Search

This background note is intended to assist debt management offices (DMOs) in assessing whether a bond placement scheme combining auctions and syndications is an appropriate strategy in their markets and, if so, to assist them in designing the corresponding procedures.

Economic growth slowed in 2012 due to capacity constraints in the oil sector, weaker global demand for metals, and unfavorable weather conditions affecting crop production. Overall, industrial output expanded by 0.5 percent in 2012, with negligible contribution to Gross Domestic Product (GDP) growth for the year. Against the decline of agriculture, and little change in industry overall, real GDP growth was supported by a 10 percent year/year growth of the services sector in 2012. Higher export revenues supported strong domestic demand for trade and transportation, as well as for other non-tradable services. High oil prices continued spurring domestic consumption while fixed capital investments remained depressed. Private consumption remains the main contributor to GDP growth as it has been growing by 9-10 percent a year since 2010, supported by favorable commodity prices and high oil export revenue. Exports of oil largely influence the composition of Kazakhstans trading partners, while membership in the customs union appears to be affecting composition of imports. The European Union (EU) maintains the first place among trading partners of Kazakhstan, mainly due to large imports of oil and other mineral resources from Kazakhstan. Overall, employment creation continues to be driven by the services sector. Kazakhstan growth has been pro-poor, driven by job creation and real income gains. However, income disparity, which had improved up to 2009, has worsened slightly due to the crisis.

The Securities Settlement Systems (SSS) in the People's Republic of China (PRC) are organized around three different types of markets, which are the bond market, the corporate securities market, and the futures market. The China Government Depositary and Clearing Corporation Limited (CCDC) is the SSS as well as the central securities depository (CSD) for bonds. The China Securities Depository and Clearing Corporation Limited (SD and C) is the central counterparty (CCP), SSS, as well as the CSD for all instruments traded on the Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE). The four futures exchanges have their own clearing and settlement departments, which offer the function of a CCP. The CCDC, SD and C, and Shanghai Futures Exchange (SHFE), Dalian Commodities Exchange (DCE), and Zhengzhou Commodities Exchange (ZCE) operate important securities and derivatives settlement systems both, due to the large volume and value of transactions and the fact that they support key financial sector markets (interbank bond market, stock exchanges and futures). The assessment of the bonds market-CCDC system against the Recommendations for Securities Settlement Systems (RSSS) concludes that the system observes (observed or broadly observed) thirteen of the 19 recommendations, being one not applicable. The assessment of the stock exchanges-SD and C system against the RSSS concludes that the system observes (observed or broadly observed) seventeen of the 19 recommendations. The assessment of the commodities futures markets-SHFE system against the Recommendations for Central Counterparties (RCCP) concludes that the system observes (observed or broadly observed) eleven of the 15 recommendations, being one not applicable. The present document is the assessment of securities and derivatives settlement systems in the PRC based on the recommendations of the Committee on Payment and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) for RSSS and the recommendations of CPSS-IOSCO for Central Counterparties (RCCP). The paper is divided into following five parts: the first part gives general information; the second gives information and methodology used for assessment; the third part is securities and derivatives settlement systems infrastructure overview; the fourth part is main findings from the assessment with international standards; and the fifth part gives authorities' response.

International financial markets remain turbulent, dominated by the political and economic challenges of the Euro zone debt crisis and signs of weakening global growth. However, to date, although portfolio outflows have been seen, Indonesia's domestic economy continues to perform strongly. The economy remains relatively well-positioned to weather future external shocks and steps have been taken to improve crisis preparedness, for example, by increasing the flexibility of any fiscal response. The Euro zone continues to grapple with the policy responses to stem the crisis. The political and policy responses to the Euro zone debt crisis have been evolving on an almost daily basis, influencing global financial markets, risk appetite and capital flows to emerging economies such as Indonesia. Increased funding stress for European financial institutions was followed by a coordinated announcement of liquidity swap arrangements by central banks including the Federal Reserve and European Central Bank. In addition to putting in place policies to address the near-term impacts of any future shocks, with a protracted weakness in external demand likely, it is an opportune time to move forward with investments and reforms which can enhance domestic productivity and growth and attract more stable and longer-term capital flows. Indeed, the 2012 budget again significantly boosts capital expenditure, although ongoing budget execution challenges could hinder the effectiveness of the increased allocation on infrastructure improved infrastructure and investment climate can help to promote further the positive recent performance of Indonesia's manufacturing sector, after its weakness in the decade following the Asian crisis. The scope for productivity growth within manufacturing and other sectors through technology adoption and adaption can also be enhanced by further improvements in the quality of education of the labor force and the institutional environment for research and development.

