This Final Research Project Finance Essay - Free Essay Example

This Final Research Project is basically focused on the rising Non-Performing Loans Habib Metropolitan Banks Asset Portfolio. The purpose of research was to study the main key factors that are responsible for this rising trend of NPLs. And to find out a solution to this problem that Habib Metropolitan Bank is facing. The results show that the Textile Sector is the major contributor in the Non-Performing Loans of Habib MetroPolitan Bank. The bank has not enough diversified its Asset portfolio and has concentrated its lending to just one sector, the Textile Sector, almost 51% of Banks total lending is extended to the textile sector alone which is now causing such high NPLs in the Banks Asset Portfolio. If the bank had properly managed and diversified its portfolio it would not have been facing such problems with its Loan Portfolio. What the bank should do now is to minimize its exposure in the textile sector and should diversify its Portfolio to all the sectors in the economy so that its Exposure to just one sector would not be very significant as compared to the whole Loan Portfolio managed by HMB. Habib Metropolitan Bank Habib Metropolitan Bank, a subsidiary of Habib Bank AG Zurich, was incorporated in Pakistan in year 1992 under Section 160 of the Companies Ordinance, 1984, as a public limited company. The bank started its operations the same year it was incorporated and licensed by the authorities. HMB is placed among the top ten (10th) Commercial Banks in Pakistan and holds a standalone (independent) ranking of 1639th in the world. In October 2006 Metropolitan Bank that operated nationally with a network of 51 on-line branches all across Pakistan finally got merged into Habib Bank AG Zurich and this new entity was named Habib Metropolitan Bank, currently known as Habib Metro Bank. [1] Habib Metropolitan Bank has its operational branches in all the major cities of Pakistan with a Vision to be the most respected Financial Institution in Pakistan by providing excellent quality services which are primarily focused in Trade Financing and Retail Banking. Habib Metropolitan Banks parent company Habib Bank AG Zurich was incorporated in year 1967 and has a standalone International Ranking of 687th in terms of Banks Capital. Habib Bank AG Zurich is an international bank that has a Headquarter in Switzerland (Zurich) and operations in many countries across the globe. Habib Metropolitan Financial Services Ltd, a subsidiary of Habib Metropolitan Bank, is a renowned name in the Equity Brokerage Industry. As of 30th December 2011 the growth in Equity brokerage business remained stable but in the coming years it is expected to grow at rapid pace as the Investors confidence comes back to Pakistani Capital markets. [2] Pakistan Credit Rating Agency (PACRA) a renowned rating agency of Pakistan has maintained the Long term Credit Rating of Habib Metropolitan Bank at AA+ and A1+ for short term rating. AA+ rating is considered to be very safe and signifies that there is almost absolutely no Risk that the Company would default on its outstanding debt. This solid credit rating of HMB for Eleven (11 years) straight years clearly indicates that HMB has a very good reputation and has the ability to pay off the interest payments to its creditors and its probability to default on its debt is very low. [3][4] About Habib Metropolitan Bank Habib Metropolitan Bank is a middle tier bank that is currently ranked as the 10th biggest bank in Pakistan. As of 31st December 2011, HMB has nationwide network of 163 branches operating all across Pakistan with 3,073 permanent employees on its payroll and a total of 123 Automated Teller Machines installed all across the country. Bank has been growing at a very decent pace over the years ever since its inception and had maintained this growth rate even during the last few years that came out to very tough for the Economy. HMB has total assets amounting to Rs 288 Billion as mentioned in its financial statements and its Deposits have reached to Rs 185 Billion. Habib Metropolitan Bank is also one of the leading Tax Payers in Pakistan as it has paid Rs 1.9 Billion in direct taxes during financial year 2011. Being an AA+ rated bank, HMB has a very strong capacity to pay off its timely Interest payments. Reason for Selection of Habib Metropolitan Bank The main fundamental reason to choose Habib Metropolitan Bank is to critically analyze the performance of the Asset quality of a mid size bank, since there has not been much work done on analyzing the performance of mid-size banks in Pakistan. In a way, it would be a great opportunity to dissect the financial performance of this bank amid of poor economic conditions, worsening energy crisis and the ever deteriorating security conditions in the country. The main focus of this research paper would be based on the Non Performing Loans of Habib Metro Bank. Industry Overview Over the last decade, Pakistan has made many financial sector banking reforms, and has been quite successful in liberalizing its Commercial Banking sector. This decade of 2000s, didnt just liberalized the banking sector but it has also modernized the Central Bank of Pakistan to a great extent. In the days of inception Pakistan used to be an Agricultural based economy, but all that changed significantly in the next few decades, and Pakistan became a Service Dominated Economy. The contribution of Service Sector in the total GDP of the country has gone up to 53% as compared to a mere small percentage in the past. It means that the contribution of the service sector in the overall economy is more than the contribution of both Industrial and Agriculture sector. The Service sector is a very broad category which includes many sub sectors like the Telecom Sector, Health care, Education, Financial Sector and many more. The contribution of financial services sector in the overall service secto r of Pakistan has increased significantly during the last decade and has created thousands of jobs in the Commercial Banks, Modaraba Companies, Asset Management firms, Brokerage houses and Investment Banks. Before the privatization of banks and liberalization of banking sector reforms, the banking sector was in dire trouble, the non performing loans, issued by the then nationalized banks were reaching the skies and were making the already dangling economy of Pakistan suffer even more. [5] In 1990s things changed, as the government started to follow the Market based reforms (Demand- Supply), the troubled Banking sector of Pakistan took a u-turn and turned itself from a loss maker to a profit maker and contributed significantly in pumping the economy in upward direction. Today, banking sector is the main contributor in the growth of the Economy; it actually positively affects the economy not just directly but also indirectly as the growth in banking sector means the easy availability of funds to the deficit units from the surplus units of funds. That is how banking sector contributes in the growth and development of other sectors. The banking sector of Pakistan provides a great deal of services to its customers both individuals and corporations. Banks are the principal means of remittance flow in the country from all around the world, which is one of the main sources of foreign reserves for the country apart from exports and foreign direct investment in the country. Over the years banking sector has increased the number of services that it offers to its clients. Many services that were not that developed few years back are currently very much developed; credit card service and household lending could be the examples of service categories being matured with the passage of time. As of today, there are more than 35 banks currently working in Pakistan out of which 6 banks are owned by the Government of Pakistan -Public sector banks (Majority of their shares are owned by the Government), 22 are locally licensed Private banks like MCB, HBL, ABL, FBL, UBL, HMB etc, 7 foreign banks which are not fully licensed to work in Pakistan and 4 Specialized banks (micro finance banks). According to the statistics from Year 2010 to 2011 made available by the State Bank of Pakistan, The total assets of banking sector have shown a growth rate of 15% and the total deposits kept with the banking sector have grown at 14.5%. While the deposits have increased in this 1 year time period the Loans issued by the banks have seen a consistent decline, one of the reasons for this declining trend in banking sector lending is Loan Default, in other words Bad Debts. Banks are feeling highly in-secured lending funds out, due to the ever increasing NPLs and because of this very same reason banks are heavily investing into stock and money markets. Now coming to the distribution of banking sector, almost 50% of the total banking assets are contributed by the top 5 banks. These top five banks are MCB, HBL, UBL, NBP and ABL. These 5 banks are not just dominating in the contribution of total assets but they are also dominating in the total investment made by the banking industry and the profits earned by the industry. Almost half of the advances (Loans issued by the banks) extended by the banking industry are contributed by these five giant banks. Area of Interest Focus of this research would be the Non performing loans of Habib Metropolitan Bank. My interest in nonperforming loans is not just because I work for a bank as a Credit support analyst, but to analyze thoroughly the reasons why Habib Metropolitan Bank just like other banks is not able to control its NPLs even by being very responsible in its lending behavior. Banks are now lending lesser and lesser amount as compared to what they used to lend in the past. But still they are not able to bring down the NPLs to a very small percentage. Research Objectives I believe that with the help of this research paper we would be able to highlight the reasons why banks, in spite of being highly responsible with funds they lend, cannot have the complete control over their Bad Debts. These days banks follow many rules and regulations enforced by the regulatory authorities like Basel I, Basel II now Basel III, apart from their own internal systems to keep a check on their credit risk and the quality of their assets, but still there seems to few loopholes that are still existing in the banks lending procedures. These ever increasing NPLs are the reasons why banks are now scared of lending money to the deficit units and are investing heavily into the Government securities. There is no doubt that Government lending is highly lucrative, since it is risk free. However, high levels of Risk Free lending implies losing out on higher profitability opportunities and reducing focus on building long term customer relations (Retail Banking becomes weak eventually). Also, profits from government lending is artificial as Government pays bank by printing money (in Pakistan), which would reduce money value and depreciate the local currency. Eventually, dollar value of profits would fall. Additionally, as savings fall and inexpensive funding sources dry up (Current Deposits); Government lending would become unfeasible as funds would have to be secured at higher rates. With weak retail banking infrastructure, narrow product line few household/corporate customers the middle tier banks like Bank Al-Habib Lim ited, Bank Alfalah Limited, Faysal Bank Limited and Habib Metropolitan Bank Limited etc would quickly start producing heavy losses. Research Question WHAT ARE THE MAIN REASONS WHY HMBs NPLs ARE RISING? Research Methodology The research methodology that would be followed for this particular research paper would be based on both Primary and Secondary Research. The already published data, financial reports and SBP Banking reviews, interviews and information gathered from Questionnaires would be the source of information for this paper. Since this paper is not truly an Academic Research paper but rather a paper that specifically deals with the working and some specific problems of a particular bank the focus would be on the Financial Reports of the Bank and the already published and publically available data. Financial statements and secondary data does not necessarily give all the insights as to why something is happening, therefore to get the deep insights, conducting Interviews were necessary to know about the opinion of bankers as to what is leading to such high NPLs and why the bank is not able to control them. And to actually check whether