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.

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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.

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Sovereign Wealth Funds: Some Frequently Asked Questions

By Kavaljit Singh | Jointly Published by Madhyam and The Corner House, October 2008

Western politicians, business leaders and commentators seem paranoid about state-owned sovereign wealth funds (SWFs), particularly those from the Middle East and China. They fear that SWFs follow strategic political objectives — investing in Western companies and banks to secure control of strategically important industries such as telecommunications, energy and banking – rather than commercial interests.

A protectionist backlash against sovereign wealth funds is fast emerging: the US, Canada, Australia and Germany have introduced substantial legislative changes to screen and restrict investments by SWFs and other state-owned entities. European Parliaments are considering regulations to curb the potential impact of SWFs on financial markets, corporate governance and security.

Are such fears based on facts or assumptions? Is the “invasion of sovereign wealth funds” real? Do SWFs pose a direct threat to financial stability? Do they have hidden agendas? Are SWFs driven by political considerations? Are governments really using SWFs to pursue nefarious foreign policy objectives? Should anyone be afraid of sovereign wealth funds? Are SWFs providing long-term investments and stability to ailing businesses and economies?

This paper examines these questions in order to understand the potential impact and implications of sovereign wealth funds in a rapidly-changing global political economy.

See also Kavaljit Singh’s letter to the Financial Times, published 23 October 2008,”Majority of SWFs are passive, and patient, investors,”and an article in The Economic Times of India, published 11 November 2008, “SWFs mark structural shift in world financial order.”

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Taking it Private: Consequences of the Global Growth of Private Equity

By Kavaljit Singh | Jointly Published by Madhyam and The Corner House, October 2008

During the last two decades, private equity became an integral component of the world’s financial system at a time when financial markets overshadowed the productive economy. Private equity was invariably behind the multi-billion buyout deals, and mergers and acquisitions that swept across the US and Europe, creating a new type of corporate conglomerate that is reshaping the way business is conducted.

Insofar as it constitutes a new form of corporate ownership, private equity poses new challenges to labour unions, NGOs and community groups because it has a significant and distinctive influence on taxation policy, corporate governance, labour rights and public services, and thus deeply affects society, human rights and environment alike.

These challenges are especially clear in Asia, which has become more attractive for private equity firms since mid-2007 when the “credit crunch” took hold and diminished the scope for the huge deals in Europe and North America.

This paper looks at the global growth of private equity and its social, environmental and political impacts, using India as a case study of its growing importance in Southern countries. It concludes with an outline of private equity’s vulnerabilities that may provide opportunities for public concerns to be addressed.

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A Discussion Paper on Aid and Good Governance

By Kavaljit Singh | Jointly Published by Madhyam and Reality of Aid | January 2003

In recent times, the terms ‘governance’ and ‘good governance’ have become buzzwords in the development discourse. Pushed by powerful international financial institutions, ‘good governance’ has become the cornerstone of development cooperation. Nowadays it is difficult to come across aid packages of multilateral financial institutions and bilateral donors that do not use the term ‘good governance’ and contain ‘governance’ conditionalities.

The governance agenda is full of inherent contradictions and dilemmas. If used technically, it may reinforce the intellectual models and traditional donor intervention approaches relating to development cooperation. However, if political and other important dimensions of development are incorporated, it has not only the potential to contribute to reducing poverty, but, equally importantly, it could also repudiate the intellectual models (for instance, Washington Consensus) on which the one-size-fits-all development strategy rests. This paper critically examines the emergence of “good governance” agenda and exposes some of the myths espoused by the development aid community. This paper critically examines the inter-linkages between aid and good governance.

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