Edited by Yung Chul Park, Takatoshi Ito and Yunjong Wang
Chapter 18: The Role of Regional Development Banks: Financing for Development in East Asia
Choong Yong Ahn, Woosik Moon and Deok Ryong Yoon 1. INTRODUCTION In East Asia, the banking sector has played an important role acting as the dominant savings-investment conduit. In particular, development banks (hereafter DBs), as institutions focusing on long-term ﬁnance, have played a critical role in promoting the economic development of East Asia. Generally speaking, private ﬁnance has been inadequate in providing the necessary ﬁnancial resources to expedite development in developing countries. As a result, there is a need for public or state intervention in the form of special policy loans, such as those provided by development banks. Given that capital markets are poorly developed in most developing countries, development banks help to ﬁll the gap by providing ﬁnancial resources, especially long-term ﬁnancing. Obviously, the role of development banks diminishes as an economy develops in the real and ﬁnancial sectors. For economic development, international and regional development banks have been of vital importance and played a much more prominent role than those of the national local development banks in developing countries. International development banks provide long-term international loans which, as a catalyst, would facilitate and promote foreign private investment. From the borrower’s point of view, obtaining foreign capital from international DBs is thus a low cost-ﬁnancing scheme used in addition to national DBs. Over the coming years the role of international development banks is expected to decline more rapidly than that of national development banks. The ﬁrst reason is the globalization of international ﬁnancial markets. Given that there is...
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