the findings from Secondary research matches with the findings from the primary research (Questionnaires and Interviews) Primary Research Primary Research would include both Interviews and Questionnaires. The basic purpose of doing a primary research on a topic like this one (NPLs) is to compare the views and general perceptions of Bankers regarding the rising trend in Non-Performing Loans of Habib Metropolitan Bank with that of already published publically available Financial Statements of HMB. Secondary Research As it has been mentioned earlier the research methodology for this Research Project would 70% -80% be comprised of Secondary research. Since we are focusing only on the rising trend of Non-performing loans of Habib Metropolitan Bank, the deep and thorough analysis of financial reports of the company and of the competitors reports along with some yearly Banking sector reviews of State Bank of Pakistan, would be reasonable enough to know the real reasons of these worsening conditions of the Banks Asset Portfolio. Literature Review Siddiqui et al (2012), basically aims to find out why the Non-Performing Loans in Pakistani Banking Sector are constantly on the rise. Their whole research is focused on finding out why is this happening and what are the main factors that are contributing to such high Non-Performing Loans even by taking all the precautionary measures that could possibly be taken, and following all the rules and regulations implemented by the Regulatory authorities like State Bank of Pakistan or Securities and Exchange commission of Pakistan. There are many factors that might be causing the borrowers to go default on their debt obligations but the major emphasis is on the Interest rate volatility and the High Interest rate charged by the lenders from the view point of increasing Non Performing loans in Pakistans banking sector. GARCH and other quantitative techniques were used to closely analyze the volatility trend in the interest rates and their possible impact on the Non-Performing loans. Siddiqui et al research clearly states that there is no significant relationship between the Volatility in interest rates Non-Performing Loans. According to the Authors the Non-Performing Loan trend in Pakistan is constantly on a rise and has witnessed a significant growth over the last few years, but as far as the neighboring countries are concerned like India, Bangladesh etc. Their NPL trend is on its way down, and the major reason that they find out seems to be Interest Rates within the economy. The lending rates in Pakistan are way higher than the Interest Rates in the neighboring countries that brings extra burden on the debtors to pay off their debt. High interest rates combined with low economic development are the main reasons why Pakistan is facing such a positive trend in the growth of NPLs while all other South Asian countries are showing a negative trend. According to the authors of this research article, state Bank of Pakistan has divided bad debts into three categories, namely, Substandard, Doubtful and Loss. These categories basically help the Bank Management and Authorities in identifying the NPLs situation. In a way, this research is one of its kinds, but now it has opened the doors for further research in identifying the main factors that affect the Non-Performing Loans. [6] O. Masood and B. Aktan (2009) focused on the determinants that lead to loan defaults especially of the state owned banks of Pakistan and Turkey. The factors that seemed to be affecting the Non-Performing Loans among the state owned banks within these two countries are of completely different in nature, which was quite unexpected. According to the authors of this research article, reasons that are causing these NPLs in Turkey are basically the Government interventions within the Banks lending business and bad analysis of creditworthiness. But in Pakistan factors like Years of service of credit managers in the banks and Communication facilities provided to the credit analysts basically affects the NPL growth rate among the state owned banks. These NPL issues could only be solved if these above mentioned factors are brought under control, otherwise this rising trend of NLPs would keep on going up. [7] Samreen and Zaidi (2012) explained the concept of Credit scoring in this research article. According to the authors, Non-Performing Loans could be reduced to a great extent if a proper credit scoring model is used by the lenders (Banks) to analyze the creditworthiness of the applicants who have applied for the loans. This way banks would be able to distinguish High credit worthy applicants from the less credit worthy applicants which would ultimately lead to a much more responsible lending and hence there would be less loan defaults. A loan is considered to be a Non-Performing loan, if a borrower has been unable to pay off the principal and interest for over 90 days (90 DPD). (Samreen, 2012) [8] Husain (2012) explains the misconception of rising NPLs among the general public and many bankers in the financial services sector. Husain says its completely wrong to say that State Bank of Pakistan is doing nothing about controlling these Non-Performing Loans. If we compare NPLs in year 1999 with NPLs in 2009, the quantum or the absolute value would be a lot higher in year 2009 even if all the loans that were issued after 1999 didnt go bad. And why is that so? The reason for these growing NPLs is the markup or interest that is constantly being charged and added up on the bad loan that hasnt been serviced for over 90 days. Lets assume a loan, worth 1 Million, was lent out in 2000 on a 20% markup rate with a maturity of 10 years. This loan got defaulted in the same year which means there are no repayments being made by the borrower on the loan that he/ she borrowed but the NPL amount would keep on rising and keep adding up every year as the interest amount due is being added to the d efaulted loan amount every year. In 2001 the NPL amount would be 1.2 million, in 2002 in would become 1.4, and in just 5 years this NPL would be doubled in amount. Another reason why these NPLs seem to be rising is because these loans were issued in foreign denominated currency and not in Pakistani currency, and as the exchange rate changes it would directly impact the NPL amount. Lets assume a loan of 1 million was issued in dollar denominated currency when the exchange rate of Rupee to Dollar is 45 to 1. After 2 years the exchange rate has been changed to 80 to 1 (Rupee to Dollar) and we are assuming that the loan has already been defaulted. Now the quantum of NPL that would be seen by the general public would grow and increase according the change in Exchange rate. [9] Sofoklis D and Nikolaidou (2011) basically tried to identify the determinants that are contributing to Non-Performing loans in the Romanian Banking system. As per their research findings there are many macroeconomic cyclical indicators that are contributing in the growth of NPLs like the inflation rate, interest rate, GDP to External Debt, infrastructure development, Unemployment rate and Investment Expenditure. All these indicators in their separate and unique way do affect the Non-Performing loans in the Financial Services sector. [10] (Shaikh, 2004), Basically explained that determinants that affect the Non-Performing Loans vary with the geographical area, the culture and norms of a particular area, and the laws of a particular country where a particular bank is operating. These variations are basically because of factors like Economic growth of a country, situation of a particular industrial sector, quality of management, Regulatory laws which are different for each country. According to the author of this research article NPLs are majorly arising from the manufacturing sector which includes textile sector, cement, sugar and the Public sector enterprises. When a particular sector is having trouble regarding its performance and growth, the risk of loan defaults in that particular sector increases, which also seems to be a very logical reasoning, as the sector wise loan default data issued by the State Bank of Pakistan clearly states that textile sector is the major contributor in causing Non-Performing Loans withi n Pakistans Financial services sector. Textile sector is going through a lot of trouble and setbacks due to power shortage crisis, natural gas crisis and growing competition from countries like Bangladesh, China and India. Who are producing and exporting textile products at cheaper prices. All these above mentioned factors have badly affected the growth of textile sector which has further contributed in the rising trend of Non-performing loans within the textile sector. [11] (Vassiliou, 2004), Basically analyzed the change in behavior of the regulatory authorities of Asian countries regarding their policies on the non-Performing loans in their financial services sector. The author explains that most countries have changed their policies in dealing with loan defaults (debtors and creditors), lets assume the case of Pakistan, in 90s the authorities were very strict with the debtors (loan defaulters) and were highly pro creditors in order to keep a check on rising NPLs, the laws were so strict at that time that defaulters were forced into jails. But few years later these policy makers completely changed their policies in an opposite direction. Now the Regulatory authorities are more lenient to Debtors than they are to creditors. [12] (Assessment of Financial Intermediation, 2012) Chapter1 gives the updates on the economic conditions and Financial Services Sector progress. This report also clearly states that Pakistans banking sector does not enjoy the highest Banking Spreads if we compare it with other developing and developed countries, because in cross country analysis factors like financial sector development, Regulatory laws and framework and business conditions. According to World Banks database, Pakistans ranking is nowhere near banking spread of developed countries but as a matter of fact it comes out to be 69th among all other developing and developed countries. [13] Comprehensive Financial Analysis PERFORMANCE BAHL BAFL SONERI SUMMIT HMB ROE 24.33% 15.34% 7.14% -27.90% 17.20% ROA 1.14% 0.75% 0.60% -1.28% 1.43% Pre-Provisions Operating Profit/Avg.Equity 53.24% 45.87% 21.41% -56.84% 35.48% Pre-Provisions Operating Profit/Avg.Assets 2.49% 2.22% 1.81% -2.69% 2.95% Personal Expense-to-Total Net Revenue 45.98% 30.65% 27.38% 327.20% 19.82% Cost-to-Total Net Revenue 46.90% 64.05% ÂÂ   -448.79% 38.21% Other Operating Income/ Total Net Revenue 15.92% 16.15% 10.45% 56.22% 40.25% Taxes/ Pre-Tax Profit 38.07% 35.53% 27.33% -49.50% 25.90% Net Non-Earning Assets/Assets net to Non-Int Lia 7.50% 18.60% 17.46% 25.17% 9.88% ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   CAPITAL ADEQUACY ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   Equity/Total Assets 4.68% 4.88% 7.89% 4.60% 8.41% Adjusted Equity)/ Total Assets 5.23% 5.51% 8.46% 5.20% 8.53% Revaluation Surplus (Deficit)/Adjusted Equity 10.49% 11.39% 6.75% 11.58% 1.37% Capital Adequacy Ratio as per SBP ÂÂ   11.60% 13.53% 7.77% 13.93% ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   LIQUIDITY ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   Liquid Assets/Deposits and Borrowing 70.50% 53.65% 48.78% 39.47% 49.28% Finance/Deposits and Borrowing 36.06% 46.42% 50.72% 43.98% 43.04% Finance/Deposits 39.54% 49.34% 58.58% 64.75% 58.51% Demand Deposits/Total Deposits 25.36% 36.62% 20.65% 19.78% 31.86% Export Refinance/Advances 17.03% 5.25% 25.40% 38.06% 22.24% Fianance(net of Export Refinance)/Deposits 33.20% 46.83% 44.22% 40.11% 46.01% Government Securities/Total Assets 55.00% 33.43% 31.69% 25.83% 44.92% Finance/ Total Assets 33.04% 42.29% 45.04% 40.21% 37.64% Lending to Financial Institutions/Borrowing from Fis 0.00% 50.99% 71.84% 6.37% 5.43% ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   LOAN LOSS COVERAGE ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   Impaired Lending/Gross Finances 2.76% 9.65% 15.85% 48.75% 14.80% Loan Loss provision /Impaired Lending 158.10% 67.70% 64.10% 49.37% 64.97% Net Impaired Lending/ Equity -11.34% 27.01% 31.36% 206.05% 22.30% Net Impaired Lending/ Adjusted Equity -10.15% 23.93% 29.00% 182.20% 21.99% ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   INTERMEDIATION EFFICENCY ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   NIRM (Net Interest/Mark-up Revenue)/ Avg-Assets 2.96% 4.23% 3.75% 0.42% 3.20% Asset Yield (Interest Earned/Average 11.36% 12.45% 12.74% 11.63% 11.93% Cost of Funds {Interest Expense/ Average 7.18% 6.41% 7.81% -8.24% 8.23% Spread 4.19% 6.05% 4.93% 19.87% 3.70% ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   GROWTH ÂÂ   ÂÂ   ÂÂ   ÂÂ   ÂÂ   Total Assets 15.10% 13.78% 20.01% 65.70% 14.28% Gross Finance -13.80% -12.01% 18.53% 38.91% -10.43% Impaired Lending 7.70% 4.24% 26.01% 96.75% 40.75% Investments 49.38% 81.71% 38.32% 93.91% 56.78% Customer Deposits 16.20% 13.34% 21.60% 46.77% 15.54% Equity 9.34% 15.78% 23.10% 53.26% 21.00% Source: https://habibmetro.com/documents/2011/UnConsolidated2011-Final.pdf Source: https://www.soneribank.com/document/url/83/Soneri_AR_2011.pdf Source: https://www.bankalfalah.com/about/download/BALAnnualReport2011.pdf Source: https://www.bankalhabib.com/quick-links/financialReport2011.php [14][15][16][17][18][19][20] Ratio Analysis Ratios of four competitor banks have been calculated using their financial statements available online on their websites for the financial analysis and performance of these banks. These four competitor banks namely, Bank AL Habib Limited, Bank Alfalah Limited, Soneri Bank Limited and Summit Bank Limited are small and middle tier banks which makes them completely eligible for comparative ratio analysis with Habib Metropolitan Bank. Since this research is only being conducted to inquire about the Non-Performing loans of Habib Metropolitan bank, only Impaired Lending Ratios would be covered in the financial ratio Analysis section. 