall in FDI and concluded that this decline spells trouble particularly for developing countries, which are dependent on foreign investment for enhancing industrial capacity, upgrading infrastructure, modernizing technology and expanding their stock of renewable energy assets. All four factors are critical for economic growth, apart from reducing dependence on fossil fuels. A general sense of despair pervades the universe of foreign direct investment (FDI), with flows from one country to another ebbing markedly in 2024. Three separate reports have independently lamented the sharp fall in FDI and concluded that this decline spells trouble particularly for developing countries, which are dependent on foreign investment for enhancing industrial capacity, upgrading infrastructure, modernizing technology and expanding their stock of renewable energy assets. All four factors are critical for economic growth, apart from reducing dependence on fossil fuels. Waning FDI flows hold critical implications even for the Indian economy, specifically due to the rising tide of outflows and Indian industry's growing preference for overseas investment destinations. Also Read: India's FDI inflows offset by outflows: Blip or worry? The annualWorld Investment Report 2025 from the United Nations Conference on Trade and Development (UNCTAD), states that FDI flows fell 11% in 2024, a second straight year of decline, and the prognosis for 2025 is equally disheartening due to 'high investor uncertainty." However, what shines through in the report was a doubling of project values in the digital sector. But this was not without its drawbacks. According to UNCTAD secretary-general Rebeca Grynspan, 'Despite more than $500 billion in greenfield investment in the digital economy into developing countries over the past five years, this investment is heavily concentrated in a few countries. Many structurally weak and vulnerable economies remain marginalized, constrained by inadequate digital infrastructure, limited digital skills and policy and regulatory uncertainty." The second data release emanated from the Organisation for Economic Cooperation and Development (OECD), a club for rich nations. The OECD report states that while the US, Luxembourg and Canada were the world's top three FDI destinations during 2024, flows to the G-20's non-OECD economies (which includes India) declined by 30%. China witnessed a decline for the third consecutive year. Also Read: Rework India's investment treaty framework to attract FDI flows A third report,Foreign Direct Investment in Retreat: Policies to Turn the Tide, was released by the World Bank. The report, using recent project announcements, states that greenfield FDI to emerging and developing economies (the dominant form of investment flows into these economies) declined 25% during 2024. This indicates a growing distaste for setting up new manufacturing facilities in these markets. The report also nails down the 2008 financial crisis as a turning point for global FDI: flows as a share of global GDP declined from 5% in 2007 to below 1% during both 2023 and 2024, the lowest since the start of this century. All three reports point to heightened trade tensions, policy uncertainty and a breakdown of global value chains due to rising protectionism as the primary reasons for waning FDI. These factors have contributed to a weakening of the global macroeconomic backdrop, further imperilling the near-term outlook for FDI flows. This has an unmistakably adverse impact on India, though the picture may look different at a gross level. Let's unpack this. Among FDI recipients, the UNCTAD report places India at 15th rank in 2024, marginally up from 16th position in 2023. And while greenfield activity was reportedly strong in India (led by semiconductor and metal projects), international project finance inflows contracted by 37%. What makes India's FDI data remarkable, however, is the country's growing outflows. The first category is of existing FDI investors cashing out and taking funds back home. A proportion of these outflows has overseas investors liquidating local holdings in favour of domestic groups. For example, Walt Disney sold its Indian operations (Star India) to Jio and private-equity firm Advent International relinquished its 100% stake in Bharat Serum to Mankind Pharma. However, given the lack of granular data, it becomes difficult to pin down the exact ratio of domestic versus overseas buyouts. Also Read: India's FDI decline seems easier to explain than reverse What seems more disconcerting, though, is Indian businesses increasingly favouring overseas investments rather than putting their money to work at home. Outflows under this category in 2024 jumped 75% over the previous year. Compared with 2016-17, outflows in 2024-25 were more than four times larger. According to the World Bank's report: 'Among the push factors that tend to encourage FDI outflows from the source country are its weak growth prospects, macroeconomic risks, political instability, rising production costs, and deterioration of the regulatory environment." The growing volume of outflows seems counter-intuitive, since the government has initiated policies to both facilitate FDI inflows—such as higher FDI caps in a number of sectors (insurance and defence, for instance) and liberalized rules for construction or single brand retail trading—and expedite domestic manufacturing (such as its production-linked incentive scheme). Typically, the largest sources of outward FDI are rich economies with capital account convertibility, barring conduits like the Netherlands or Singapore. For example, the US and Japan occupy the top two spots in the outward FDI league tables, while China, with partial convertibility, is in third place. India, in contrast, is still a low-middle income economy and the rupee's internationalization is lower than the renminbi's. It thus becomes imperative for the Indian government to probe the reasons behind India Inc's reluctance to invest at home, despite all the incentives, low interest rates and generous tax breaks. The author is a senior journalist and author of 'Slip, Stitch and Stumble: The Untold Story of India's Financial Sector Reforms' @rajrishisinghal Topics You May Be Interested In
Muscat Daily
07-07-2025
- Business
- Muscat Daily
Oman ranked 4th among developing economies in digital FDI
Muscat – Oman ranked fourth globally among developing economies in attracting foreign direct investment (FDI) for greenfield projects in information and communications technology infrastructure between 2020 and 2024, according to the World Investment Report 2025 released by United Nations Conference on Trade and Development. The report highlights Oman's growing role as a regional hub for digital infrastructure, innovation and emerging technologies. The sultanate's ranking reflects its success in attracting substantial digital-related investment, surpassing several advanced economies. Government Communication Centre stated that Oman attracted foreign investment worth US$1.7bn in digital infrastructure projects during this period. The volume of new investments in the digital economy nearly tripled, driven by implementation of the National Digital Economy Programme and broader national efforts to transform Oman into a knowledge-based economy. Mexico tops the list in the category with US$5.2bn in investment, followed by Nigeria (US$4.3bn), Malaysia (US$2.2bn), and Brazil (US$1.6bn) ranked fifth. The achievement underscores the sultanate's strategic vision under Oman Vision 2040 to diversify the economy and enhance its attractiveness as a destination for technology-driven investment. It also reflects the effectiveness of national policies aimed at improving digital readiness and fostering a competitive, innovation-led investment environment. In 2024, Oman launched the National Programme for Artificial Intelligence and Advanced Digital Technologies, which will run through to 2026. The programme aims to boost the ICT sector's role in the economy and align national capabilities with global advancements in AI. Key components of the programme include introduction of AI and data analysis in school curricula to build essential digital skills among youth, and development of a national open data platform to support entrepreneurs, investors and policymakers. A national research centre for AI will also be established to advance academic and scientific research, while an AI studio will offer sector-specific solutions for professionals and institutions. The programme targets a rise in Oman's position in the global Government Readiness Index for AI and aims to increase the digital economy's contribution to GDP from 2% in 2021 to 10% by 2040. These efforts underline Oman's commitment to building a resilient, tech-driven economy.
