Financial markets reform programs: Success factors

Abstract

Modern financial markets are global and strenuously competing for global investment. Tightening of global competition between national financial sectors predetermines their conversion into a form of international financial centers (IFC). We classified the IFC into "traditional" and "off-shore", and identified "traditional" markets/centers that are developing in accordance with the government programs aimed at improving global competitiveness of national financial markets, including programs of national financial markets transformation into IFC. The paper contains a short description of successive reforms of the financial markets in such countries as China, Hong Kong, Republic of Korea and India which are the biggest competitors to Russia in the global financial market. Based on the analysis of these programs, we formulated the success factors of financial sector reforms. The success of the reform was evaluated according to three groups of parameters: a) achievement of the stated objectives (if they had been clearly stated); b) increase in global rankings of the national financial market (Global Financial Centres Index of the Z/Yen Group Limited, Financial Development Index Rankings of the World Economic Forum and International Financial Centers Development Index of the alliance between Xinhua and Dow Jones); c) substantial increase of the studied countries' role within some sectors of the global financial market. In such terms, there are signs of reforms' success in Hong Kong, China, Republic of Korea and India, and, conversely, of the failure of similar programs in Russia and Kazakhstan. The principal conclusion is that the primary factor of success is the general quality of work of the state as an institution. Special governmental policies and measures aimed at the development of the national financial market may be productive and may become a potential competitive advantage if the application of the recommendations of international financial institutions is based on full consideration of national specifics and characteristics of the respective markets.