1) Impaired Lending/Gross Finances: Non-Performing loans to Total Gross Finances ratio is a very important ratio with significant usage in financial services sector. It basically explains the percentage of loans that have gone bad from the banks total Loan portfolio. Higher this ratio is, higher the trouble for the bank. Now if we see the figures given above in the table, the ratio of HMB does not come out to be very positive. It is way higher than the industry average. It could be clearly seen that BAHL and BAFL (2.76% 9.65% respectively) have small figures as compared to HMB which is almost touching 15% (14.8% to be exact). These ratios clearly states that HMB is not managing its loan portfolio very efficiently which is why it is having such a high figure for NPLs/Gross Finances ratio while its counterparts are keeping a strict control over it and not letting it to exceed beyond one figure. 2) Loan Loss Provision/ Impaired Lending: this ratio is probably the most important one in finding out the efficiency of Banks management in managing its Loan Portfolio. Higher this ratio is safer a bank would be, because provisions act like cushions for the banks in absorbing loan losses. If this ratio is more than or equal to 100%, it would mean the banks loan portfolio is completely covered with the provisions is not at risk regarding loan defaults. If the provisions allocated by the bank are not enough to cover up the NPLs portfolio completely and supposedly the whole loan portfolio maintained by the bank goes bad, then the banks equity would be at stake, which would ultimately cause trouble for the equity holders (Share holders) of the bank. As per the figures given above all four banks apart from BAHL have their Loan Loss Provision to Impaired Lending Ratio lower than 100%, which means these banks are at the mercy of the borrowers credit worthiness. Supposedly if only 64.97% (H MBs Ratio) of NPLs are covered and the total loan loss as of the total loan portfolio turns out to be 80%, then it would be a serious trouble for the Banks. 4) Net Impaired Lending / Equity: Non-Performing loans to Total Equity ratio basically represents the percentage of Non-performing loans over the banks Total equity. Higher this ratio is, worst the scenario would be for the bank. As far as figures in the above given table are concerned Habib Metropolitan bank has a very decent ratio as compared to its competitors. Lower this ratio is, safer the bank would be. Financial Analysis Over the years Habib Metropolitan bank has witnessed a very significant growth in its deposits, total assets, and total number of branches, investments, profit before tax and profit after tax. All these factors are the main indicators of a banks growth (growth or decline). In a period of just one year (FY10 to FY11) Habib Metropolitan Banks total assets grew from Rs 252 Billion to Rs 288 Billion which is a very significant figure. Similarly, Investments made by the Bank (Stock Markets / Government Securities) also grew from Rs 100 Billion to Rs 147 Billion which is also a very significant (increase) change in banks investment portfolio. These figures clearly shows that HMB is focusing and channeling its funds more towards Investment side (Government securities, Stocks, Bonds etc) rather than focusing into Advances. Over the years Bank has reduced its Advances portfolio due to the bad performance of Loan portfolios and diverts those extra funds towards investments which are the main r eason why Advances figure have seen a dip while the Investment figure has witnessed a jump (growth). Overall the bank is earning profits but the profit growth rate figures have reduced in the recent years, the reason for that is HMB is playing safe and in investing in Government securities which are a safer option of getting returns on its funds, rather, lower returns as compared to what Bank gets by lending these funds to some credit worthy borrowers which might earn bank higher returns. Now since the economy is in recession and most probably all the sectors are suffering from it, banks are very reluctant to release (lend) and channel their funds in the economy by lending their surplus funds to the deficit fund borrowers. Primary Research Questionnaire Analysis A sample size of 25 questionnaires was chosen for the collection of data essential to conduct this research and to come up with a significant conclusion on what Bankers and General Public think about the Non-Performing Loans condition in Pakistans Financial Services sector, what according to them is the trend being followed by the NPLs, upward or downward, and what factors do they actually think affects the creditworthiness of the outstanding Loans held by the debtors. The data that would be collected using this survey would be very useful in comparing what the real reasons are and what the Bankers think are the reasons behind the loans going bad. Question No: 1 Out of a total sample of 25 Individuals to whom this questionnaire was floated to 18 responded with Yes and only 7 individuals replied with a No. This means that majority of the individuals have or had borrowed money from banks at some part of their life. This pie chart shows that 72% of the respondents have themselves experienced a life of lending and borrowing from the financial services sector and 28% of the individuals have never taken a loan from a bank. Question No: 2 This question is very important in a sense that it will provide us with a feedback from the bankers (respondents) about what they think of Banks lending decisions and whether these banks follow proper rules and regulations while lending funds to the borrowers or not. Out of a total sample of 25 respondents, 15 responded with a Yes and remaining 10 responded with a No that means majority of the respondents believe Banks take all the necessary measures in their lending decisions and to make sure they lend to the responsible creditworthy borrowers and not to irresponsible and less credit worthy borrowers. In percentage terms 60% of the respondents believe that the banks are very careful in making lending decisions while only 40% believe this not to be the case. Question No: 3 This question is also a very important one for this research. All 25 respondents were asked about their views on the trend of Non-Performing Loans within the Banking sector and what they think is the direction of this trend, either its rising, declining or consistent. The response that was received was not unanimous at all. Its amazing how only 44% of the respondents believe NPLs are on a rising trend and 40% think they are following a declining trend and only 16% respondents believe that there is no significant change in the trend and is being quite consistent. The result shows that majority of the respondents dont even know the trend being followed by Non-Performing Loans in the banking sector which could be easily seen in the State Bank of Pakistans publications and each banks Financial Statements. In numeric terms only 11 out of 25 respondents think NPLs are rising in the banking sector while 10 out of 25 think NPLs are decreasing and only 4 respondents think the trend is being c onsistent. Question No: 4 This question had some trickiness hidden inside; the basic purpose of asking this question was to find out the understanding of lending and borrowing processes among the low level bankers and credit analysts. 76% of the respondents believe Banks could put a leash on this rising trend of Non-Performing loans occurring within the banking sector and only 24% of respondents believe stopping NPLs from rising is inevitable, the probability of loans going into default could not be controlled because you would never know when a creditworthy borrower might become a less creditworthy defaulter. There might be so many unknown determinants that could affect the creditworthiness of a borrower and could turn him into a defaulter. In numeric terms 19 out of 25 respondents said the probability of loans going bad could be reduced while only 6 out of 25 said it could not be controlled (Probability of default could not be reduced). Question No: 5 This survey question is just a follow up of the previous question. In the previous question respondents were asked whether the probability of loan default could be reduced or not, and the majority of the respondents replied with a Yes, and then a follow up question comes up, asking, how? 28% of the respondents said by applying more Checks in the banks lending processes, 24% said by restriction in lending to declining economic sectors e.g. Manufacturing, Textile, and Agriculture etc. 20% respondents said by giving more communication facilities to the Credit Analysts. 16% said by restriction in lending to particular geographical regions (areas where concentration of defaults is very high). 8% said all of the above options would help in reducing the probability of loan defaults and only 4% respondents said none of the above given options would result in a lesser probability of loan default. Question No: 6 This question is basically the crux of this research. Respondents were asked that which of the following determinants causes Non-Performing Loans within the banking sector. Almost 36% of the respondents said that lending to low growth economic sectors of the economy is the main factor that causes NPLs, 20% respondents each voted for Lending based on contacts and Poor Credit Analysis, 12% respondents said that fluctuating interest rate is the main factor which causes NPLs, 8% of the respondents said, all of the above mentioned factors do have their negative impact on NPLs, and only 4% respondents said there are other unknown factors that affects the Loan Portfolios of the banking sector (NPLs). Question No 7 Respondents were asked about their views on the Non-Performing loans with respect to the Economic conditions of a country. Almost 84% of the respondents responded to this question with a Yes which means that according to them Economic conditions within a country do affects the creditworthiness of the debtors. Only 16% respondents responded with a No, which means they dont believe Loan Portfolios of banks within a country gets affected by the Economic conditions within that particular country. In numeric terms 21 respondents out of 25, responded with a Yes and only 4 respondents out of 25 responded with a No. Question No 8 This question is basically looking for a link between the defaulted loans of a bank and the outstanding External Debt of that particular country where that bank is functioning. Almost 13 out of a total sample size of 25 respondents said No, external debt of a country does not have any impact on the NPLs of that countrys banking sector. 