India-EU FTA: Where is the Europe’s Trade Agenda Headed?

By Kavaljit Singh | Research Report | February 2012

The internal documents of the European Commission reveal the disgraceful attempts to push for higher levels of commitments in trade in industrial goods and agricultural products, services and investment liberalisation, geographical indications and government procurement under the proposed India-EU free trade agreement (FTA).

The EC documents, which are not publicly available, were prepared just weeks before the 2012 India-EU Summit. The documents assume greater significance as the trade negotiations between India and EU are being held behind closed doors on India-EU FTA. The documents provide an overview of the current state of play in the India-EU trade negotiations. The EC documents are elaborated versions of the landing zones paper (released in November 2011) containing some additional detail to avoid ambiguities and “clearly establish conditionality of the EU’s offer.”

South Korea’s Experience with Banking Sector Liberalisation

By Hyekyung Cho | Jointly Published by Madhyam and SOMO | December 2010

South Korea has seen a rapid financial development in the past decade in line with financial liberalization policies that the government rigorously pursued. The government’s ambition to make South Korea a financial hub in Northeast Asia supported by the self-serving financial industry pushed the financial expansion far beyond the ability of the Korean economy to deal with risks and dangers inherent in financial development.

Eventually, the Korean financial sector has become the victim of its own success, suffering ill-fated overstretch. Benefits of the financial expansion for the overall economy remain elusive. The widespread belief that financial liberalization would deliver an efficient allocation of capital and smooth external shocks proved to be an illusion.

Banking Sector Liberalisation in Uganda: Process, Results and Policy Options

By Lawrence Bategeka and Luka Okumu | Jointly Published by Madhyam and SOMO | December 2010

This study critically examines the major developments in the banking sector in Uganda over the past two decades. In particular, the study documents the outcomes of banking sector liberalization policies which were initiated since the early 1990s. It also deals with recent developments in the Ugandan banking sector in the aftermath of global financial crisis.

With a special focus on the entry of foreign banks, the study assesses the major impacts and consequences of market-led banking reforms on economy, development and poverty eradication. It examines the large presence of foreign banks with particular attention on access to credit to poor people, small and medium enterprises, rural and informal economy.

The findings of this study are relevant in the light of increased foreign ownership of domestic banks and financial institutions in many poor and developing countries. From a host country perspective, the study raises several policy-oriented issues related to the entry of foreign banks in the developing world. It highlights several adverse impacts of foreign bank entry which are not given due attention in policy and academic circles.

The Changing Landscape of Export Credit Agencies in the Context of the Global Financial Crisis

By Kavaljit Singh | Jointly Published by Madhyam and FERN | March 2010

With the onset of the global financial crisis and the subsequent squeeze in credit and insurance markets, there is a renewed global demand for export credit and investment insurance products offered by ECAs. Despite previous predictions of the demise of official ECAs, the current global financial crisis has reasserted their position as dominant players in the trade finance markets as they have stepped-in to fill the huge gap left by the private market.

The financial crisis has dramatically changed the landscape of export credit agencies (ECAs). Several countries took steps to launch their own Export-Import bank. Many ECAs have lately started offering new products to their clients: direct lending and working capital loan guarantees on a short-term basis. New commitments made by ECAs have been also on the rise. Most ECAs have reported an increase in the total volume of guarantees during the crisis. However, new signs of vulnerability and risks are fast emerging at the global level too.

The report asserts that since the operations and structures of ECAs will adapt in relation to new developments in global trade and financial systems, it is very important for civil society actors to be watchful and monitor developments closely.

India-EU Free Trade Agreement: Should India Open Up Banking Sector?

By Kavaljit Singh | Special Report | March 2009

Since 2007, India and European Union (EU) are negotiating a free trade agreement (FTA). The negotiations not only cover trade in goods but also services, rules pertaining to intellectual property rights, cross-border investments, competition policy, government procurement and regulatory issues. One of the key themes under negotiation is the liberalization of cross-border trade and investment in banking services.

The 70-page Special Report questions the policy framework and objectives of opening up banking sector under the FTA. The report argues that the liberal entry of European banks is likely to further constrict the access of banking services in the country: geographically, socially and functionally. The report reveals that urban-centric European banks are primarily interested in serving three niche market segments in India: up-market consumer retail finance, wealth management services and investment banking. Not a single EU-based bank has opened a branch in the rural areas despite several of them (including Standard Chartered, BNP Paribas and HSBC) have been operating in India for more than 140 years, points out the report.

With the help of statistical data and case-studies, the report debunks several myths associated with the higher efficiency and productivity levels of foreign banks in India. It also debunks the popular conception that foreign banks are discriminated in India. The report observes that no reciprocity in market access has been observed in other trade agreements signed by India.

The report documents important developments in the Indian banking sector since Independence and maps out several disturbing trends (such as growing financial exclusion, decline in bank lending to agriculture and small enterprises, etc.) in the post-liberalization period.

The report questions the much-touted benefits of opening up banking sector under the India-EU FTA. Are big European banks going to augment the reach of the banking system to millions of Indians citizens who have no access to basic banking services? What specialization and experience do European banks have when it comes to providing basic banking services to landless rural workers and urban poor dwellers? Will the India-EU FTA reduce the domestic regulatory space?

In the wake of severe crisis gripping many European banks, the report calls upon trade negotiators to rethink about opening up banking sector under the FTA.