Financial Opening under the WTO Agreement in Selected Asian Countries: Progress and Issues

Kim, Yun-Hwan Working Paper Financial Opening under the WTO Agreement in Selected Asian Countries: Progress and Issues ERD Working Paper Series, No. 24 Provided in Cooperation with: Asian Development Bank (ADB), Manila Suggested Citation: Kim, Yun-Hwan (2002) : Financial Opening under the WTO Agreement in Selected Asian Countries: Progress and Issues, ERD Working Paper Series, No. 24, Asian Development Bank (ADB), Manila, https://hdl.handle.net/11540/1966 This Version is available at: https://hdl.handle.net/10419/109248 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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If the documents have been made available under an Open Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. http://creativecommons.org/licenses/by/3.0/igo ECONOMICS AND RESEARCH DEPARTMENT ERD WORKING PAPER SERIES NO. 24 Yun-Hwan Kim September 2002 Asian Development Bank Financial Opening under the WTO Agreement in Selected Asian Countries: Progress and Issues ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 28 ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES YUN-HWAN KIM September 2002 Yun-Hwan Kim is a Principal Economist at the Economics and Research Department, Asian Development Bank. 29 Asian Development Bank P.O. Box 789 0980 Manila Philippines 2002 by Asian Development Bank September 2002 ISSN 1655-5252 The views expressed in this paper are those of the author(s) and do not necessarily reflect the views or policies of the Asian Development Bank. ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 30 Foreword The ERD Working Paper Series is a forum for ongoing and recently completed research and policy studies undertaken in the Asian Development Bank or on its behalf. The Series is a quick-disseminating, informal publication meant to stimulate discussion and elicit feedback. Papers published under this Series could subsequently be revised for publication as articles in professional journals or chapters in books. ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 32 Contents I. Introduction 1 II. Relation between Financial Services Liberalization and Capital Account Liberalization 2 III. Overview of Financial Opening under GATS in Selected Asian Countries 4 A. Definition of Financial Services 4 B. Commitments of Individual Countries 4 IV. Implications of Banking Sector Opening 14 A. People’s Republic of China 14 B. Republic of Korea 17 C. Indonesia and Malaysia 19 V. Comparative Assessment of Financial Opening Policies 22 VII. Conclusion 26 References 27 31 Abstract Opening of financial services has enormous policy implications for a member country. As demonstrated by the 1997 Asian crisis, mismanagement of financial opening may lead to disastrous economic consequences. Only prudent financial policies, including implementation of commitments under the General Agreement on Trade in Services, can result in macroeconomic stability, sustained output growth, and financial sector development. This paper examines six selected countries, i.e., People’s Republic of China (PRC), Indonesia, Republic of Korea (Korea), Malaysia, Singapore, and Thailand. For the PRC, successful liberalization of financial services trade is of great importance. For the five other countries, all crisis-affected, there is a need to review ongoing financial liberalization policies and explore future directions. The paper examines the relationship between financial services liberalization and capital account liberalization, GATS and/or multilateral commitments made by the countries, progress in compliance of the commitments and their impact, and implications and issues of financial opening with focus on the banking sector. The paper suggests three guiding principles in opening financial services: (i) resource mobilization for economic recovery and sustained development, (ii) financial stability, and (iii) market competition. 1 I. INTRODUCTION The General Agreement on Trade in Services (GATS) provides an international regulatory framework for administering global liberalization of trade in services.1 Its major component is trade in financial services. The increasing importance of services trade led to the establishment of the GATS as one of the new areas in the Uruguay Round negotiations, although developing countries, in general, initially had reservations. The reservations were based on the perception that services, unlike goods, are exported more from developed economies to developing economies, and that domestic service industries remained at an underdeveloped stage requiring further protection and regulation. Against this backdrop, the GATS allows remarkable flexibility within which the member governments of the World Trade Organization (WTO) determine their level of obligations. Four main elements of flexibility underlie the GATS (WTO 2002): (i) Member governments choose those service sectors or subsectors in which they will make commitments, guaranteeing the right of foreign suppliers to provide the service. Each member must have a schedule of commitments, but there is no minimum required coverage—members may cover only a small part of one sector. (ii) For those services that are committed, the governments may set limitations specifying the level of market access and the degree of national treatment they are prepared to guarantee. (iii) The governments are able to limit commitments to one or more of the four recognized “modes of supply”2 through which services are traded, and they may also withdraw and renegotiate commitments. (iv) In order to provide more favorable treatment to certain partners, the governments may take exemptions, in principle limited to 10 years, from the most-favored-nation (MFN) principle,3 which is otherwise applicable to all services, whether scheduled or not. This flexibility in the scheduling of commitments contributed to the early resolution of the north-south controversy over services trade. 1Generally, the GATS rules over all services with two exceptions, namely the services provided in the exercise of governmental authority and, in the air transport sector, air traffic rights and all services directly related to the exercise of traffic rights. 2GATS identifies four different modes of trade in services. Mode 1 (cross-border) means that the service is delivered to consumers in the trade partner country across borders; in Mode 2 (consumption abroad), consumers go to the service provider; in Mode 3 (commercial presence), the providers establish a branch or subsidiary; and in Mode 4 (movement of natural persons), individuals travel from their own country to supply services in another. In the case of the first two, the provider of services stays in the home country, whereas the provider comes to the country of the consumers in Mode 3. Mode 3 is presently the dominant mode of financial service trade (WTO 2002). 3The MFN principle applies also to newly acceding countries. The MFN principle or nondiscrimination principle means treating one’s trading partners equally. It guarantees equal opportunities for suppliers from all WTO members. However, it does not require any degree of market openness (WTO 2002). ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 2 The Fourth WTO Ministerial Conference declaration in November 2001 in Doha, Qatar provides the mandate for negotiations on a wide range of subjects and sector issues. Of primary importance is the declaration that sets 1 January 2005 as the date for completing all but two of the negotiations (i.e., the Dispute Settlement Understanding and a multilateral register of geographic indications for wines and spirits by 2003). It is therefore during the period 2002–2004 that a new round of negotiations on financial services should be held and concluded. Services negotiations have been ongoing as mandated since January 2002. WTO countries should submit initial requests for specific commitments by 30 June 2002, and initial offers by 31 March 2003; all services negotiations should conclude by the end of 2004. Opening of financial services has enormous policy implications for a member country. As demonstrated by the Asian crisis, which erupted in 1997, mismanagement of financial opening may lead to disastrous economic consequences. Only prudent financial policies, including implementation of GATS commitments, can result in macroeconomic stability, sustained output growth, and financial sector development. This paper examines six selected countries, i.e., the People’s Republic of China (PRC), Indonesia, Republic of Korea (Korea), Malaysia, Singapore, and Thailand. For the PRC, as a new WTO member, successful liberalization of financial services trade is of great importance. For the five other countries, all crisis-affected, there arises the need to review ongoing financial liberalization policies and explore future directions. The first four sections of this paper will examine the following: (i) relations between financial services liberalization and capital account liberalization, (ii) GATS and/or multilateral commitments made by these countries, (iii) progress in compliance of the commitments and their impact, and (iv) implications and issues of financial opening with focus on the banking sector. The last section presents conclusions. II. RELATION BETWEEN FINANCIAL SERVICES LIBERALIZATION AND CAPITAL ACOUNT LIBERALIZATION It is desirable to clarify both the difference and linkage between opening up of financial services within the context of the GATS and capital account liberalization before discussing opening up of financial services. Confusion arises frequently in that people do not always distinguish between cross-border capital flows and transactions of financial services. Strictly speaking, the latter does not necessarily always entail the first (for example, provision of financial information only by foreign financial organizations), although most of financial transactions involve cross-border capital flows (e.g., foreign currency lending by a foreign [resident] bank using money sourced from abroad). If a domestic bank sources foreign currency funds from overseas markets/institutions, this is not opening up of financial services but simply international capital movements related to capital account liberalization. Table 1 provides an example on differences between domestic financial deregulation, capital account liberalization, and financial services liberalization. 9 provided the legal basis for foreign exchange control in the country was replaced by the Foreign Exchange Transactions Act (FETA) to support financial liberalization. Offshore issuance of securities and foreign borrowing by Korean firms and financial institutions became much easier. Since 2001, many restrictions on foreign exchange transactions by foreign and Korean individuals have been removed. Korean laws largely prohibit cross-border financial services trade, which is increasingly important within the context of GATS negotiations. Although cross-border banking is not allowed in principle, a limited number of cross-border transactions are possible under the FETA (partially open). Table 1 shows the liberalization status of cross-border trade as well as commercial presence by type of financial services. With respect to cross-border trade, banking and mutual fund investment are partially open, securities transactions are not open, while life insurance and investment advisory are fully open. As of March 2002, there were 61 foreign bank branches and 26 foreign representative offices. 4. Malaysia Malaysia has kept a financial liberalization schedule within the context of the GATS (February 1998) and AFAS (September 1998). The 10-year Financial Sector Master Plan also provides the country’s financial sector with a roadmap on financial reform, opening of domestic markets, and development direction. Market access and national treatment for cross-border supply; consumption abroad; and presence of natural persons of offshore banks, offshore investment banks, and offshore insurance companies are generally not allowed. Concerning market access, commercial presence of these offshore financial institutions is allowed only in Labuan and entry is limited to establishment of a branch or a subsidiary incorporated in Malaysia. There is no restriction on national treatment. Market access and national treatment for cross-border supply and consumption abroad of commercial banks and merchant banks are not generally allowed. The 13 wholly foreign-owned foreign banks are permitted to remain 100 percent foreign owned; new licenses are not allowed. Natural persons are not allowed to hold office on a temporary basis except senior managers and specialists. Entry of wholly foreign-owned banks is limited to equity participation by foreign banks in Malaysian-owned or controlled commercial banks and merchant banks. Aggregate foreign shareholding in a commercial or merchant bank shall not exceed 30 percent. Shareholding by a single person individually or jointly is limited to a maximum of 20 percent. Market access and national treatment for cross-border supply and consumption abroad of direct insurance companies are not allowed in general. On commercial presence, branches of foreign insurance companies are required to be locally incorporated by 30 June 1998 and new licenses are not allowed. Acquisition by a foreign insurance company of more than 5 percent aggregate shareholding in a locally incorporated insurance company is possible with the approval of the government, provided certain conditions are met. The basic principles behind market access and national treatment for cross-border supply and consumption abroad of securities business are summarized as follows: Section III Overview of Financial Opening under GATS in Selected Asian Countries ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 10 (i) Offshore financial institutions are only for nonresident customers. (ii) Issues and placements as agents are open to merchant banks and a locally incorporated joint venture company. (iii) Underwriting companies require commercial presence and authorization. (iv) Asset management companies require commercial presence and authorization. (v) Securities broking companies require equity participation in an existing stockholding company or establishment of a locally incorporated joint venture company with a Malaysian stock brokering company. (vi) Aggregate foreign shareholding in the company should not exceed 30 percent. To cope with challenges in this age of globalization, Malaysia is considering a banking consolidation program within which banks will be merged into three to four large banks to provide a full range of banking services, with another three to four medium-sized banks consolidated to perform specialized services. The consolidated banks will be better capitalized to meet international standards and to undertake a wider scope of business. The operational business integration process and rationalization exercise have been the major components of the recent consolidation efforts to reduce duplication of resources and/or functions and to attain higher levels of economies of scale and efficiency in banking institutions. There are currently 14 foreign banks operating in Malaysia out of a total of 47 banking institutions (composed of commercial banks, finance companies, and merchant banks). Foreign bank branches totaled 145 out of 2,557 branches in the entire banking system. 