9 out of 25 respondents responded with Yes which means they believe Loan Portfolios maintained by the banks of a country gets affected by the External debt of that particular country. Only 12% respondents said they dont know either External Debt of a country have any impact on the NPLs or not. Question No 9 This question is about the impact of changes in Exchange Rate on Loan portfolio of the banking sector. Almost 64% of the respondents said that changes in exchange rate has absolutely no impact on the Non-Performing Loans within the Banking sector, 20% believe that changes in Exchange Rate affects the Non-Performing Loans (Asset portfolios of the banks) within the Banking sector. And only 16% of the respondents said, they dont know either change in Exchange Rate have any impact on the Non-Performing Loans or Not. In numeric terms 16 out of 25 respondents responded with a No, 5 responded with Yes and only 4 of the respondents said they dont know. Question No 11 This question is probably the most important one in this entire survey. It is basically the crux of this whole research. All the 25 respondents were asked to pick any of the below mentioned sectors which they think are the main cause of growing NPLs and are contributing more towards the Non-Performing Loans within the banking sector. 40% of the respondents think NPls are more concentrated within the Sugar industry, 32% respondents said NPLs are more concentrated in the Textile Sector, 12% of the respondents think its the power sector and only 8% respondents think its Cement sector where NPLs are more concentrated while remaining 8% respondents think other sectors are causing these NPLs. Question No 12 This question is basically to inquire about the impact of Credit Managers Performance and competence on the Loan portfolio of the Banks. Almost 64% of the respondents responded with No, 20% responded with Yes and only 16% of the respondents responded with May be which means they dont know either it has any impact on the NPLs or not. In numeric terms 16 out of 25 respondents said No, 5 responded with a No and only 4 respondents responded with May be Question No 13 This research question is about the impact of High Interest Rates on the Non-Performing Loans within the Banking sector. According to 52% of the respondents High interest rates within the Economy leads to high Non-Performing Loans in Financial services sector, 24% of the respondents think High interest rates dont have any impact on the NPLs while the remaining 24% respondents are not sure whether it has any impact on the Non-performing loans in the banking sector or not. Question No 14 The last question in the Primary survey questionnaire is about the impact of Government intervention on the Loan Portfolios of the banks. Majority of the respondents believe that Government Intervention in the banks lending decisions leads to high Non-Performing loans within the banking sector, 12% respondents believe Government intervention has nothing to do with the rising NPLs in the Banking sector while only 4% of the respondents responded with May be which means are not sure about the impact of Government Intervention on NPLs. Cross Tabulations NPL * FACTORS Cross tabulation FACTORS Total 1.00 2.00 3.00 4.00 5.00 6.00 NPL 1.00 2 3 6 11 2.00 3 2 2 2 1 10 3.00 1 1 2 4 Total 5 5 9 3 2 1 25 NPLs 1 Rising 2 Declining 3 Consistent Factors 1 Poor Credit Analysis 2 Contacts 3 Declining Sectors 4 Interest Rate 5 All of the Above 6 Others 6 out of 11 respondents who believed NPLs are rising think its because of concentration of Banks lending within few (manufacturing or Service) sectors of the Economy. While 3 out of 11 respondents believe its because of lending based on Contacts or in other words lending to a person or company not based on its credit worthiness but on somebodys request that might have influence on the Banks management or its operations, like politicians or people with authority. And only 2 out of 11 respondents who voted for the rising NPLs believe its because of poor credit analysis of the individuals or corporations applying for loan, by the Credit Analysts of the Banks. None of the 11 individuals who think NPLs are rising think Interest rates have anything to do with the alarming Non-Performing advances situation in Pakistan which is rather odd response to get, because many top level executives of Banks who were interviewed for this research said High Interest rates within the economy is also a ve ry important contributor in causing NPLs. NPL * ECOGROTH Cross tabulation ECOGROTH Total 1.00 2.00 NPL 1.00 11 11 2.00 8 2 10 3.00 2 2 4 Total 21 4 25 NPLs 1 Rising 2 Declining 3 Consistent Economic Growth 1 Yes 2 No The response gathered from the individuals regarding the cause and effect relationship between the Economic Growth of a country and the Non-performing Loans within in the banking sector, was quite unanimous, almost all of the respondents who voted for a rise in NPLs agreed that Economic growth within a country does affect the Loan portfolios of its banking sector NPL * EX.DEBT Cross tabulation EX.DEBT Total 1.00 2.00 3.00 NPL 1.00 8 2 1 11 2.00 1 7 2 10 3.00 4 4 Total 9 13 3 25 NPLs 1 Rising 2 Declining 3 Consistent External Debt 1 Yes 2 No 3 Dont Know This table is a cross tabulation between the trend in NPLs and the effect of External Debt taken by the country on the Non-Performing advances in the banking sector of that particular country. 8 out of 11 respondents who think NPLs are following a rising trend believes External Debt has a positive impact on the Non-Performing Advances of the banks, while only 2 out of 11 responded that there is no cause and effect relationship between the NPLs and the external debt of a country. NPL * EX.RATE Cross tabulation EX.RATE Total 1.00 2.00 3.00 NPL 1.00 4 6 1 11 2.00 1 8 1 10 3.00 2 2 4 Total 5 16 4 25 NPLs 1 Rising 2 Declining 3 Consistent Exchange Rate 1 Yes 2 No 3 Dont Know The above given table basically gathers up the response from all the respondents and helps in making patterns out of this raw data. This cross tabulation basically shows that according to the respondents there is not much of a cause and effect relationship between the exchange rates and Non-performing loans. This conclusion is representation of the numbers given above in the Cross Tabulation table as only 4 out of 11 respondents said there is a cause and effect relationship between these two while 6 out of 11 responded there is no relationship between the two. NPL * SECTOR Cross tabulation SECTOR Total 1.00 2.00 3.00 4.00 5.00 NPL 1.00 5 4 2 11 2.00 3 5 2 10 3.00 1 2 1 4 Total 8 10 2 3 2 25 NPLs 1 Rising 2 Declining 3 Consistent Sectors 1 Textile 2 Sugar 3 Cement 4 Power 5 Other This table basically aims to establish a cross tabulation between the rising Non-Performing Loans and the various declining sectors of the economy (Services Manufacturing). The response gathered was pretty much limited to only three sectors namely Textile, Sugar and the Power sectors. 5 out of 11 respondents said textile sector is the main contributor in the Non-performing advances of the banking sector, while 4 responded in the favor of the sugar sector and only 2 responded in favor of Power sector. NPL * I.RATE Cross tabulation NPLs 1 Rising 2 Declining 3 Consistent Interest Rate 1 Yes 2 No 3 May be I.RATE Total 1.00 2.00 3.00 NPL 1.00 10 1 11 2.00 2 5 3 10 3.00 1 1 2 4 Total 13 6 6 25 The response as per the figures given in the above table was somewhat unanimous. 10 out of 11 respondents who voted for rising trend in NPLs believe Interest Rate is a major factor that causes Non-Performing Advances in the banking sector, while only 1 out of 11 respondents responded with a May be which means he is not hundred percent sure if the NPLs are affected by the Interest Rates or not. Out of a total 25 respondents, 10 of whom responded that NPLs are declining, only 5 believe there is no cause and effect relationship between the NPLs and Interest Rates within the economy. NPL * GOVT.INT Cross tabulation GOVT.INT Total 1.00 2.00 3.00 NPL 1.00 10 1 11 2.00 7 2 1 10 3.00 4 4 Total 21 3 1 25 NPLs 1 Rising 2 Declining 3 Consistent Interest Rate 1 Yes 2 No 3 May be Almost all of the respondents who think NPLs are rising also think Government Intervention is the main factor that causes Non-Performing advances. 10 out of 11 respondents believe Government intervention in the Banks lending operations is one of the major factors why a consistently growing percentage of Advances given out by the banks to the individuals or the corporations end up in bad loans or Defaults. 10 out of 25 respondents who responded In favor of declining NPLs, majority of them also believes NPLs are caused by Government intervention but the trend is now declining the passage of time. Interviews Interviews are a great tool for getting in-depth insights for research purposes from the people who are the real experts in their particular fields. 12 interviews were conducted with both top level executives and middle level Credit Analysts in order to get their perspectives on the alarming Non-Performing loan situation within Pakistani Financial Services sector. The focus was not just on the whole financial system but it was also on Habib Metropolitan Bank. But, the question is, why are we even concerned with whats going on in the system and not just focusing on Habib Metropolitan Bank? The logic for that is quite simple and straight forward, what affects the whole system affects the entities that are working or operating within it. If the situation of Non-Performing Loans within the financial sector is correctly analyzed, it would be of great help in analyzing the trends and reasons of NPLs that are incurred by Habib Metropolitan Bank. Interviews were conducted both internally and externally. All the external Interviews were conducted with the employees of HMBs competitor, Faysal Bank Limited, and all the interviews conducted internally are with the Top level and middle level executives of the Bank. Internal Interviewees Fateh H Shamsi Senior Vice President Habib Metropolitan Bank Naveed Akbar Manager Operations Habib Mertopolitan Bank External Interviewees Muhammad Amir Sheikh AVP-Regional Manager CIU Verification-Central Faysal Bank Limited Hassan Credit Analyst Faysal Bank Limited Ahmar Credit Analyst Faysal Bank Limited Kamran Credit Analyst Faysal Bank Limited Syed Nadeem Ahmad CIU-Unsecured-Manager Faysal Bank Limited Tariq Raza CIU-Secured-Manager Faysal Bank Limited Mohsin Umar Verification Manager Faysal Bank Limited Sabah Sajjad Data Entry Manager Faysal Bank Limited Ali Senior Credit Analyst Faysal Bank Limited Fawad Senior Credit Analyst Faysal Bank Limited Key Findings Mr. Amir Sheikh, a MBA graduate from Lahore School of Economics, currently working as an Assistant Vice President Regional Manager CIU Verification -Central at Faysal Bank Limited, started his career as a Trainee with Prime Bank which was later on acquired by ABN-AMRO Bank, which also recently got acquired by Faysal Bank Limited, one of the fastest growing banks in Pakistan. According to Mr. Amir who has been working in the lending side of the Banks for the last 13 years, there are many factors that affect the Asset Portfolios of the Banks, which includes lending based on very high interest rates to both retail and corporate borrowers, slow economic growth, relaxed lending practices, poor credit analysis of potential borrowers, large amount of lending concentrated in few declining sectors of the economy, interest rate volatility, Depreciation of currency, External debt taken by the Government and the Intervention of Government in the Banks lending businesses. Almost similar response was given by Mr. Fateh H Shamsi, Senior Vice President of Habib Metropolitan Bank, who started his career in banking 34 years ago, and is now among the top Executives of the Bank. According to him Non-Performing Loans of Habib MetroPolitan Bank are constantly on a rising trend, even though they are not as high as they were used to be in the era of Nationalization, when the Government intervention in the banks lending businesses resulted in great losses to the Banks, as these interventions by the Governments, made banks to lend funds to less credit worthy borrowers who wouldnt have been able to get these loans themselves on the set criteria of the Banks. Even though Banks have recovered from that stage (Nationalization Era) this rising trend in Non-Performing Loans have started once again but the main factors causing it are different from those that were causing it in the Era of nationalization. Now the banks are following strict rules and regulations imposed b y the regulatory authorities such as State Bank of Pakistan and Securities and Exchange Commission of Pakistan to protect and safeguard the rights of the investors and the creditors of the Banks. Mr. Shamsi said our Bank is a subsidiary of Habib Bank Zurich which is a big