Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (798)	4/4/2000 11:15:00 PM
From: mph	Respond to of 33421

<grub> see what I mean?<g> M

To: John Pitera who wrote (798)	4/4/2000 11:15:00 PM
From: John Pitera	Read Replies (2) \| Respond to of 33421

World Bank Warns Rapid Investments Could Revive Emerging-Market Crises By DAMIAN MILVERTON April 4, 2000 Dow Jones Newswires WASHINGTON -- Many of the developing countries moving along the path toward better economic health run a risk of returning to the financial chaos seen in the late 1990s, the World Bank said Tuesday. Read an overview of the World Bank's report on growth prospects for developing countries. The development institution, whose goal is to reduce poverty by promoting sustainable economic growth in its client countries, said portfolio investors remain wary in the wake of financial crises in Asia, Russia and Latin America. Even so, it warned the next decade "may well see another boom in capital flows to emerging markets, accompanied again by high volatility and the potential for crises." In a report titled "Global Development Finance," the bank said it sees improved but uneven growth in developing economies over the next three years, helped by a slow comeback of offshore capital. But a return to the kind of strong growth that earned the Asian Tigers their short-lived moniker could also recreate the conditions that caused their downfall -- a jump in short-term debt and a reliance on flighty capital inflows. "The recent pause in capital flows notwithstanding, continued technological progress, rapid economic growth and a favorable political climate are likely to support a full resumption of capital flows to emerging markets at some time in the next decade, and perhaps yet another boom," the World Bank said. "However, flows are expected to remain volatile." Bank Reconsiders Capital Controls Given this scenario, the World Bank has watered down its objections to the use of capital controls, declaring that a combination of such short-term safeguards might help stave off a crisis. The bank suggests that the costs of capital controls are borne by those who are able to bear the expense -- that is, wealthy individuals and the corporate sector -- as opposed to the cost of a full-blown economic crisis, which directly affects the poor. Safeguards included in the World Bank report range from Chilean-style controls on incoming capital flows to curbs on outflows, such as those Malaysia implemented toward the end of the Asian crisis. "None of these measures can substitute for ... better macroeconomic fundamentals," the World Bank added. "For example, they cannot protect countries against the consequences of large fiscal deficits or overvalued currencies." The World Bank said safeguarding developing economies from future crises is all the more important given the nature of the recovery under way. The bank estimates growth among developing countries will rise to 4.6% this year and 4.8% in 2001 from 3.3% growth in 1999, but it notes that the rebound is uneven. "Some 41 low-income countries -- with a combined population of more than one billion people -- will barely cross the threshold into positive growth," the bank said. "This underscores the still fragile path of reform and recovery that lies ahead for these countries," it added. Foreign Investment Grows Significantly, the bank noted that the flow of foreign direct investment into developing nations seems to have been barely affected by recent crises. Total annual foreign investment rose to $192 billion in 1999 from $35 billion eight years earlier. This flow of capital has "become the single-largest and most stable source of long-term development finance for developing countries," it said. To encourage the flow of long-term capital, developing countries will need to "rely more heavily on trade," diversify their economic base and achieve greater competitiveness, the bank said. "Several economies in East Asia, European Union-accession countries in Eastern Europe, Brazil and Mexico exhibit two or more of these attributes," it said. "China and India, with 46% of developing country population and 55% of the poor, are also expected to sustain fairly rapid growth while grappling with domestic reform issues," it added.