The Global Financial Transformation from Asia to Europe Was Discussed TEPAV addressed the financial transformation throughout the world via country examples at a conference titled “From Asia to Europe: Global Financial Restructuring.”
ISTANBUL – TEPAV held a conference titled “From Asia to Europe: Global Financial Restructuring” on Wednesday, October 19, 2011 in cooperation with the World Bank.
During the conference, speakers shared country examples about the financial restructuring process in the context of the current state of affairs in the European economy and entrepreneurship finance for small- and medium-sized enterprises (SMEs) in the context of the recent developments in Asia.
Delivering the opening speech, Ulrich Zachau, World Bank Country Director for Turkey, enumerated Turkey’s needs: Increasing infrastructure investments to improve the investment climate, advancing entrepreneurship to increase productivity, and enhancing education and training opportunities and improving the skills of the labor force as a long-term investment.
Fatih Özatay, TEPAV Finance Institute Director, maintained that the Turkish economy first had contracted and then recovered at similar degrees in 2001 and 2009. “However, the policy requirements were different in those two periods. In 2001, fiscal policy was not loosened due to the absence of economic stability, whereas the stable environment in 2009 enabled fiscal loosening to some degree.”
“Caution is needed with foreign fund inflows”
Stressing that Turkey had not been able to converge with European Union (EU) countries in terms of per capita income over the last five decades, Özatay said, “Poor EU countries, on the other hand, have converged with the rich EU countries.” He stated that Turkey could face problems with foreign capital inflows in the coming period if the necessary reforms failed and instability rose.
In the first session of the conference, Andrzej Raczko, member of the Management Board of the National Bank of Poland, addressed the experiences of the Polish economy in the context of EU membership.
Juan Zalduendo, Lead Economist of the World Bank Europe and Central Asia Region delivered a speech in the first discussion session themed “Europe and Financial Restructuring.” He stated that stability was necessary but insufficient for international capital flows to improve economic growth. The institutional infrastructure also needed to be strong. In this context, the EU member states had improved their investments by attracting high-quality, long-term foreign capital via various reforms, generating positive implications on growth. He accentuated that such a positive effect on growth could not be seen in Latin American countries and others since capital inflows had not been backed by reforms and that capital inflows had to be managed successfully in order to keep risks under control.
TOBB President M. Rifat Hisarcıklıoğlu also delivered a short speech during the conference. He addressed the rising need for the financial sector to support the private sector and celebrated the efforts to make Istanbul a financial center.
“Private sector loans are low”
Speaking during the second discussion session titled “Asia and Innovations in the Finance of Entrepreneurship,” TEPAV Director Güven Sak stated that the banking sector in Turkey was not developed sufficiently. The share of bank loans to the private sector in the national income was only 36.5% in Turkey compared to an average of 51% in the Middle Eastern and North African countries and 141% in the EU. The share of SMEs in total bank loans was around 36%, which constituted a great impediment to enterprise growth. Sak emphasized that limited venture capital opportunities were another significant flaw in the financial structure.
Strong SMEs and strong SME financing in China
Sharing China’s experience, Liu Chunhang, Director-General for Policy Research and Statistics of the China Banking Regulatory Commission, pointed at the importance of SMEs for the Chinese economy. He said that SMEs constituted 99% of the business establishments and 60% of the GDP, developed 66% of new patents and owned 82% of new product development.
He stated that the Commission had asked banks to maintain the growth rate of small business lending at or above the rate of total credit growth, and income tax reduction was introduced for SMEs under certain criteria. He added that actors other than banks also provided financing for enterprises.
South Korea seeks to develop angel market
Yong Rin Park, Head of the Policies and Regulations Department of the Korea Capital Market Institute said that the country provided support to early-stage investment and venture capital support to enterprises. However, angel investors, who were important actors for consultancy, were not promoted. Park added that the sources of venture capital funding were still driven mostly by the government.