multinational bank with a great reputation, and the way we are running our bank is very much equivalent to international standards, we are following the rules and regulations suggested by Basel Committee which means we are sincere and doing everything we can to further improve our banking operations and efficiency in our work. According to Mr. Shamsi One major reason that is causing NPLs in Habib Metropolitan Banks asset portfolio, is the alarming energy crisis prevailing within the country, which has also adversely affected the Textile sector of Pakistan where the Banks have heavily concentrated their lending. Now that the Textile Firms are not getting enough electricity to operate on their full capacity, their pr ofits have taken huge hits, which have caused most of them to default on their loans. Since most of the textile firms are export oriented and are generally dependant exports for generating profits, but the rising competition in international markets from countries like Bangladesh, India China is posing real threats to Pakistani Textile Sector and its profitability, which has resulted in more loan defaults from the firms in textile sector. The employees in the middle management and lower level management like Senior Credit Analysts, Credit Support Analysts or the Verification Managers, who work in backend offices of the banks also referred to as, the assembly lines of the Banks, and who are in direct contact with their clients also known as Relationship Managers, were not very interested in looking into a bigger perspective, putting it in simple words, they liked to evaluate such issues (NPLs) on a Micro level rather on a Macro level, according to majority of them, Poor Credit Analysis, poor infrastructure and above all, lack of documented information available to them are the main reasons why NPLs (especially in Retail Lending) are increasing in the banking sector. In corporate lending most of them believed Government intervention in banks lending decisions and lending concentrated in Textile and other manufacturing sectors are the main causes of this rising NPL trend. Majority of them were not able to make any cause and affect relationship between Exchange rate and Non Performing Advances of the Banking sector. According to Mr. Hassan who is a Credit Analyst, banks have set certain rules and criteria and defined each company and the employees working in it according to that set criteria, but this categorization is not updated on a frequent basis that is why the Credit Analysts who are evaluating the company for its credit worthiness are not able to identify the current situation of that company, which ultimately leads them in lending to less credit worthy borrowers who were once credit worthy which would ultimately cause Higher NPLs for the Bank in the future. Analysis Over the last few years Habib Metropolitan Bank has witnessed a jump in its deposits. This significant increase in its deposits is due to an increase in inflow of remittances from Pakistanis living abroad, and increase in the total branch network of HMB. On one hand the deposits of the bank are increasing while on the other hand the asset portfolio maintained by the bank is also deteriorating, as the Non-Performing Advances have increased in number (Not only in numbers but also in percentage terms, as the Provision to Non-Performing Loans ratio in 2011 has decreased as compared to the ratio in previous years). One of the reasons for rise in HMBs NPLs is, the top 5 (bigger banks) banks in Pakistan holds the majority of credit worthy borrowers while the smaller bank, including HMB, have to go for much risky borrowers to increase their network and extend their Loan Portfolios. The Credit risk of HMB has increased due to the Power Crisis, High Inflation Rate and Poor Economic Condition of the country. HMB has a very organized system for managing all kinds of risks its exposed to, because HMBs management considers the effective risk management as a tool for long term profitability and banks operating efficiency. As per the data given in the Financial Statements of Habib Metropolitan Bank, 51% of the total Advances in HMBs Advances Portfolio are extended to the Textile sector which is the main contributor in the Banks Non-Performing Loans. The remaining 49% of the advances are diversified in various sectors of the economy to reduce the credit risk from Loan defaults, caused by the macro factors like Power shortage, inflation, fluctuating interest rate, External Debt, Exchange Rate, poor economic growth and Government intervention. Trade and sale segment constitutes only 0.7% of the banks NPLs while the remaining 99% is constituted by the commercial banking. The Asset quality of Habib Metropolitan Bank is not good. Banks NPLs arising from the Textile sector alone have surged the NPL to Gross Finances Ratio to 14% (FY 2011). The provisions kept by HMB are not sufficient enough to NPLs which has further deteriorated the asset quality of the HMB and has made it vulnerable to unforeseen losses. ÂÂ   2011 2010 2009 Gross finances 108,486,293 125,988,840 115,035,839 NPLs 15,427,848 10,961,145 6,364,335 Provisions 10,022,934 7,522,371 4,629,476 NPLs/Gross Finances 14.80% 9.42% 6.33% Provisions/NPLs 64.97% 68.63% 72.745 Net NPLs/Equity 22.30% 16.41% 9.18% [21] Source: https://habibmetro.com/documents/2011/UnConsolidated2011-Final.pdf The main objective for conducting both the primary and secondary research was to evaluate and analyze, what the Bankers from all three hierarchical levels (Top, Middle Lower level) think, are the reasons for such high NPLs in the Asset portfolio of Habib Metropolitan Bank and what the Financial Reports of the Bank and other publically available published data and information in various research papers say. The main factor that is affecting the NPLs of Habib MetroPolitan Bank is the concentration of its Asset Portfolio within one sector of the economy, the textile sector. 51% of its asset portfolio is extended to the Textile sector which is also the main contributor in loan defaults. This is the reason why HMB is having problems with its Asset Portfolio; there is not enough diversification in its asset portfolio. Other questions might arise that Textile sector is taking this hit due to other Macro economic factors like energy crisis, inflation, Interest rate volatility, High Interest rate, Exchange rate volatility, poor economic situation and poor credit analysis. But the fact is, these factors are same for the whole financial sector, they are not just affecting HMB alone, they are affecting all the banks in the financial services sector. Moreover these factors could not be controlled by a single entity; they are a part of External Environment, which the bank cant change. The HMB could only change what is in its control (Internal environment), and that is Diversification in its asset portfolio and Good Credit Analysis. Recommendations The major reason why Habib Metropolitan Bank is not able to control its ever increasing Non-performing loans is the Non-Diversification of its asset portfolio. One basic rule which is taught in the basic foundation courses of finance is diversification. Dont put all your Eggs in one basket [22] Diversification means, one diversifies its money (Investments or advances) not just in one area but in a lot of areas. Hypothetically, if a bank lends all its funds to a single borrower and some days later that borrower goes bankrupt, then how would that bank get its money back? The money that the bank has lent to that borrower is gone as soon as that borrower is not able to pay back its obligation. This is the risk involved in Non-diversification. That is why in the world of finance diversification is considered to be very important, because Diversification reduces risk. If one borrower goes bust others are still alive and paying back their obligations to the bank on time. Habib Metropolitan Bank ha

The economic governance for crisis prevention - Free Essay Example

Sample details Pages: 22 Words: 6602 Downloads: 8 Date added: 2017/06/26 Category Statistics Essay Did you like this example? TABLE OF CONTENT Pages Don’t waste time! Our writers will create an original "The economic governance for crisis prevention" essay for you Create order 1.0 Introduction 2.0 Background 3.0 Statement of the Problem 3 4.0 Research Questions 4 5.0 Research Objectives 4 6.0 Significance of the Study 5 7.0 Literature Review 5 7.1 Definition and indicators of governance 6 7.1.1 Broad definition of governance 7.1.2 Governance from economic perspective 7.2 Governance relationship with development and growth 6 7 11 7.3 Governance link to crisis and roles in recovery process 13 7.4 Governance roles in crisis prevention 16 8.0 Overview on the Study of Governance 17 8.1 Development of the study of governance 17 8.2 Scope and limitation of the concept of governance 18 9.0 Methodology 20 9.1 Case Study Analysis 20 9.2 Index for Economic Governance Quality 21 9.3 Analysis of Causal and Dynamic relationship to growth 23 References 25 1.0 INTRODUCTION The proposed research attempts to identify the critical components of economic governance in four Asian countries namely Malaysia, South Korea, Thailand and Indonesia. The study by employing in-depth case study analysis seeks to analyze the economic governance practices in these countries and its relationship to their economic growths. The study then attempts to investigate the links between economic governance and the Asian financial crisis in 1997, and the roles the economic governance could have played in the recovery process since the above countries had somehow recovered at somewhat different speed. Based on the identified components of economic governance considered imperative for sustainable and resilient economy, the study will develop an index namely Economic Governance Quality Index capturing the score of governance parameters by the countries during the booms and slumps of their economies throughout the period under study. Finally, the components of economic governance wil l be employed in panel data analysis to empirically determine their significance towards economic growth. Its findings then will be of significance in crisis prediction and prevention methods in which the identified key governance parameters are the core ingredients. 2.0 BACKGROUND à ¢Ã¢â€š ¬Ã…“Good governance is perhaps the single most important factor in eradicating poverty and promoting development.à ¢Ã¢â€š ¬? Kofi Annan, former Secretary General of the United Nations. The concept of governance has assumed a more central focus and been given key attention not only by the officials from the United Nations Development Program, the World Bank and the International Monetary Funds, but also from the policymakers in especially developing countries, aidà ¢Ã¢â€š ¬Ã¢â€ž ¢s donors, and regional organizations of economic cooperation as well as academics fraternity. Since the beginning of 1990s, there is a strong indication of growing emphasis that à ¢Ã¢â€š ¬Ã…“good governance,à ¢Ã¢â€š ¬? together with democracy and protection of basic human rights, is indispensable for sustainable economic growth. Economic development cannot be achieved without the development of good governance, which is composed of competence and honesty, public accountability, and broader participation in discussion and decision making on central issues. In addition to traditional view of governance which is on the public governance, there is also a notable increase in the endeavors t o grasp the concept of governance in a multi-dimensional perspective which includes economic governance. The relationship between governance and development is thus studied from diverse angles, especially in the vein of economic transformation, macroeconomic management and prevention of crisis as well as structural reforms. The Asian financial crisis in 1997 had somehow exposed the vulnerability of the once high-performing countries in the region, whose lack of governance practices was said as the main cause of the severe affects. 