ADB: Lagging development in capital markets drags on socioeconomic progress in CAREC countries

Lagging development in capital markets is a drag on socioeconomic progress in many CAREC developing member countries, Report informs referring to the Asian Development Bank (ADB).

Traditional financial institutions, e.g., banks, dominate the finance sector of most CAREC program members, and the 2018 Global Competitiveness Report found the levels of market capitalization low in many member countries.

“Very low levels of savings in most of the population groups and the rising inequality in CAREC DMCs 7 have also fundamentally constrained the efficient mobilization of financial resources through the finance sector. This deprives CAREC economies of the efficient resource allocation, risk-sharing, and unlocked financial investment that strengthened capital markets can provide as well as the essential role they can play in financing growth and sustainable development. Stronger RCI of CAREC DMCs to harmonize capital market regulation and standards can also make cross-border trade and investment more productive and efficient.

The strengths of capital markets and finance sectors in individual CAREC DMCs vary widely, with more economically advanced countries having more vibrant capital markets.

“The less-developed CAREC DMCs that receive concessional ADB assistance face the greatest challenges. However, there is common ground for greater and more effective regional dialogue and action on capital markets. Banking dominance, weak legal and regulatory frameworks, and inadequate institutional capacity are strikingly similar across the region.

Harmonizing approaches and solutions discussed and achieved through country-to-country knowledge sharing and searching for synergies using the CAREC platform can help find and apply solutions that will strengthen individual economies and the region. The benefits would include access to a much larger and deeper pool of development funding in CAREC capital markets and better services, lower costs for financial services, and more liquid and efficient capital markets,” the ADB noted.