On the morning of October 14th, speakers tried to answer the following questions: “What are the causes of the financial crisis? Will developing countries be the new frontiers of IDE?”
The crisis has highlighted the frailty of the international financial balance. Investments, normally free to move worldwide in real time, are still subjected to national laws. The lack of transparence and of shared accounting principles, the absence of a transnational form of control, the operating autonomy conceded to fiscal havens and the excessive centering of some bank groups caused the worst financial crisis since 1929.
All the speakers agreed on some issues:
- privately owned investment banks, especially American ones, played a m a major role in causing the crisis
- a greater cooperation between international financial institutions and central banks is essential
- the entrepreneurial world needs cash, new rules and new more complex financial services
Africa and Developing countries
Josep Borrell, reminded that in 2008 Africa recorded a substantial increase in its IDE (+25%), but in the first trimester of 2009 witnessed a drop of investments by multinationals that started to repatriate profits twice as fast compared to previous years.
Norbert Walter, from Deutsche Bank, underlined that developing countries, engaged in major infrastructural works (energy, oil pipes, roads, ports…) are struggling with the inability of the international bank system to team up and to create transnational networks able to sustain more demanding projects.
Risk evaluation
In pre-crisis times banks used to loan loads of money practically to everyone, adhering to a particularly aggressive policy. Today very low amounts of money are lent to very few people. And small and medium enterprises struggle to cope with cash needs.
Borrel reminded that if the credit system fails to finance the cash flow, new entrepreneurial initiatives won’t emerge and consumes would get stuck.
Sovereign funds
Western sovereign funds, in order to limit the effects of the financial crisis, have made available 80,000 million USD that managed to avoid a bigger damage. This huge availability was once peculiar mostly to western world economies. Nowadays Asian and middle eastern sovereign funds have an extraordinary importance. A recent research showed that should a major western stock exchanges crisis ever occur, Asian sovereign funds could buy all western utilities companies.