Shipbuilding – Article Example

Shipbuilding Shipbuilding is an article printed on May 1st, 2003 in both online and print editions of, The Economist. The article is about a study on better regulations that can be employed by banking industries, particularly in the developing countries to improve their financial gains. The article gives precise data on the various measures, banking industries in the developing countries can apply. This includes; implementation of financial reforms, reduction of corruption and encouragement of foreign ownership or diversification in the banking sector.
The article argues that corruption poses a greater risk in the development of the banking sector that it discourages the inflows of vital resources for foreign direct investment (FDI’s). It is necessary that measures are undertaken to reduce corruption. These measures, as discussed in the article include; strict regulations on the lending process preventing the arising of favors. Further, using better accounting standards and more disclosure of financial information both to the banks and to the public to attract investors.
A study by Gaston Gelos and Shang-Jin Wei, quoted in IMF article shows that transparency in the banking and financial institutions is a suitable prospect. The study showed that countries with transparency received a bigger share of global equity investments than their non-transparent counterparts. It also gives investors ample time since there is minimal or no herding in the countries that exercise the disclosure of information. Transparency also equips investors on the long -term reassurances especially during the financial crisis. This facilitates in increasing the stability of domestic financial markets in the developing countries.
The article further points out that diversification and encouragement of foreign ownership of financial institutions help in the development of the sector. Foreign ownerships of banks according to the article leads to the introduction of better technologies, new management skills and big competition for the domestic or state-owned institutions. The reason is foreign-owned banks have their reputations in their countries and the world as a whole transparency and fighting corruption. Besides, they have a wider spread of risk in case of a financial crisis.
According to the article, to achieve stability in the banking sector, an international consensus should be achieved to avoid “sovereign bankruptcy”. This will lead to regulation of the currency rates and the reduction of foreign debts to the developing countries.

Reference
Shipbuilding. The Economist. May 1st, 2003. Web February 21, 2015.