This assessment finds that Argentina has made significant progress to improve its securities regulatory system within the existing legal framework. Specifically, Argentina operates a highly, even uniquely, transparent securities regulatory program. The assessment also finds that the Argentine securities regulator has dedicated professional staff, active on-site inspection programs, pro-active investigation of complaints, a road map to transition by 2012 to international accounting standards (IFRS) and plans to modernize auditing standards, the ability to assist foreign regulatory authorities to the extent of its current powers, and a commitment to use the powers it has to meet its mandate, achieve international benchmarks, and build on its practical experience to strengthen regulatory oversight. At the same time this assessment finds areas, of which the securities regulator is well aware, that need to be improved. These include that: (i) the complex structure of the market may be a source of inefficiency and an impediment to price formation and best execution; (ii) the regulator has insufficient administrative power to oversee comprehensively the regulatory performance by certain self-regulatory organizations affecting equity and private debt markets with respect to their members and to supervise, discipline and enforce its rules and the securities laws over such members directly; (iii) the ability to cooperate domestically and with foreign regulators is constrained by securities and banking secrecy law; (iv) the legal underpinning for protecting customer funds held by intermediaries needs enhancements; (iv) there are no existing market disruption contingency plans at the regulatory level; and (v) the markets offer some products that may require additional, tailored monitoring and explanation to external participants. This assessment of the International Organization of Securities Commissions (IOSCO) objective and principles of securities regulation was conducted between May 11 and May 26, 2011 in Buenos Aires, Argentina and includes references to certain post on-site improvements. The assessment included a review of the main securities laws, executive decrees, and general resolutions that relate to the mandate of the Comision Nacional de Valores (CNV) and underpin the public offer and trading of securities in Argentina.

The current edition of the Rwanda economic update is titled seeds for higher growth and specially features the agriculture sector. The importance of agriculture's contribution to growth in Rwanda remains considerable, despite the emergence of other significant growth drivers, such as services. Rwanda's agriculture sector will play an essential role in attaining the country's development vision of sustainable growth and increased poverty reduction, due to its employment weight. The agriculture feature of this update edition outlines key channels through which agriculture contributes to the economy. The second part of the update provides the regular overview of recent macroeconomic developments. While the special feature on agriculture will analyze the evolving role of the sector over the past five years, the second part on recent economic developments will focus on events during 2010.

This assessment covers the transparency of monetary policy in the Republic of Indonesia, and in particular, BI's role in the formulation and implementation of this policy. It forms part of the Financial Sector Assessment Program (FSAP) for Indonesia, which was conducted jointly by the IMF and the World Bank during 2009-2010. The assessment was primarily undertaken during the first FSAP mission in October 2009 with subsequent refinements through written communications with the authorities. The assessment was conducted according to the IMF's code of good practices on transparency in monetary and financial policies, as issued in September 1999, and supporting documents as approved in July 2000. The assessment is primarily based on information available as of October 2009, in particular on the relevant laws and regulations then in force. After receiving a draft version of this assessment, Bank Indonesia (BI) took a number of steps to enhance transparency, and the ratings in some practices have been marked up accordingly. The review also incorporates a wide range of other materials published by the Indonesian authorities, including those on their website and draws extensively on a self-assessment and a response to a questionnaire. In addition, the assessment was informed by discussions held during the FSAP mission with the authorities at a senior level and with various departments and divisions of BI, as well as with representatives of the private financial sector.