5. Singapore Cross-border supply and consumption abroad of all financial services are generally prohibited. Presence of natural persons is also limited. The schedule of specific commitments within the context of the GATS (February 1998) and AFAS (September 1998) deals with insurance and insurance-related services, banking, securities, and other financial services. The presence of natural persons is unbound, except for intracorporate transfers of managers, executives, and specialists. The entry of these intracorporate transfers is limited to three years, which may be extended for up to two additional years (horizontal restrictions). Specific commitments under GATS are summarized as follows: (i) For life insurance and nonlife insurance, consumption abroad is allowed and foreign parties can acquire aggregate equity stakes of up to 49 percent in locally owned insurance companies, provided the acquisition does not result in any foreign party being the largest shareholder. (ii) As to acceptance of deposits and other payable funds from the public (banks), market access is granted only for institutions approved as banks, merchant banks, and finance companies; foreign banks can operate only one office and cannot establish 11 off-premise ATMs, ATM networking, or new sub-branches. (iii) As to bank lending, Mode 2 (consumption abroad) is allowed; each offshore bank’s lending in Singapore dollars to residents shall not exceed $200 million in aggregate; there is no limit on the establishment of off-premise cash dispensing machines for credit and charge cards. (iv) For financial leasing, guarantees, and money and foreign exchange market transactions, there are generally no restrictions. (v) Participation in issues of securities including underwriting and placement as agents is limited to foreign stockbrokerage companies; as non-members of the Stock Exchange of Singapore (SES), they can become Approved Foreign Brokers to trade directly in non-Singapore dollar-denominated securities quoted on SES. (vi) For advisory and other auxiliary financial services, commercial presence is required, and establishment of branches, subsidiaries, or representatives is allowed. While the schedule generally keeps a conservative stance toward trade in these financial services, the Singapore financial authorities have, since 1998, taken many important steps to expedite internationalization and liberalization of Singapore’s financial markets and the Singaporean dollar. According to the Monetary Authority of Singapore (MAS), Singapore has, since the Asian financial crisis, reviewed the East Asian growth model that emphasizes high savings, reliance on foreign investment, and outward orientation. Some economists have argued that East Asian economies should lower savings and stimulate domestic demand, develop indigenous enterprises, and insulate themselves from volatile external conditions.9 However the review has reached a conclusion that, in particular, small economies like Singapore relying on small domestic markets and traditional-type indigenous enterprises to stimulate its growth and investment seems inherently implausible, and Singapore’s economic regime should remain externally oriented. Against this backdrop, Singapore has shifted from the previously conservative and riskaverse regulatory approach to an internationalized and liberalized approach supported by prudential supervision, while at the same time accepting calculated risks in order to promote competition and efficiency of the financial industry. The core of this liberalization policy comprises two key elements: progressive internationalization of the Singaporean dollar; and fostering capital markets, particularly bond markets with a goal to diversify Singapore’s financial markets and develop the country as a global financial hub. On the first element, through two amendments in banking laws and regulations, most of policy restrictions propping up the long-standing noninternationalization policy have been phased out over the past four years. Singapore is retaining only two basic restrictions to prevent currency speculation: (i) financial institutions may not extend Singapore dollar credit facilities exceeding S$5 million to nonresident financial entities, where they have 9Refer to the Special Keynote Address delivered by Lee Hsien Loong, Deputy Prime Minister and Chairman of the Monetary Authority of Singapore, at the Euromoney Asia-Pacific Issuers and Investors Forum, 19 March 2002. Section III Overview of Financial Opening under GATS in Selected Asian Countries ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 12 reason to believe that proceeds may be used for speculation against the Singapore dollar exchange rate; and (ii) when a nonresident entity wishes to obtain a Singapore dollar loan, or tap Singapore equity or bond markets to fund overseas activities, it must swap or convert the proceeds in Singapore dollars into foreign currency as and when it uses the proceeds offshore. Concerning the second point, the country’s efforts have yielded encouraging results. The outstanding volume of Singapore Government Securities (SGS) since 1998 had doubled to S$54 billion by 2001, and average daily turnover had increased about three times to S$1.9 billion in 2001. New corporate debt issuance has also continued to grow rapidly, with Singapore dollar and non-Singapore dollar corporate bond issues totaling a record amount of S$72 billion in 2001, an almost eight-fold growth over issuance volumes in 1998. The tenors of corporate issues range evenly across a spectrum of maturity of up to 15 years, exhibiting a greater diversity of corporate bonds. The functions of local bankers on the entry of foreign financial institutions into Singapore is highly favorable and generally support the aforementioned liberalization measures that will create more efficient and vibrant markets. A reservation is possible overcompetition in local retail banking and insurance markets, with international financial institutions taking away the business ground of smaller-sized local banks and insurance companies. In line with this, the MAS has licensed only six Qualifying Full Banks (QFBs) till now, which are allowed to establish additional local branches, off-premise ATMs, and ATM sharing to undertake retail banking. Further, a deposit insurance scheme is under consideration to protect small savers. The entry of insurers and independent intermediaries is allowed based on strict MAS criteria, despite the general liberalization stance in place since early 2000. Securities business is virtually fully open. About 200 foreign banks are operating in Singapore, with their share in total public loans (i.e., loans to nonbank clients) and total deposits being about 50 and 35 percent, respectively. It is a significantly high share, noting a liberalized business environment in Singapore. Major clients of foreign banks, except for the six QFBs, are home country enterprises. 6. Thailand The following is a summary of major commitments under GATS: (i) As to horizontal conditions, (a) commercial presence is permitted in principle only through a limited liability company registered in Thailand, in which foreign equity participation must not exceed 49 percent of the registered capital10 and the number of foreign shareholders must be less than half of the total number of shareholders of the company concerned; (b) national treatment for this mode has no limit in principle; (c) temporary movement of natural persons is unlimited except for corporate transfers at the managerial or executive level or for specialists for a oneyear period (altogether for not more than three years); and (d) foreigners are not 10 In reality, the Stock Exchange of Thailand allows any share exceeding 49 percent to be held in a special Fund. The exceeding portion is not entitled to vote. 11 Some changes have recently been made to allow foreigners to purchase land to construct manufacturing facilities. 