The Hindu
05-07-2025
- Politics
- The Hindu
With PM Modi in Argentina, Congress recalls India's deep connect with country, Indira's 1968 visit
With Prime Minister Narendra Modi in Argentina, Congress leader Jairam Ramesh on Saturday (July 5, 2025) recalled India's deep connection with that country and then PM Indira Gandhi's visit to Buenos Aires in 1968. Mr. Ramesh also recalled that Raul Prebisch, an Argentine economist who was very influential in the 1950s and 1960s, helped establish the United Nations Conference on Trade and Development (UNCTAD). He said that the Global South, a term now used by Prime Minister Modi and External Affairs Minister S. Jaishankar, was propagated by UNCTAD, although it was first used by British banker Oliver Franks way back in 1960. "The Super Premium Frequent Flier is in Argentina today. 3 down, 2 more to go. To Indians, Argentina instantly means Diego Armando Maradona and Lionel Messi. But there are three deeper connects as well," Mr. Ramesh said in his post on X. Rabindranath Tagore spent time in Argentina in November 1924 at the invitation of Victoria Ocampo, a prominent literary figure, he said. "Tagore's works were already very well known. He and Ocampo developed a warm friendship which has been written about extensively by Tagore's biographers, with Ketaki Kushari Dyson having devoted an entire book to it," he said. Tagore's collection of 52 lyrical poems called "Purabi" — published exactly a hundred years ago — was dedicated to 'Vijaya', his name for Ocampo, Mr. Ramesh pointed out. "In September 1968, Indira Gandhi met Ocampo in Buenos Aires and conferred on her the honorary degree of Doctor of Literature of Tagore's Visva-Bharati University, in which she had herself spent nine months beginning July 1934," Mr. Ramesh said. He further said that Jorge Luis Borges, who got some of his initial breaks through Ocampo, was a titan of 20th-century Argentinian and Spanish literature. "When he was seven years old in 1906, Borges had read Sir Edwin Arnold's The Light of Asia and that led him to read and explore the life of the Buddha even more. The impact of the Buddha is reflected in Borges's short stories, essays, poems, and lectures," he said. The Super Premium Frequent Flier is in Argentina today. 3 down, 2 more to go. To Indians, Argentina instantly means Diego Armando Maradona and Lionel Messi. But there are three deeper connects as well. Rabindranath Tagore spent time in Argentina in November 1924 at the… — Jairam Ramesh (@Jairam_Ramesh) July 5, 2025 Ten years before his death in 1986, Borges's book "Que es el budismo" (What is Buddhism), reflecting a lifetime of fascination with the Buddha, was published, Mr. Ramesh noted. On July 6, 1977, Borges gave his famous lecture on Buddhism in Buenos Aires, which survives on YouTube, he said. The Congress leader also recalled Prebisch as a very influential economist in the 1950s and especially in the 1960s. 'He helped establish the United Nations Conference on Trade and Development, an organisation that earned its place in world economic history as UNCTAD. Dr. Manmohan Singh had worked in UNCTAD in New York during January 1966-May 1969, and there is a lovely picture of him with his two daughters during this time.' "UNCTAD's second session had been held in New Delhi during January-March 1968 — the first time a developing country was hosting a major UN event," Mr. Ramesh noted. It was UNCTAD that propagated the idea of G77, a collective of developing countries that has become influential in global forums, Mr. Ramesh said. "The collective now has 133 developing countries. China does not consider itself as a formal member and so the collective is called G77 plus China," he said. "Global South is another term now very much in use by Mr. Modi and the External Affairs Minister — this term too was propagated by UNCTAD, although it was first used by a British banker Oliver Franks way back in 1960," Mr. Ramesh said. Mr. Ramesh also shared two photographs — one of Singh from his time at UNCTAD and another of Gandhi with Ocampo at Buenos Aires. In another post, Mr. Ramesh said Argentina issued stamps in honour of Gandhi in 1986. He also shared pictures of the stamps. Earlier, Prime Minister Modi arrived in Buenos Aires on a two-day visit and was accorded a ceremonial welcome upon his arrival at the Ezeiza International Airport. This is the first Indian bilateral visit at the prime ministerial level to Argentina in 57 years. It is Mr. Modi's second visit to the country as Prime Minister. He last visited the country in 2018 for the G20 Summit. In the fourth leg of his visit, Mr. Modi will travel to Brazil to attend the 17th BRICS Summit, followed by a state visit. In the final leg of his visit, Mr. Modi will travel to Namibia.