3.0 STATEMENT OF THE PROBLEM The Asian economies success was once dubbed the à ¢Ã¢â€š ¬Ã…“Asian Miracle,à ¢Ã¢â€š ¬? and a model to be emulated by other developing countries seeking higher growth. The success had introduced a growth model with emphasis on policies of setting the prices right, liberalizing the economy and the private sector as the engine of growth. When financial crisis struck the Asian countries in 1997, and looking at the devastating effects the countries in the region had experienced following the malaise, many however started to raise questions whether the quality of governance practices in these countries had somehow contributed to the crisis. Furthermore, the fact that South Korea and Malaysia had somehow recovered rapidly from the crisis compared to Indonesia and Thailand has sparked off interests on what roles good governance could have played in the recovery process. Hence, good governance has become a topic widely studied in the aftermath of the crisis. The discussions center on two main perspectives; firstly, the absence of good governance has been perceived as a MAJOR CAUSE of the crisis, and secondly, an inference is made that good governance is IMPERATIVE for durable and resilient economy. This study hence sets out to empirically identify and ascertain the governance parameters and their significance towards crisis prevention. Since the study focuses on economic governance, and to avoid constant repetition, the word à ¢Ã¢â€š ¬Ã…“governanceà ¢Ã¢â€š ¬? used in this proposal should be taken in the context of economic point of view, unless explicit reference to other perspective of governance is relevant. 4.0 RESEARCH QUESTIONS This study will attempt to answer the following questions: What are the economic governance parameters presumed as crucially importance for sustainable and resilient economy? How to capture the score of economic governance practices in the East Asian countries during the period under study? How would the significance of governance parameters be empirically ascertained for the purpose of crisis prediction and prevention? 5.0 RESEARCH OBJECTIVES The study hypothesized that good governance is imperative for sustainable and resilient economy, and the absence of such would result in increased vulnerability of the economy towards declining into crisis. Therefore, the objectives of the study are: To identify the parameters of economic governance crucial for resilient and sustainable economy. To develop an index of Economic Governance Quality capturing the score of economic governance practices by the East Asian countries during the period under study. To empirically ascertain the significance of economic governance parameters towards growth via a dynamic estimation model whose findings then would be of importance for crisis prediction and prevention. 6.0 SIGNIFICANCE OF THE STUDY It would be interesting to investigate what makes good governance and how do they link to economic growth in the four selected Asian countries. Furthermore, it would be crucially important to examine, from the governance perspective, how could the countries once considered by many as the fastest growing economies in the region were severely affected by the Asian crisis in 1997. Notwithstanding that, the fact that South Korea and Malaysia had made a more swift recovery than the other affected countries, it would therefore be interesting to analyze how the governance practices in the different countries facilitated the recovery process. The findings from this study are expected to provide a significant contribution to the existing governance literatures especially from the economic perspective since it attempts to discover the critical components of economic governance that are imperative for sustainable and resilient economy. Policy makers not only from the countries under study but also from other developing countries may utilize the findings of the study to evaluate their economic governance practices and be able therefore to make necessary adjustments and required changes with the objectives of registering better growth and strengthening the economy against any possibility of future crisis. The researchers from world organizations and academic community may also be interested with the findings since the study attempts to develop a new feasible dynamic estimation model to analyze the relationship between the components of economic governance and growth, of which they could use as a basis for their future research undertaking in the similar field. In addition, the findings could also stimulate and facilitate them to search for additional approaches to counter or justify the results of this study. 7.0 LITERATURE REVIEW Good governance has become a topic widely debated by academicians and economic communities especially in the aftermath of the Asian financial crisis in 1997. The discussions in this context center on two main perspectives; first, the absence of good governance has been perceived as a major cause of the crisis, and the second prognosis is drawn by inference, namely, that good governance is imperative for durable development (Lam, 2003). Therefore, to have a better understanding of the governance, this section discusses definitions and indicators of the governance, its relationship with the economic growth, how it links to the crisis and its roles in the recovery process, and finally how could these governance factors be used for crisis prevention. 7.1 Definitions and indicators of governance Definitions and indicators of governance can be found in numerous literatures. A top-down approach is best used to understand the concept of governance, where a general or broad definition of governance will be firstly explored before moving on to a more specific definition. The World Bank continuously updates key governance indicators in its regular publication of à ¢Ã¢â€š ¬Ã…“Governance Matters,à ¢Ã¢â€š ¬? a governance study encompassing many aspects like political, social, economic, legal and moral. Meanwhile, the International Monetary Funds (IMF) has been doing a great deal of works in an effort to promote governance in the financial sector management through Financial Sector Assessment Programs (FSAPs) which include regulatory, risk management and aid management. 7.1.1 Broad definition of governance From the viewpoint of United Nations Development Program (1997), the definition of governance is à ¢Ã¢â€š ¬Ã…“the exercise of economic, political administrative authority to manage a countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s affairs at all levels. It comprises mechanisms, processes and institutions, through which citizens and groups articulate their interests, exercise their legal rights, meet their obligation and mediate their differences.à ¢Ã¢â€š ¬? Good governance is, among other things, participatory, transparent and accountable, effective and equitable, and it promotes the rule of law. It ensures that political, social and economic priorities are based on broad consensus in society and that the voices of the poorest and the most vulnerable are heard in decision-making over the allocation of development resources (Abdellatif, 2003). In its report, Governance and Sustainable Human Development in 1997, the UNDP acknowledges the following as core characteristics of good governance, i.e. participation, rule of law, transparency, responsiveness, consensus orientation, equity, effectiveness and efficiency, accountability, and strategic vision. A report by the World Bank (2006) entitled à ¢Ã¢â€š ¬Ã…“Governance Matters Và ¢Ã¢â€š ¬? covering 213 countries and territories since 1996 until 2005, presented the latest version of the worldwide governance indicators, namely voice and accountability, political stability and absence of violence, government effectiveness, regulatory quality, rule of law, and control of corruption. Meanwhile, Inada (2003) discussed the governance in Indonesia where the word à ¢Ã¢â€š ¬Ã…“governanceà ¢Ã¢â€š ¬? is translated as à ¢Ã¢â€š ¬Ã…“Tata Pemerintahan.à ¢Ã¢â€š ¬? It however has different meanings covering different agendas from political systems to corporate governance. They includes political democratization, reorganization of police and the military, curing the problems of corruption, collusion, and nepotism (KKN), justice reform system, decentralization, financial management, corporate governance, and state-owned enterprise reforms. Shimomura (2003) in his case study of governance in Thailand adopted pluralist democracy, accountability, transparency, predictability, and openness in the manner of exercising power, rule of law, effective and efficient public sector management, prevention of corruption, and prevention of excessive military expenditures as the standard definition of good governance. 7.1.2 Governance from economic perspective According to Dixit (2006), economic governance consists of the processes that support economic activities and economic transactions by protecting property rights, enforcing contracts, and taking collective actions to provide appropriate physical and organizational infrastructure. These processes are carried out within institutions, formal and informal. He described that the field of economic governance studies and compares the performance of different institutions under different conditions, the evolution of these institutions, and the transitions from one set of institution to another. Meanwhile, Huther Shah (1998), Gonzalez Mendoza (2001) and Mahani (2003) defined governance as a multi-faceted concept, encompassing all aspects of the exercise of authority through both formal and informal institutions in the management of resources. In other words, governance is: à ¢Ã¢â€š ¬Ã…“An exercise of economic power in the management of resource endowment of a country done through mechanisms, processes, and institutions through which citizens and groups can articulate their interest, exercise legal rights, meet their obligations and mediate their differences.à ¢Ã¢â€š ¬? According to Mahani (2003), indicators of economic governance are: Macroeconomic management à ¢Ã¢â€š ¬Ã¢â‚¬Å" fiscal management, level of government debt, unemployment and inflation. Investment à ¢Ã¢â€š ¬Ã¢â‚¬Å" size and trend of foreign and domestic investments, capital flows and allocation of resources. Trade regime à ¢Ã¢â€š ¬Ã¢â‚¬Å" trade orientation, export and import performance and balance of payment position. Financial sector management à ¢Ã¢â€š ¬Ã¢â‚¬Å" the banking sector and capital market. Exchange rate regime. Private sector participation à ¢Ã¢â€š ¬Ã¢â‚¬Å" privatization and corporate governance. Social development à ¢Ã¢â€š ¬Ã¢â‚¬Å" income distribution and level of poverty. Lanyi Lee (1999) studied on various aspects of à ¢Ã¢â€š ¬Ã…“economic governance,à ¢Ã¢â€š ¬? that is, the way in which economic life is governed and regulated à ¢Ã¢â€š ¬Ã¢â‚¬Å" which does not mean solely governance by the government. They first discussed the political basis of economic governance which is in their view crucial for the way in which different aspects of economic governance operate. The other aspects include the governance of macroeconomic policy making, and the interrelated issues of financial and corporate governance. From political perspective, they argued that economic governance in a market economy consists partly of direct control or indirect influence exerted by the government and of governance exercised within markets themselves on the other part; but even self-governance by markets operates within the legal, judicial and regulatory framework that has been erected and is supported by the government. The optimum role of government in this context is à ¢Ã¢â€š ¬Ã…“market-augmenting government.