13 allowed to purchase or own land.11 (ii) On specific commitments: (a) “Cross-border supply” and “consumption abroad” are generally not allowed for banking, securities services, and nonlife insurance. (b) The ceiling for foreign share holding is: life and nonlife insurance, 25 percent of registered share capital; services auxiliary (excluding pension funds), 49 percent; representative office of commercial banks, none; local incorporated banks, 25 percent (each limited to 5 percent); securities companies and credit foncier, companies 25 percent (each limited to 10 percent); securities companies, 49 percent; asset management companies, 25 percent for the first five years followed by 49 percent after five years; and financial leasing, factoring services, credit cards, and charge and debit cards, 49 percent.12 (c) As to presence of natural citizens, for life and nonlife insurance, only senior managerial personnel, specialists, and technical assistants are allowable, subject to the approval of the Insurance Commissioner. (d) On banking, consumption abroad and cross-border supply is without limit except for financial advisory and financial data processing; commercial presence has generally no restrictions for existing foreign bank branches. (e) For securities companies (brokerage, dealing, underwriting, investment advisory services) market access and national treatment for consumption abroad is fine; national treatment for cross-border supply is allowed; limitations on market access for commercial presence are absent for representative offices; share acquisition of existing companies is allowed up to 100 percent of paidup capital; and national treatment allowed. Percentage of foreign share holding in Thai banks has, since the Asian crisis, increased significantly due to the government’s policy encouraging foreign participation under multi purposes such as recapitalization of domestic troubled banks and transfer of advanced banking techniques. In June 1997 before the outbreak of the crisis, foreign share in the financial sector was zero but rose to six percent as of December 2000 (all in commercial banks).13 The number of foreign bank branches decreased slightly from 21 in 1997 to 18 in March 2002 in the wake of the general consolidation of banking institutions in the country since the crisis. Local clients of foreign banks generally have a positive perception of these banks, noting that they can contribute to mobilizing foreign funds for the country and that the major cause of the crisis was not simply capital inflows but, more importantly, lack of prudential supervision of financial activities. 12 The commitment schedule under the AFAS is different from the GATS in that three more commitments have been added: foreigners’ share holding of securities companies, increase in number of expatriates of a securities company from two to three, and pension fund consulting services. 13 Percent foreign share as of March 2002 was 48.77, Bangkok Bank; 46.82, SCB; 48.98, Thai Farmer; 2.97, Thai Military; 50.27, DBS Thai Danu; 75, ABN Amro Asia; 75.02, Standard Charted Nakornthon; 75.02, UOB Radanasin; and minimal in Ayudhaya, Krung Thai, Bank Thai, Siam City Bank, and Metropolitan Bank. Section III Overview of Financial Opening under GATS in Selected Asian Countries ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 14 IV. IMPLICATIONS OF BANKING SECTOR OPENING A. People’s Republic of China14 1. Implications and Issues The PRC has made far-reaching commitments in WTO negotiations in opening up its financial sector. During the phase-out period of five years, the PRC will gradually remove the geographic and regulatory restrictions for foreign financial institutions and liberalize the scope of businesses. The final commitments will open the sector to foreign access while maintaining some limitation on cross-border supply and foreign equity participation. Given the rapid development of the PRC financial sector and its integration into the global financial sector, the country faces a daunting task of improving its legal and regulatory system to address existing weaknesses and prepare for future challenges. Substantial development of the legal and regulatory framework for the financial sector has greatly accelerated the reform and growth of its banking and nonbanking sectors. One noticeable example is the recent enactment of the Trust Law, which provides underlying principles for fiduciary duties and governing rules on the Board of Trustees. The law lays the foundation for development of legal trusts in the PRC. The future laws and regulations governing various trusts will comprise two general tiers: basic law such as the Trust Law, and other laws pertaining to detailed rules on specific trusts, such as pension funds and investment funds. However, there are a number of weaknesses in the legal and regulatory system, which may hamper financial sector development. There are still gaps or gray areas where no suitable law or subordinate legislation can apply. For example, there is no legal code for handling bankruptcy of financial institutions, nor are there regulations governing electronic transactions, antimoney laundering, and nonbank financial companies, such as trust and investment companies, finance and leasing companies, etc., as they are regulated by various regulations and decrees. A consistent and effective approach in enacting and amending laws is also lacking, as well as transparent procedures to bring in stakeholders’ participation into the legislation process. Enforcement laws and regulations are inadequate and on many occasions, financial sector supervisors would have to rely on the interpretation of the Supreme Court when implementing the law. Foreign participation in the PRC financial sector has been governed mostly by separate sets of temporary regulations and provisions. However, the PRC’s entry into the WTO requires a complete overhaul of these temporary regulations and makes them consistent with the PRC’s WTO commitment regarding opening up of the financial industry. 14 This section is heavily indebted to an internal paper prepared by Tang (2002) of the Asian Development Bank. 15 The segregated regulatory system has overemphasized the regulation of market behaviors compared with the prudential regulation of financial institutions. Prudential supervision proves to be more difficult in a segregated system where financial institutions are engaged in cross-sector activities. There is no mechanism in the PRC to address solvency issues within a financial conglomerate such as double or multiple gearing, risks incurred by unregulated entities, and erection of firewalls between subsidiaries and between subsidiaries and parent companies. International experience shows that in the long run, increased foreign participation in the banking sector has a generally positive effect on countries. The banking sector will also benefit in many ways from involvement in the process of global financial integration. First, involvement in global integration and competition will act as a catalyst for banks to reform and improve efficiency, thus accelerating the process of economic development. Second, internationalization can help in the process of building more robust and efficient financial systems by introducing international best practices and standards; by improving the quality, efficiency of financial services; and by attracting more stable sources of funds. Third, domestic banks surviving the competition will learn to establish more sophisticated services and systems that meet international standards and thereby increase their productivity. Fourth, it will facilitate the