India is considering letting its business houses run banks. It should think twice

India is considering letting its business houses run banks. It should think twice

May 25th 2013 | MUMBAI |From the print edition

BANKING in India is a vast problem and a huge opportunity. Only 35% of adults have formal accounts. A grim reminder of the risks for the 600m-odd unbanked folk came in April. A multi-billion-dollar, barely regulated, “chit fund” in Kolkata collapsed, destroying the savings of hundreds of thousands of poor people. Up to a dozen committed suicide, one by immolation. Precisely because the banking market is so underpenetrated, it should offer lots of growth. Although there are 196 domestic banks, a majority are state-controlled and stodgy. Lending margins are high. So when new licences for private players are granted, fortunes are made. The last two permits, awarded in 2003-04 when the industry was recovering from bad debts, have helped make $10 billion for their backers. Now the Reserve Bank of India (RBI), the central bank, plans to issue new licences. Applications are due by July 1st and a frenzy is building. Vikram Pandit, the Indian-born ex-boss of Citigroup, an American bank, has teamed up with a local outfit. There could be up to 100 entries for perhaps ten licences, reckons a banker.

Read more of this post

Why Myanmar’s military rulers are giving power to the people; Why investors still need to proceed with caution

Why Myanmar’s military rulers are giving power to the people

May 25th 2013 |From the print edition

MYANMAR’S TRANSITION HAS been a top-down affair. This, more than anything, distinguishes it from other recent upheavals such as the “people power” revolutions of the Arab spring, the fall of communism in Europe and the toppling of Indonesia’s President Suharto. At crucial moments the threat of mass protests hurried the process along. Government advisers concede that in 2011 they were afraid of an Arab spring on the streets of Yangon. The army had mercilessly oppressed protests such as the aborted “saffron revolution” in 2007, led by monks, and the pro-democracy uprising in 1988 that had first propelled Miss Suu Kyi to national prominence. Those 1988 protests led to elections in 1990 which were won by the NLD but annulled by the government. For the main part, though, Myanmar now stands as a rare example of an authoritarian regime changing itself from within. Read more of this post

Indonesia’s Weak Institutions Spark Nostalgia for New Order; power abuse by elites and uneven growth has left people yearning for Suharto

Indonesia’s Weak Institutions Spark Nostalgia for New Order

A jurist and an economist say power abuse by elites and uneven growth has left people yearning for Suharto

By Ezra Sihite on 8:55 am May 27, 2013.

President Suharto’s image can be found on posters around Indonesia in increasing numbers, as people seek the stability that his often-brutal leadership brought to the country. (JG Photo/Ali Lutfi)

Many Indonesians believe that life in the New Order era under President Suharto was better than today and that social elites dominate modern politics and law, according to a senior former jurist.

Speaking at a forum in Jakarta, former Constitutional Court chief justice Mahfud M.D. said that Indonesia is blighted by an oligarchy of elites that prioritize their interests over the public interest and do not abide by social rules, causing disillusionment and a lack of confidence in the law.

“Don’t be surprised to see people today wanting to see the military back [in power] because of oligarchic [conditions]. In Yogyakarta, you see stickers on cars with picture of a smiling Suharto reading, ‘Wasn’t it good during my time?’ ” Mahfud said. Read more of this post