à ¢Ã¢â€š ¬? Furthermore, they defined macroeconomic governance as the political and administrative processes by which macroeconomic policies are formulated, implemented, and evaluated. They argued that technically the same policies can be carried out with equal effectiveness by either an autocratic or a democratic government. An autocratic government, if supported by well-trained technocrats, is likely to come up with first-class macroeconomic governance. Nevertheless, there may be factors that over time lead to deterioration in the quality of these policies in an autocratic government, as well as problems in the ability of such governments to adjust policies in response to changes in economic circumstances. The working definition of governance used for financial and corporate governance depends on the key distinction between principals and agents. In this context, they defined governance as the legal and institutional arrangements governing the behavior of an economic entity, by which owners, creditors, markets and the government compel or induce agents to behave according to the interests of the principals, or those of the broader society. In this regard, two key elements of governance are discussed. First, there is the structure of incentives and rules facing agents with regard to such matters as granting and terminating lending, bankruptcy, the rights of boards of directors, compensation structure, and the termination of employment. Second, there is the structure of the information flow from agents to principals, that is, the rules and incentives affecting accountability, transparency and disclosure of information. In both cases, the government plays a key role in setting the rules by which private actors operate. Meanwhile, Das Quintyn (2002) in their study on the role of regulatory governance in crisis prevention and crisis management have identified four main components of the regulatory governance practices, namely independence, accountability, transparency and integrity. The study explored the quality of regulatory governance based on the financial system evaluations under the Financial Sector Assessment Programs (FSAPs). Introduced in May 1999, FSAPs is a joint effort by the IMF and World Bank aims to increase the effectiveness of efforts to promote the soundness of financial systems in member countries. Supported by experts from a range of national agencies and standard-setting bodies, works under the program seek to identify the strengths and vulnerabilities of a countrys financial system; to determine how key sources of risk are being managed; to ascertain the sectorsà ¢Ã¢â€š ¬Ã¢â€ž ¢ developmental and technical assistance needs; and to help prioritize policy responses (IMF the World Bank, 2005). Regulatory governance applies to those institutions that possess legal powers to regulate, supervise and/or intervene in the financial sector, which include agencies like central bank, sectoral regulators and supervisors, deposit insurance agencies, and in systemic crisis situations, restructuring agencies and asset management companies. Regulatory agencies need a fair degree of independence from the political sphere and from the supervised entities to achieve good regulatory governance. Agency independence increases the possibility of making credible policy commitments and improves transparency and stability of the output. Independence goes hand in hand with accountability. Accountability is essential for the agency to justify its action against the background of the mandate given to it. Independent agents should be accountable not only to those who delegated the responsibility à ¢Ã¢â€š ¬Ã¢â‚¬Å" the government or legislature à ¢Ã¢â€š ¬Ã¢â‚¬Å" but also to the public who fall under their functional realm. Transparency in monetary and financial policies refers to an environment in which objectives, frameworks, decisions, and their rationale, data and other information, as well as terms of accountability, are provided to the public in a comprehensive, accessible, and timely manner. Global integration of financial markets and products require greater degree of transparency in monetary and financial policies, and in regulatory regimes and processes, as a means of containing market uncertainty. Increased transparency supports accountability, protect the independence and eventually increase commitment to prudent behavior and risk control in the financial business. The final component of regulatory governance is integrity which reflects the mechanisms that ensure that staff of the agencies can pursue institutional goals of good regulatory governance without compromising them due to their own behavior, or self-interest. Independence, accountability, transparency and integrity interact and reinforce each other. Independence and accountability represent two sides of the same coin, while transparency is a vehicle for safeguarding independence and key instrument to make accountability work. Transparency also helps to establish and safeguard integrity. 7.2 Governance relationship with development and growth Economic governance is often studied through its role in the promotion of growth. This is done by setting policies, incentives and institutions that create an environment conducive to sustained stable growth through efficient management of a countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s resources. It means managing a countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s resources in a way that is accountable to, and representative of, the community; transparent, that is, open and predictable; and efficient and equitable in terms of the use, and distribution of, resources. Hence, good and effective governance requires government policies that encourage and efficiently manage investment and economic growth, support a fair and efficient public sector, strengthen the rule of law, protect human rights, and foster public participation and representation in decision making. Among the many studies that have examined the economic governance and growth nexus is such as that of Barro (1997). He studied the concept of growth based on the conditional convergence hypothesis which centers on the speed of economic growth in a country towards its steady-state level. He had empirically identified that more schooling, better health, lower fertility rate, less government consumption relative to GDP, greater adherence to uncorrupted rule of law, improvements in terms of trade changes, and lower inflation all go hand-in-hand with faster economic growth. Furthermore, he also explored on the interplay between economic and political development, and found that there is nonlinear relationship between democracy and growth. According to his findings, in countries with low levels of political freedom, a marginal increase in political freedom is associated with an acceleration in growth. However, at high levels of political freedom, a marginal increase in political freedom is associated with a slowing in growth. Huther Shah (1998) also studied the relationship between governance and growth and found that countries that practiced good governance have also enjoyed high growth. They developed a governance index featuring four sub-indices, i.e. citizen participation index (CP), government orientation index (GO), social development index (SD) and economic management index (EM) and each of the sub-indices has several components. For the Economic Management index, its components are outward orientation, central bank interdependence, and debt-to-GDP ratio which were used to assess trade policy, monetary policy and fiscal policy respectively. Gonzalez Mendoza (2001) argued that Southeast Asia provides ample evidence that there is a remarkable connection between administrative guidance and economic upturn. They compared the average growth rate of national output during the last decade against the quality of country governance and found that the high-performing economies à ¢Ã¢â€š ¬Ã¢â‚¬Å" Singapore and Malaysia à ¢Ã¢â€š ¬Ã¢â‚¬Å" have the edge in public management. Those left behind, such as the Philippines and Indonesia, have poor management structures. A study by Inada (2003) on Indonesia governance showed the importance of political stability and effective economic management as key elements for sustainable economic development among many governance factors. Bordo (2007) provides a good qualitative analysis on the possible determinant of emerging market crises from the perspective of balance sheet approach, which then put at center stage the importance of financial development. Though he never mention the word à ¢Ã¢â€š ¬Ã…“governanceà ¢Ã¢â€š ¬? itself, he outlines the deep institutional determinants of financial development à ¢Ã¢â€š ¬Ã¢â‚¬Å" including the governance parameters such as the rule of law, protection of property rights, political stability, and representative democracy à ¢Ã¢â€š ¬Ã¢â‚¬Å" towards achieving financial stability. He further conjectures about the ways countries learn from their financial crises to improve their institutions and grow up to financial stability. 7.3 Governance link to crisis and roles in recovery process Lanyi Lee (1999) presented a strong case that governance issues were important in the East Asian crisis. They hypothesized that transparency and accountability in macroeconomic policymaking, in the operation of the financial system, and in corporate governance do serve to lessen a countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s vulnerability to financial crises and to strengthen the ability to deal with crises when they occur. They also hypothesized that a democratic political system, in which leaders are held accountable to their electorate by both direct election of the executive and an elected legislature à ¢Ã¢â€š ¬Ã¢â‚¬Å" as well as by an independent judiciary and a free press and civil society à ¢Ã¢â€š ¬Ã¢â‚¬Å" is less likely to collapse in the face of economic and financial difficulties than is a country run by an autocratic government, which imposes severe restraints on the public expression of opinion and dissemination of information. On the political basis of economic governance, they have suggested a hypothesis regarding the kind of political regimes likely to produce an effective, growth-enhancing, market-augmenting government. It is the type of political regime that is especially effective in the early stages of economic development may be less suited to fostering the creation of a full-fledged, sophisticated market economy at a later stage. They argued that there certainly seems to be some indications of this in the Asian experience, where authoritarian regimes fostered rapid growth when these economies were at relatively low income levels, but seems to be evolving toward more democratic models to deal with demands for greater market autonomy. They however suggested that even if a case can be made for the desirability of democratization as a market economy becomes more sophisticated, the varied historical examples warrant the need to find out more about the conditions under which either an autocratic or a democratic government can be market-augmenting, or not. They further highlighted that it would be useful to find historical examples of, and develop plausible scenarios for, the transition from discretionary (an autocratic government) to armà ¢Ã¢â€š ¬Ã¢â€ž ¢s-length (a democratic government) approaches to state economic governance, and to define the most effective ways in which the international community might assist with this transition. Furthermore, they believed that empirical work on macroeconomic governance would need to tap into the huge literature on macroeconomic policies and their effect, and link existing work with variables that reveal the quality of governance. Unfortunately, such variables are hard to quantify; but perhaps a classification of regimes together with a classification of the way macroeconomic policy is organized, could yield ways of exploring the relationships between the political and administrative variables, on the one hand, and the more familiar economic variables on the other. In other words, it would be interesting to look how the macroeconomic policies are formulated, implemented and evaluated through the governance perspective, to understand whether adherence to, or lack of, the governance practices could influence the outcome of the macroeconomic policies, as well as to determine conditions that would lead to good quality policies which would eventually identify the appropriate type of market-augmenting government as the market economy progresses. Besides, they also made preliminary attempts to trace the relationship between empirical indicators of financial and corporate governance with some governance variables that have been developed by others. They however suggested that one needs to look more carefully, perhaps through case studies, at the realities of financial and corporate governance in particular cases and the linkage between indicators of these types of financial and corporate governance with the more carefully articulated classification of political regimes. Specifically with regard to the adjustment of most severely affected countries to the Asian crisis, they suggested that it would be interesting to examine the reasons why recovery in Korea has been more rapid than in the Indonesia and Thailand. Similarly, it would also be interesting to investigate Malaysiaà ¢Ã¢â€š ¬Ã¢â€ž ¢s speedy recovery from the crisis even though the country did not subscribe to the IMF recovery prescriptions. Mahani (2003) highlighted that after the rapid recovery of the Asian economies in 1999, discussion of the causes of the crisis has been centered on the quality of economic governance in these economies. The East Asian economies success was at one time a model to be emulated by other developing countries, but after the 1997 financial turbulence, doubts were raised about