PRC’s access to international markets and the opportunity for PRC banks to open up overseas operations. Finally, a liberalized and efficient financial sector will make a significant contribution to the overall development of the economy. Better and more efficient banking services will stimulate the development of the industrial, agricultural, and service sectors. In the short term there will be costs associated with WTO accession. Once the current protective measures are removed, the PRC’s state-owned commercial banks would be placed in a rather unfavorable competitive position. One of the important drawbacks will be a fall in the market share of domestic banks. Estimates suggest that five years after the PRC’s entry to the WTO, the market share of foreign banks in the total banking business would increase from the current 2 percent to about 15 percent. Ten years later, the market share of foreign banks will rise to one third of the total banking business. This increase in the foreign banks’ share indicates a corresponding decrease in domestic banks’ share. Another drawback is the decline in the profitability of local banks. Some high-quality clients with good creditworthiness, particularly those located in the coastal areas, may shift to foreign banks, leaving the less creditworthy clients and some policy-based business with the domestic banks. This probable shift is a major threat to the domestic banks. Increased competition with international banks may adversely affect the liquidity of domestic banks as some of the funds available for domestic banks may gradually shift to foreign banks. Given the high proportion of bad assets among domestic banks, especially the state-owned commercial banks, the loss of liquidity will worsen the precarious situation of these banks and threaten their survival. With the strength of their flexible management mechanisms and better remuneration packages, international companies would likely attract skilled personnel from domestic banks, Section IV Implications of Banking Sector Opening ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 16 leading to a “brain drain” of the PRC’s financial firms. This will post a threat to their operation and management and force domestic salary scales to increase. In fact, competition for personnel has already started. Initial estimates show that about one third of the managers or higher positions employed by foreign banks in Beijing and Shanghai came from domestic banks. Domestic banks are given five years to assess these challenges and take necessary measures. The reform of the financial sector must be accelerated to face the challenges arising from international banks. 2. Addressing Nonperforming Loans The key challenge for the government is to strengthen domestic banks by addressing the problem of nonperforming loans (NPLs). The official figure for NPLs of the big four state-owned commercial banks is about 25 percent of their total loan portfolio. This excludes the 10 percent equivalent of total portfolio NPLs transferred to the four Asset Management Companies established in 1999. However, if a more strict, international NPL classification were adopted, NPLs may be close to half of the loan portfolio of the four state-owned banks. The NPLs of other commercial banks are lower due to their shorter operational history and less exposure to the state-owned enterprises. Further, the NPLs in the rural and urban credit cooperatives could be as high as, or even higher, than that in the four big banks. Table 3. Nonperforming Loan Rates in Selected Asian Countries, 2001 (percent of total loans) People’s Republic Indonesia Korea Malaysia Philippines Thailand of China NPLs 25 18 5.4 9.4 16.7 17 NPLs (broad)* 35 57 16 16 NA 27 * Includes NPLs transferred to asset management companies. A comparison of the level of NPLs in other countries suggests a severity of the NPL problem in the PRC. Table 3 shows that with the exception of Indonesia, the ratio of NPLs in the PRC is higher than many of the countries badly hit by the Asian financial crisis. However, a simple comparison of the NPLs in the PRC with that of the other countries may be somewhat misleading. A large proportion of NPLs in the PRC is part of the transition cost from a centrally planned economy to a market economy, particularly related to reform of state-owned enterprises. The NPL situation in the PRC has to be addressed as part of the ongoing transition and structural changes of the economy, a long-term process involving many steps. 17 3. Commercialization of State-owned Banks Accelerating the pace of commercialization of state-owned banks is another important task if domestic banks are to enhance their international competitiveness. As a first step, domestic banks should establish an effective corporate governance structure. The Governor of the Central Bank has recently announced that a number of state-owned banks will be listed in the stock exchange in the next few years. To do so, the banks must operate under market rules and improve disclosure and transparency. To improve the competitiveness of domestic banks, expeditious development of privateowned banks is strongly suggested. For a long period of time, banking regulations have restricted private sector participation. The significance of developing a private-owned banking system has great merit in two areas. It facilitates competition by ending the monopoly of major state-owned banks. Creating a competitive environment will improve efficiency, innovation, and development of new services. Second, development of private banks will help address the distortion in credit allocation in which the state sector benefits at the expense of the nonstate sector, particularly small and medium enterprises. State-owned industrial enterprises contribute less than 30 percent of total industrial output. However, they receive more than 70 percent of the credit allocated by the banking sector. If a nonstate sector banking system is developed, SMEs, private enterprises, and consumers will have better access to bank credit. 4. Human Resource Development Domestic banks must develop better human resource management systems, compensation systems, and incentive packages. There is an acute shortage of high-quality and senior personnel familiar with modern commercial bank management. The Central Bank is considering employing an officer from Hong Kong as its Deputy Governor. The government also plans to modify its policy by allowing domestic banks and brokerages to hire overseas Chinese professionals as departmental heads, in an effort to accelerate their development as commercial entities. This shows the government’s willingness to upgrade professional skills to better respond to the changing environment. B. Republic of Korea Table 3 shows that in Korea, the market share of foreign banks remained at 6-7 percent except for 8.0 percent in 1997 when the crisis started. The share is low, indicating that the role of foreign banks in Korea is far from significant and that Korea’s financial opening has not led to any major change in the foreign banks’ share in the Korean market. However, it is noted that their share has steadily increased since 1998. It is not clear, though, whether this is a long-term trend or a temporary occurrence. Section IV Implications of Banking Sector Opening ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 18 Hwang and Shin (2000) examined cyclical characters of foreign and domestic currency loans by foreign banks in Korea for the period 1981-1999. They ran regressions to find out the relationship between growth rates of foreign and domestic currency loans, and nominal GDP growth rates and interest rate differentials between Korea and the United States. The first finding is that domestic banks provided a