A New Financial Market Structure for East Asia
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A New Financial Market Structure for East Asia

Edited by Yung Chul Park, Takatoshi Ito and Yunjong Wang

This book contends that the East Asian financial constitution lacks an appropriate infrastructure, resulting in inefficient allocation of high savings and an over-inflated short-term debt market. It goes on to point out that despite high savings, East Asia’s dependency on financial centers outside the region is also relatively high, and that there is no strong region-wide network to connect various financial centers in East Asia.
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Chapter 18: The Role of Regional Development Banks: Financing for Development in East Asia

Choong Yong Ahn, Woosik Moon and Deok Ryong Yoon


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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