The capital markets in Salvador are small and relatively underdeveloped, and have played a very limited role in the economy. On average, institutional investors invest less than 10 percent of their total assets in capital market instruments. In 2009, there were only five new issuances of corporate bonds and three in the case of equity. Banks and pension funds are the main institutional investors. The current market architecture and the natural monopoly it grants to the exchange hamper market development and prevent the modernization of the regulatory framework. There is an urgent need to overhaul of the regulatory framework to promote sound market development in the short-to-medium term. The regulatory framework should guarantee a level playing field between bonds and bank deposits, which should be reflected in the investment guidelines for institutional investors. The exchange should reposition itself to become more competitive and strategic at the local and regional level. The investment funds law should be finally approved to broaden and diversify the investor base. The importance of this reform is paramount as the current reliance on just two main institutional investors (banks and pension funds), with investment limitations (35 percent each per issue), creates a major limitation for new issuances. In the medium -to long- run, it is recommended to explore gradually integrating the individual markets at the regional level. This paper is divided into following four parts: part one gives current market situation; part two gives regulatory and supervisory framework; part three gives recommendations; and part four is reference section.

This assessment forms part of the joint International Monetary Fund (IMF) World Bank Indonesia Financial Sector Assessment Program (FSAP) which is being undertaken during 2009-2010. The assessment, which covers the private sector equity and corporate bonds securities system's observance of the Committee on Payment and Settlement Systems / International Organization of Securities Commissions (CPSS/IOSCO) recommendations for securities settlement systems, was conducted during an ad hoc mission. The assessment focuses on two types of trades. First the clearing and settlement process is assessed as regards equity transactions traded on the stock exchange Indonesian Stock Exchange (IDX), cleared through the Clearing and Guarantee Corporation (KPEI) clearing system (e-CLEARS) and settled through the Central Securities Depository for the Stock Exchange securities (KSEI) settlement system (C-BEST). In addition, the assessment focuses on corporate bond transactions, which are traded outside the exchange and settled through the KSEI settlement system (C-BEST).

Capital account liberalization, it is fair to say, remains one of the most controversial and least understood policies of our day. One reason is that different theoretical perspectives have very different implications for the desirability of liberalizing capital flows. Another is that empirical analysis has failed to yield conclusive results. The answer, another influential strand of thought contends, is that this efficient-markets paradigm is fundamentally misleading when applied to capital flows. Limits on capital movements are a distortion. It is an implication of the theory of the second best that removing one distortion need not be welfare enhancing when other distortions are present.

Among 51 countries studied, there are large regional differences in the proportion of private wealth held abroad, ranging from 3 percent in South Asia to 39 percent in Africa. Three variables explain capital flight in Africa: exchange rate overvaluation, adverse investor risk ratings, and high indebtedness. Collier, Hoeffler, and Pattillo examine flight capital in the context of portfolio choice. They estimate the stock of flight capital held abroad and compare it with the stock of real (nonfinancial) capital held within each country. For 51 countries, they construct estimates (as of 1990) of private domestic capital and flight capital - which combined add up to domestic wealth. There are large regional differences in the proportion of private wealth that is held abroad, ranging from 3 percent in South Asia to 39 percent in Africa. They explain differences in portfolio choice in terms of the capital to labor ratio, indebtedness, exchange rate distortions, and risk ratings-all proxies for differences in the risk-adjusted rate of return on capital. They then apply the results to four policy questions in which private portfolio choices are potentially important: the effect of the East Asian crisis on domestic capital outflows; spillovers; the effect of HIPC debt relief on capital repatriation; and why Africa has so much of its private wealth outside the continent. Their conclusions: The four most severely affected East Asian countries will eventually lose about $250 billion in domestic wealth as a result of the deterioration in risk between March 1997 and September 1998. They found some support for a spillover model. The effect of the HIPC debt relief initiative on capital repatriation will vary massively between HIPC-eligible countries. Africa has by far the lowest capital per worker, which makes massive capital flight from Africa all the more distinctive. Three variables explain capital flight in Africa: exchange rate overvaluation, adverse investor risk ratings, and high indebtedness. This paper-a joint product of the Development Research Group and the International Monetary Fund-is part of a larger effort to understand how growth in low income countries can be increased. Paul Collier may be contacted at pcollier@worldbank.org.