more stable lending service in domestic currency while foreign banks did so in foreign currency. Looking into the relationship between loan growth and nominal GDP growth, this study concludes that domestic currency loans by foreign banks are procyclical, whereas no significant relationship was found in the case of domestic banks. However, highly contrasting results were achieved in the case of foreign currency loans. GDP growth did not have any significant explanatory power in foreign currency loans by the foreign banks but it had a significant positive relationship with domestic banks’ foreign currency loans. Given this result, they concluded that foreign banks played a stabilizing role in economic fluctuations. Similarly Goldberg et al. (2000) found that foreign banks in Argentina and Mexico had lower volatility in lending, contributing to financial stability in times of financial crisis and economic depression. In relation to the Asian financial crisis, foreign banks had not contributed to the eruption of the crisis given that foreign banks’ assets (both in size and share) including loans did not show any sharp increase immediately before the crisis (Table 4). Their market share in the precrisis period was even much lower than in the postcrisis period. On the contrary, since 1998 foreign banks have been increasingly relying on domestic sources in mobilizing their operating funds (Table 5). This trend is attributed to the country’s active liberalization policy under the new government since the crisis, which provides a more favorable operational environment to foreign banks. This signifies localization of foreign banks. Till 1997, the share of domestic liabilities of foreign banks remained at about 20 percent of total liabilities but it sharply rose to 37.4 percent in 1998, followed by 62.3 percent in 2000, and 68 percent by the end-November 2001. Now the major source of liabilities is deposits received from domestic customers in both Korean won and foreign currencies. Table 4. Market Share of Foreign Banks in Korea, End of Period Assets of Foreign Assets of All Banks Market Share Banks (trillion won) (trillion won) (A/B) (%) (A) (B) 1995 19.4 379.5 5.1 1996 24.7 451.2 5.5 1997 45.8 573.7 8.0 1998 33.8 576.9 5.9 1999 34.7 640.0 5.4 2000 46.9 737.8 6.4 November 2001 49.3 762.1 6.5 Source: The Bank of Korea ( 2002). 25 An interesting feature of Korea’s liberalization is that the country opened its domestic markets more actively in the postcrisis period compared to the precrisis period.15 Singapore has taken a similar policy, while other ASEAN countries have not taken new major measures since the crisis but have generally kept the commitments originally made in 1998. This difference and its implications deserve a careful study. A comparative study on the Korean and ASEAN pattern will be able to draw some interesting and useful lessons. In terms of economic growth and financial restructuring since the crisis, Korea has performed better than the other crisis-hit countries. The question is whether such better performance has encouraged the Korean government to expedite opening of domestic markets, or, on the other hand, the active opening policy has contributed to fast growth and restructuring. Given that most of the liberalization measures were taken not long after the eruption of the crisis in Korea, the latter appears to be more convincing, implying that financial opening has had a significant positive impact on the domestic economy and financial markets in Korea. Also it should be noted that foreign banks’ lending has been more countercyclical than domestic banks’. Foreign banks in these countries generally concentrate their business on expatriate homecountry enterprises. There are two views on the role of foreign banks in developing countries (Clark et al. 2000). The first, referred to as the traditional view (Aliber 1984), is that foreign banks follow their domestic clients to finance their trade and service their needs in other countries. The second view envisions a more active role by foreign banks in the development of the host country’s banking sector. Drawing on the theory of comparative advantage, the second view posits that foreign banks can use management technology and banking expertise developed for their home use at a very low marginal cost abroad. In the ASEAN countries in general (except for the Singapore offshore market), the role of foreign banks is basically consistent with the first view. In Korea, however, some foreign banks such as Citibank are rapidly cornering local clients, exacting a more positive and deep impact on the local banking sector. Foreign banks generally enjoy more advanced banking practices than local banks, and thus contribute to introduction of new techniques into local markets. Foreign banks hold comparative advantages particularly in risk analysis and management, loan project assessment, credit analysis, portfolio management, and computerization. 15 Foreign investment in Korea: Foreign direct investment, $52 billion for 1998-2001 ($24.6 billion for 19621997); foreign portfolio investment, $29.1 billion for 1998-2001 ($17.8 billion for 1962-1997). Foreigners’ share in stock market as of 2001: Korea, 36.6; Japan, 12.4; Taipei,China, 9.4; and Singapore, 9.6 percent. Section V Comparative Assessment of Financial Opening Policies ERD Working Paper No. 24 FINANCIAL OPENING UNDER THE WTO AGREEMENT IN SELECTED ASIAN COUNTRIES: PROGRESS AND ISSUES 26 VII. CONCLUSION The four ASEAN countries studied in this paper have retained their original commitments since 1998. Korea has revised its original commitments significantly in 1999 while the PRC has just become a member of WTO. Given this, the ASEAN countries may have to consider substantial revisions, particularly in response to the Doha agreement. In opening financial services, however, it is advisable to take three guiding principles into account: (i) resource mobilization for economic recovery and sustained development, (ii) financial stability, and (iii) market competition. Some policy suggestions within this context are presented below. First, ASEAN countries may have to consider more active liberalization of financial services in light of their extensive economic exposure to foreign trade and the global economy as well as the immense need for foreign capital and financial services. Although economic circumstances in these countries are different from those in Korea, they may draw valuable lessons from the Korean experience after the crisis in order to figure out the best liberalization strategy. The ASEAN countries are committed to not only the GATS but also to the ASEAN Framework Agreement on Services (AFAS) arising from the ASEAN Bangkok Summit in 1995, which provides a basis for liberalization of seven areas of services, i.e., banking, tourism, air transportation, maritime transportation, telecommunications, construction, and professional services. However, the scope of commitments either in the GATS or in the AFAS is not broad enough and the progress in liberalization is slow. Second, sequencing of liberalization is of prime importance. In this regard, priority should be placed on the banking sector. Foreign banks bring foreign capital, facilitate foreign investment through their support of trade and production activities of foreign investors in the host country, and increase market competition in the banking industry. This paper found that foreign banks’ lending attitude is more countercyclical than domestic banks.’ In the case of Singapore, it would be important to develop its offshore financial market more vigorously within the context of its goal to transform into an international financial center. Third, Indonesia, Malaysia, and Thailand may need to consider further opening up its other nonbank financial markets to minimize inflows of short-term speculative money and at the same time promote foreigners’ long-term direct investment in local infrastructure and productive sectors. Opening of leasing, guarantees, local bond markets, underwriting of international bonds issued by domestic enterprises, and foreign direct investments in local banks/securities companies are consistent with this objective. Each country needs to carefully envision its long-term financial sector objectives through undertaking a thorough research study, and then formulate shortand medium-term negotiation strategies to maximize the benefits of financial opening. Fourth, issues on “commercial presence” of foreign suppliers should be addressed, followed by those on “cross-border” supplies, given that the latter involves free movement of services, capital, and information (e.g., international hedge funds) without sufficient supervisory mechanisms in place. Fifth, it is crucial to implement sound capital account policies in parallel with financial opening, given that opening of financial services is closely associated with capital account 27 liberalization. A great lesson drawn from the Asian crisis is that it is not advisable for developing countries to fully liberalize their capital accounts until effective regulatory and supervisory regimes for their financial systems are operational and appropriate macroeconomic policies, including a well-aligned exchange rate regime, are in place. Lastly, domestic equity markets need to be opened up in a phased manner, taking into account capital market development, corporate sector capacity, and the urgency for foreign currency resources. It is also important to establish regulations to prevent sudden and large capital flights, while financial authorities monitor capital flows so that they may take relevant policy actions if necessary. Equity investment flows into and out of a country are determined by many factors, both external and domestic. Domestic factors include economic reforms, capital control, explicit and implicit government guarantees, and transparency and disclosure of information. External factors include changes in interest rates in the United States, terms of trade shocks, and increases in international risk premia. REFERENCES Aliber, R. Z., 1984. “International Banking: A Survey.” Journal of Money, Credit,and Banking 16(4):661-78. Cecchini, P., 1988. The European Challenge in 1992: The Benefits of a Single Market. Aldershot: Gower. Clarke, G., R. Cull, L. D’Amato and A. Molinari, 2000. “On the Kindness of Strangers? The Impact of Foreign Entry on Domestic Banks in Argentina.” In S. Claessens and M. Jansen, eds., The Internationalization of Financial Services. Kluwer Law International, The Hague, London, Boston. Dobson, W., and P. Jacquet, 1998. Financial Services Liberalization in the WTO. Institute for International Economics, Washington, D. C. Goldberg, L., B. Gerard Dages, and D. Kinney, 2000. Foreign and Domestic Bank Participation in Emerging Markets: Lessons from Mexico and Argentina. NBER Working Paper 7714, National Bureau of Economics, Massachusetts. Hwang, S. I., and I. S. Shin, 2000. The Liberalization of Banking Sector in Korea: Impact on the Korean Economy. Working Paper, Korea Institute for International Economic Policy, Seoul, Korea. Kim, Y. H., 2000. “Post-Crisis Policy Agenda for Reforming the Financial Sector in Asia.” In Sustainable Recovery in Asia – Mobilizing Resource for Development, Asian Development Bank and the Organisation for Economic Cooperation and Development. Kono, M., and L. Schuknecht, 2000. “How Does Financial Services Trade Affect Capital Flows and Financial Stability?” In S. Claessens and M. Jansen, The Internationalization of Financial Services. Kluwer Law International, The Hague, London, Boston. WTO, 2002. “GATS—Fact and Fiction.” Available: http://www.wto.org. References 28 PUBLICATIONS FROM THE ECONOMICS AND RESEARCH DEPARTMENT ERD WORKING PAPER SERIES (WPS) (Published in-house; Available through ADB Office of External Relations; Free of Charge) No. 1 Capitalizing on Globalization —Barry Eichengreen, January 2002 No. 2 Policy-based Lending and Poverty Reduction: An Overview of Processes, Assessment and Options —Richard Bolt and Manabu Fujimura January 2002 No. 3 The Automotive Supply Chain: Global Trends and Asian Perspectives —Francisco Veloso and Rajiv Kumar January 2002 No. 4 International Competitiveness of Asian Firms: An Analytical Framework —Rajiv Kumar and Doren Chadee February 2002 No. 5 The International Competitiveness of Asian Economies in the Apparel Commodity Chain —Gary Gereffi February 2002 No. 6 Monetary and Financial Cooperation in East Asia—The Chiang Mai Initiative and Beyond —Pradumna B. Rana February 2002 No. 7 Probing Beneath Cross-national Averages: Poverty, Inequality, and Growth in the Philippines —Arsenio M. 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Rana, December 1993 No. 6 Environmental Challenges in the People’s Republic of China and Scope for Bank Assistance —Elisabetta Capannelli and Omkar L. Shrestha, December 1993 No. 7 Sustainable Development Environment and Poverty Nexus —K.F. Jalal, December 1993 No. 8 Intermediate Services and Economic Development: The Malaysian Example —Sutanu Behuria and Rahul Khullar, May 1994 No. 9 Interest Rate Deregulation: A Brief Survey of the Policy Issues and the Asian Experience —Carlos J. Glower, July 1994 No. 10 Some Aspects of Land Administration in Indonesia: Implications for Bank Operations —Sutanu Behuria, July 1994 No. 11 Demographic and Socioeconomic Determinants of Contraceptive Use among Urban Women in the Melanesian Countries in the South Pacific: A Case Study of Port Vila Town in Vanuatu —T.K. Jayaraman, February 1995 No. 12 Managing Development through Institution Building — Hilton L. Root, October 1995 No. 13 Growth, Structural Change, and Optimal Poverty Interventions —Shiladitya Chatterjee, November 1995 No. 14 Private Investment and Macroeconomic Environment in the South Pacific Island Countries: A Cross-Country Analysis —T.K. Jayaraman, October 1996 No. 15 The Rural-Urban Transition in Viet Nam: Some Selected Issues —Sudipto Mundle and Brian Van Arkadie, October 1997 No. 16 A New Approach to Setting the Future Transport Agenda —Roger Allport, Geoff Key, and Charles Melhuish June 1998 No. 17 Adjustment and Distribution: The Indian Experience —Sudipto Mundle and V.B. Tulasidhar, June 1998 No. 18 Tax Reforms in Viet Nam: A Selective Analysis —Sudipto Mundle, December 1998 No. 19 Surges and Volatility of Private Capital Flows to Asian Developing Countries: Implications for Multilateral Development Banks —Pradumna B. Rana, December 1998 No. 20 The Millennium Round and the Asian Economies: An Introduction —Dilip K. Das, October 1999 No. 21 Occupational Segregation and the Gender Earnings Gap —Joseph E. Zveglich, Jr. and Yana van der Meulen Rodgers, December 1999 No. 22 Information Technology: Next Locomotive of Growth? —Dilip K. Das, June 2000 OCCASIONAL PAPERS (OP) 33 1. Improving Domestic Resource Mobilization Through Financial Development: Overview September 1985 2. Improving Domestic Resource Mobilization Through Financial Development: Bangladesh July 1986 3. Improving Domestic Resource Mobilization Through Financial Development: Sri Lanka April 1987 4. Improving Domestic Resource Mobilization Through Financial Development: India December 1987 5. Financing Public Sector Development Expenditure in Selected Countries: Overview January 1988 6. Study of Selected Industries: A Brief Report April 1988 7. Financing Public Sector Development Expenditure in Selected Countries: Bangladesh June 1988 8. Financing Public Sector Development Expenditure in Selected Countries: India June 1988 9. Financing