Reforming Financial Systems: Policy Change and Privatization

(Hardback)

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One of the key constraints to accelerated economic performance in developing countries is, in the authors' view, the absence of strong, dynamic financial systems. Many, if not most, developing countries suffer from repressed financial systems. Thus the most important step in effecting the development of capital markets is to lay a foundation of sound macroeconomic and regulatory policies conducive to financial sector development. This book presents an approach to financial sector reform composed of financial sector diagnosis, policy and institutional targeting, macroeconomic reforms, bank regulation and supervisory reform, and privatization. The work also presents criteria to help decision-makers apply the approach. The issues and approaches presented are as relevant to the emerging democracies of Eastern Europe and such transitional countries as Brazil and Mexico as they are to developing countries. The authors begin with an introductory discussion of the two-pronged strategy of financial reform and privatization and then, in chapter 2, provide an overview of development financial systems. Chapter 3 discusses the public/private debate. Chapter 4 is devoted to financial sector liberalization, and chapter 5 goes on to discuss the privatization of financial institutions. A framework for financial reform and privatization is presented in chapter 6, and chapter 7 provides concluding comments. In addition, a series of case studies are presented in the appendix. These case studies demonstrate the methods and strategies used to address financial sector reform in Bangladesh, Chile, Guinea, Jamaica, Mexico, and the Philippines. This book will be useful to financial and development experts and to policy makers in countries amenable to changing their financial systems. It would also be appropriate for courses in international economics, international banking, international monetary issues, international finance, and economic development.

Reviews

One of the most striking developments of the late 1980s was an astonishing change in the dominant ideology of economic development. The economic thinking as well as economic practice undoubtedly moved away from centralized planning and control toward decentralized economic liberalism. However, both previously centralized economies and LDCs failed to achieve satisfactory economic performance. Repressed financial systems of these countries proved to be a primary constraint to successful macroeconomic stabilization. This book offers approaches and guidelines to privatize and/or liberalize the financial system of a developing country. Starting with the premise that bank privatization is a more delicate task than the privatization of the rest of the economy, the authors propose a two-pronged strategy of financial reform and privatization. The book describes the operating components of financial markets, presents evidence supporting the greater efficiency of the private banking sector, and describes the many aspects of financial reform and privatization strategies. Finally, six country case studies of actual privatizations and policy reforms in the financial sector are analyzed. References. Nontechnical and readable, this volume is recommended for academic readers as well as professionals.-Choice
"One of the most striking developments of the late 1980s was an astonishing change in the dominant ideology of economic development. The economic thinking as well as economic practice undoubtedly moved away from centralized planning and control toward decentralized economic liberalism. However, both previously centralized economies and LDCs failed to achieve satisfactory economic performance. Repressed financial systems of these countries proved to be a primary constraint to successful macroeconomic stabilization. This book offers approaches and guidelines to privatize and/or liberalize the financial system of a developing country. Starting with the premise that bank privatization is a more delicate task than the privatization of the rest of the economy, the authors propose a two-pronged strategy of financial reform and privatization. The book describes the operating components of financial markets, presents evidence supporting the greater efficiency of the private banking sector, and describes the many aspects of financial reform and privatization strategies. Finally, six country case studies of actual privatizations and policy reforms in the financial sector are analyzed. References. Nontechnical and readable, this volume is recommended for academic readers as well as professionals."-Choice

Author Bio

NEAL S. ZANK is a consultant and Research Associate at the Center for Global Management and Research at the George Washington University. He is coauthor of Reforming Financial Systems: Policy Change and Privatization (Greenwood, 1991) and Welfare System Reform: Coordinating Federal, State, and Local Public Assistance Programs (Greenwood, 1993), and he has written numerous articles on job training, foreign aid, and international economic issues. Mr. Zank was Associate Director of the National Commission for Employment Policy (1990-1993) and a staff member for two Presidential commissions and the U.S. Agency for International Development. JOHN A. MATHIESON is Director of the International Policy Center of SRI International. He is the co-author of two books, The United States and the Third World (1982) and Struggle Against Dependence: Nontraditional Export Growth in Central America and the Caribbean (with Kathleen D. Vickland, 1988). FRANK T. NIEDER is Senior International Economist with the International Policy Center of SRI International--Washington. He has worked extensively on macroeconomic, finance, and trade and investment promotion issues in developing countries. KATHLEEN D. VICKLAND is Senior International Economist with the International Policy Center of SRI International--Washington. In addition to co-authoring Struggle Against Dependence, she has authored several articles and papers on economic development issues. RONALD J. IVEY is a Senior Manager with Ernst and Young's International Management Consulting Group. He has extensive experience in privatization and private sector development in developing countries.