Public Sector Development Expenditure in Selected Countries: Indonesia June 1988 10. Financing Public Sector Development Expenditure in Selected Countries: Nepal June 1988 11. Financing Public Sector Development Expenditure in Selected Countries: Pakistan June 1988 12. Financing Public Sector Development Expenditure in Selected Countries: Philippines June 1988 13. Financing Public Sector Development Expenditure in Selected Countries: Thailand June 1988 14. Towards Regional Cooperation in South Asia: ADB/EWC Symposium on Regional Cooperation in South Asia February 1988 15. Evaluating Rice Market Intervention Policies: Some Asian Examples April 1988 16. Improving Domestic Resource Mobilization Through Financial Development: Nepal November 1988 17. Foreign Trade Barriers and Export Growth September 1988 18. The Role of Small and Medium-Scale Industries in the Industrial Development of the Philippines April 1989 19. The Role of Small and Medium-Scale Manufacturing Industries in Industrial Development: The Experience of Selected Asian Countries January 1990 20. National Accounts of Vanuatu, 1983-1987 January 1990 21. National Accounts of Western Samoa, 1984-1986 February 1990 22. Human Resource Policy and Economic Development: Selected Country Studies July 1990 23. Export Finance: Some Asian Examples September 1990 24. National Accounts of the Cook Islands, 1982-1986 September 1990 25. Framework for the Economic and Financial Appraisal of Urban Development Sector Projects January 1994 26. Framework and Criteria for the Appraisal and Socioeconomic Justification of Education Projects January 1994 27. Guidelines for the Economic Analysis of Projects February 1997 28. Investing in Asia 1997 29. Guidelines for the Economic Analysis of Telecommunication Projects 1998 30. Guidelines for the Economic Analysis of Water Supply Projects 1999 SPECIAL STUDIES, COMPLIMENTARY (SSC) (Published in-house; Available through ADB Office of External Relations; Free of Charge) No. 1 Estimates of the Total External Debt of the Developing Member Countries of ADB: 1981-1983 —I.P. David, September 1984 No. 2 Multivariate Statistical and Graphical Classification Techniques Applied to the Problem of Grouping Countries —I.P. David and D.S. Maligalig, March 1985 No. 3 Gross National Product (GNP) Measurement Issues in South Pacific Developing Member Countries of ADB —S.G. Tiwari, September 1985 No. 4 Estimates of Comparable Savings in Selected DMCs —Hananto Sigit, December 1985 No. 5 Keeping Sample Survey Design and Analysis Simple —I.P. David, December 1985 No. 6 External Debt Situation in Asian Developing Countries —I.P. David and Jungsoo Lee, March 1986 No. 7 Study of GNP Measurement Issues in the South Pacific Developing Member Countries. Part I: Existing National Accounts of SPDMCs–Analysis of Methodology and Application of SNA Concepts —P. Hodgkinson, October 1986 No. 8 Study of GNP Measurement Issues in the South Pacific Developing Member Countries. Part II: Factors Affecting Intercountry Comparability of Per Capita GNP —P. Hodgkinson, October 1986 No. 9 Survey of the External Debt Situation in Asian Developing Countries, 1985 —Jungsoo Lee and I.P. David, April 1987 No. 10 A Survey of the External Debt Situation in Asian Developing Countries, 1986 —Jungsoo Lee and I.P. David, April 1988 No. 11 Changing Pattern of Financial Flows to Asian and Pacific Developing Countries —Jungsoo Lee and I.P. David, March 1989 No. 12 The State of Agricultural Statistics in Southeast Asia —I.P. David, March 1989 No. 13 A Survey of the External Debt Situation in Asian and Pacific Developing Countries: 1987-1988 —Jungsoo Lee and I.P. David, July 1989 No. 14 A Survey of the External Debt Situation in Asian and Pacific Developing Countries: 1988-1989 —Jungsoo Lee, May 1990 No. 15 A Survey of the External Debt Situation in Asian and Pacific Developing Countrie s: 1989-1992 —Min Tang, June 1991 No. 16 Recent Trends and Prospects of External Debt Situation and Financial Flows to Asian and Pacific Developing Countries —Min Tang and Aludia Pardo, June 1992 No. 17 Purchasing Power Parity in Asian Developing Countries: A Co-Integration Test —Min Tang and Ronald Q. Butiong, April 1994 No. 18 Capital Flows to Asian and Pacific Developing Countries: Recent Trends and Future Prospects —Min Tang and James Villafuerte, October 1995 STATISTICAL REPORT SERIES (SR) 34 Edited by S.Ghon Rhee & Yutaka Shimomoto, 1999 $35.00 (paperback) 9. Corporate Governance and Finance in East Asia: A Study of Indonesia, Republic of Korea, Malaysia, Philippines and Thailand J. Zhuang, David Edwards, D. Webb, & Ma. Virginita Capulong Vol. 1, 2000 $10.00 (paperback) Vol. 2, 2001 $15.00 (paperback) 10. Financial Management and Governance Issues Asian Development Bank, 2000 Cambodia $10.00 (paperback) People’s Republic of China $10.00 (paperback) Mongolia $10.00 (paperback) Pakistan $10.00 (paperback) Papua New Guinea $10.00 (paperback) Uzbekistan $10.00 (paperback) Viet Nam $10.00 (paperback) Selected Developing Member Countries $10.00 (paperback) 11. Guidelines for the Economic Analysis of Projects Asian Development Bank, 1997 $10.00 (paperback) 12. Handbook for the Economic Analysis of Water Supply Projects Asian Development Bank, 1999 $15.00 (hardbound) 13. Handbook for the Economic Analysis of Health Sector Projects Asian Development Bank, 2000 $10.00 (paperback) 1. Rural Poverty in Developing Asia Edited by M.G. Quibria Vol. 1: Bangladesh, India, and Sri Lanka, 1994 $35.00 (paperback) Vol. 2: Indonesia, Republic of Korea, Philippines, and Thailand, 1996 $35.00 (paperback) 2. 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Mongolia: A Centrally Planned Economy in Transition Asian Development Bank, 1992 $15.00 (paperback) 3. Rural Poverty in Asia, Priority Issues and Policy Options Edited by M.G. Quibria, 1994 $25.00 (paperback) 4. Growth Triangles in Asia: A New Approach to Regional Economic Cooperation Edited by Myo Thant, Min Tang, and Hiroshi Kakazu 1st ed., 1994 $36.00 (hardbound) Revised ed., 1998 $55.00 (hardbound) 5. Urban Poverty in Asia: A Survey of Critical Issues Edited by Ernesto Pernia, 1994 $18.00 (paperback) 6. Critical Issues in Asian Development: Theories, Experiences, and Policies Edited by M.G. Quibria, 1995 $15.00 (paperback) $36.00 (hardbound) 7. From Centrally Planned to Market Economies: The Asian Approach Edited by Pradumna B. Rana and Naved Hamid, 1995 Vol. 1: Overview $36.00 (hardbound) Vol. 2: People’s Republic of China and Mongolia $50.00 (hardbound) Vol. 3: Lao PDR, Myanmar, and Viet Nam $50.00 (hardbound) 8. Financial Sector Development in Asia Edited by Shahid N. Zahid, 1995 $50.00 (hardbound) 9. Financial Sector Development in Asia: Country Studies Edited by Shahid N. Zahid, 1995 $55.00 (hardbound) 10. Fiscal Management and Economic Reform in the People’s Republic of China Christine P.W. Wong, Christopher Heady, and Wing T. Woo, 1995 $15.00 (paperback) 11. Current Issues in Economic Development: An Asian Perspective Edited by M.G. Quibria and J. Malcolm Dowling, 1996 $50.00 (hardbound) 12. The Bangladesh Economy in Transition Edited by M.G. Quibria, 1997 $20.00 (hardbound) 13. The Global Trading System and Developing Asia Edited by Arvind Panagariya, M.G. Quibria, and Narhari Rao, 1997 $55.00 (hardbound) 14. Social Sector Issues in Transitional Economies of Asia Edited by Douglas H. Brooks and Myo Thant, 1998 $25.00 (paperback) $55.00 (hardbound) 15. Rising to the Challenge in Asia: A Study of Financial Markets Asian Development Bank, 1999 Vol. 1 $20.00 (paperback) Vol. 2 $15.00 (paperback) Vol. 3 $25.00 (paperback) Vols. 4-12 $20.00 (paperback) SPECIAL STUDIES, OUP (SS,OUP) (Co-published with Oxford University Press; Available commercially through Oxford University Press Offices, Associated Companies, and Agents)