the quality of economic governance in these Asian countries. Questions were raised whether the governance in these economies contributed to the crisis when countries like Indonesia, Malaysia, Thailand and South Korea experienced sharp economic contraction during the crisis. She further highlighted that questions on the quality of governance centered on the issue whether or not the same economic governance that produced high growth also weakens the economies and makes them vulnerable to external shocks, whether the economic governance fails to avoid market failures in pursuing its high growth strategy, whether the conditions for good governance always the same irrespective of the stage of economic development, and whether the crony capitalism a result of the governance failure since it was among the widely acknowledged factors contributing to the crisis. To know whether economic governance had made the economy vulnerable to a crisis, it is crucially important to examine the causes of the crisis and to link them with the economic weak points. Was the crisis due to the imprudent economic management or due to external factors? Although external factors have been recognized as the key cause for the crisis, domestic shortcomings were also responsible for deepening or aggravating the impact of the crisis. Furthermore, Malaysiaà ¢Ã¢â€š ¬Ã¢â€ž ¢s own crisis remedies and the rejection of the IMFà ¢Ã¢â€š ¬Ã¢â€ž ¢s standard crisis solutions open the debate on what is good economic governance. She argued that the 1997 Asian experience showed the economic governance framework by the IMF and the World Bank has some weaknesses, namely unfettered short term capital flows, lack of long-term and broader macroeconomic objectives when growth is driven by the private sector, and minimal attention given to socioeconomic issues such as income distribution. The rapid recovery by Malaysia and Korea, which adopted different strategies shows that there are alternative ways to respond to a crisis, implying that there is also no single definition of economic governance. Policy flexibility arising from good economic governance before the crisis made it possible to Malaysia to take response measures specially tailored to its need and situation, and rejecting one-size-fits-all prescriptions by the IMF. 7.4 Governance roles in crisis prevention The rapid pace and spread of globalization pose stiff challenges to economic governance as new criteria and developments may impose a heavier governance burden on the government and economy. One of the biggest challenges is the increasingly volatile international flow of capital that makes economic governance much more difficult as economic fundamentals are not the only factors that determine performance. Global integration also limits the choice of measures that are available to a country in making its response. Yet good governance is essential for sustained economic growth. The challenge is to determine what good governance consists of under these changing conditions. Ever better economic management is called for, to preserve economic resilience and prevent external shocks from turning into crises. Thus, a close and critical evaluation of the new economic governance parameters and institutions is essential. 8.0 OVERVIEW ON THE STUDY OF GOVERNANCE 8.1 Development of the study of governance Inada (2003) outlined the development in the study of governance over the last 10 years which can be categorized into several types: Identifying factors of governance: what factors are the governance factors that affect the performance of the economies of developing countries? Example à ¢Ã¢â€š ¬Ã¢â‚¬Å" World Bank (1992) documented such factors as accountability, transparency, predictable legal framework, efficiency of the public sector, etc. Categorization: of several factors of governance. Typical categorization is to divide the factors into political (democratic) factors and administrative (public sector management). Das Quintyn (2002) looked governance from regulatory perspective, whereas Lanyi Lee (1999) categorized economic governance into political basis of governance, macroeconomic governance and financial and corporate governance. Huther Shah (1999) categorized governance factors into four in developing a governance index, which includes Citizen Participation, Government Orientation, Social Development, and Economic Management. Making governance index: effort to make a cross-sectional governance index. UN and World Bank have been making efforts to elaborate their own cross-sectional data on governance. The United Nations University (UNU) has been trying to make a à ¢Ã¢â€š ¬Ã…“World Governance Surveyà ¢Ã¢â€š ¬? (2001) and the World Bank published its report titled à ¢Ã¢â€š ¬Ã…“Governance Mattersà ¢Ã¢â€š ¬? (1999) and à ¢Ã¢â€š ¬Ã…“Governance Matters IIà ¢Ã¢â€š ¬? (2002). Huther Shah (1999) also developed an index of governance factors in their study, which made used a great deal of social and economic data, and in some cases, made qualitative ratings using social surveys and feedback from experts, especially regarding political and social factors which are difficult to make quantitatively measure. Analysis on causal relationship: the next step is to analyze causal relations between governance factors and economic or efficiency-based performance. This is the most challenging area in an academic sense. There are two types of analyses, firstly cross-national analyses. World Bank has made many kinds of regression analyses, one of them is World Bank report titled à ¢Ã¢â€š ¬Ã…“Assessing Aidà ¢Ã¢â€š ¬? (1998), which analyzed the relationship between governance factors of the recipients and the effectiveness of the donorsà ¢Ã¢â€š ¬Ã¢â€ž ¢ aid. Secondly, case studies on a specific country, community, program, etc. which is an analysis how governance factors affect the economic performance or efficiency of the specific case. Both types of analyses have common methodology of analyzing the causal relationship: Define certain economic institutional factors as governance factors, To set the governance factors as independent variables, To set the socio-economic performance of the target (country, program, community) as dependent variable, To analyze the causal relationship between independent variables (governance factors) and dependent variable (performance). 8.2 Scope and limitation of the concept of governance The concept of governance is very useful for understanding non-economic and institutional factors of economic development as it is capable of explaining important non-economic factors such as institutions, public sector management, political process, and the role of civil society. Nevertheless, there are some criticisms against the methodology in the governance analysis, as questions are raised on: What governance factors among the many possible important non-economic factors are picked up as independent variables? Some say that it depends on an analystà ¢Ã¢â€š ¬Ã¢â€ž ¢s judgment based on the analystà ¢Ã¢â€š ¬Ã¢â€ž ¢s personal values. Ambiguity and difficulty of measurement and index-making of governance factors, whereby the measurement is said to be done arbitrarily. The questions above underline the limitations faced by the governance study. Though it is able to prove certain factors that affected the performance are important, it may in some way or other neglect the other factors that could be important too. This simple causation trap à ¢Ã¢â€š ¬Ã¢â‚¬Å" one factor can be proved to significantly affect the performance, but other factors might affect as importantly as well à ¢Ã¢â€š ¬Ã¢â‚¬Å" can be possibly reduced by making more comprehensive multi-variants regression analysis. Still there will be some invisible factors like social capital, initial conditions and political environment that might be very importance yet difficult to identify as index. Furthermore, from economic perspective, it has some limitations in conducting an empirical study. Though cross-national regression analyses using econometrical or statistical method are very popular especially among the experts of international organizations such as World Bank and United Nations, those analyses do not always prove causal relationship between governance factors and economic performance especially when discussing the case of a specific single country. Hence, the definitions of governance are still ambiguous and broad (Inada, 2003). Another trap is that the governance factors themselves may have been changing over time according to socio-economic performance hence making the governance factors specified in the model are not independent variables in reality. Thus, we need a dynamic model which analyzes dynamic relationship among many factors instead of simple static causation model. Nevertheless, dynamic model in analyzing governance factors are in fact very difficult to construct in econometrical methods. Therefore, a descriptive analyses/case studies capturing all critical factors of governance and analyzing its link to growth/crisis and recovery are therefore very useful and important to supplement the limitations of simple causation models. Notwithstanding that, there still a great need to develop dynamic model feasible in analyzing key governance factors and their dynamic relationship with growth/crisis and recovery. 9.0 METHODOLOGY The proposed methodology for the study is divided into the following stages: Stage One: employing in-depth descriptive/case study analysis on the selected countries and identifying important economic components or indicators. Example: Mahani (2003). Stage Two: developing an index of Economic Governance Quality based on the identified indicators. Example: Huther Shah (1999). Stage Three: Analyzing the dynamic relationship of the identified indicators towards economic growth/crisis using panel data estimation techniques. Methodologies utilized by Barro (1997) would be the framework on which the proposed study will base on. 9.1 Case Study Analysis A detailed case study analysis on the countries severely hit by Asian Crisis would be conducted to identify the critical governance factors that had, prior to the crisis, contributed to their phenomenal growth and to investigate how did the governance factors link to the crisis when it struck. Furthermore, the study would also like to examine the roles played by governance in the respective countries in their recovery process. Mahanià ¢Ã¢â€š ¬Ã¢â€ž ¢s (2003) case study on Malaysiaà ¢Ã¢â€š ¬Ã¢â€ž ¢s economic governance identified the following as governance indicators, which have apparently captured wider areas of governance. They are: Macroeconomic management à ¢Ã¢â€š ¬Ã¢â‚¬Å" fiscal management, level of government debt, unemployment and inflation. Investment à ¢Ã¢â€š ¬Ã¢â‚¬Å" size and trend of foreign and domestic investments, capital flows and allocation of resources. Trade regime à ¢Ã¢â€š ¬Ã¢â‚¬Å" trade orientation, export and import performance and balance of payment position. Financial sector management à ¢Ã¢â€š ¬Ã¢â‚¬Å" the banking sector and capital market. Exchange rate regime. Private sector participation à ¢Ã¢â€š ¬Ã¢â‚¬Å" privatization and corporate governance. Social development à ¢Ã¢â€š ¬Ã¢â‚¬Å" income distribution and level of poverty. 9.2 Index for Economic Governance Quality Huther and Shah (1999) have constructed an index to gauge the quality of governance as the following: GQI = CPÃŽÂ ¸1 * GOÃŽÂ ¸2 * SDÃŽÂ ¸3 * EMÃŽÂ ¸ ÃŽÂ ¸1- ÃŽÂ ¸2- ÃŽÂ ¸3 where à ¢Ã¢â€š ¬Ã‹Å"ÃŽÂ ¸Ãƒ ¢Ã¢â€š ¬Ã¢â€ž ¢ is the weight indicating relative importance of components to overall governance assessment. The Governance Quality Index (GQI) features four pertinent sub-indices namely Citizen Participation index (CP), Government Orientation index (GO), Social Development index (SD) and Economic Management index (EM). For every sub-index, there are several number of component indices. Our focus is Economic Management index, which captures the following: EM = OOà Ã‹â€ 1 * CBà Ã‹â€ 2 * DBà Ã‹â€  à Ã‹â€ 1- à Ã‹â€ 2 Components indices of Economic management index are Outward Orientation (OO) which is performance indicator of trade policy, Central Bank Independence (CB), indicator of monetary policy, and Debt-to-GDP ratio (DB), indicator of fiscal policy. Outward Orientation index includes a component of investorsà ¢Ã¢â€š ¬Ã¢â€ž ¢ perceptions of the receptivity of government to trade. The data sources for this component index is obtained from World Bank which comprises of factors such as population-adjusted trade ratio, country credit rating by Institutional Investor, Foreign Direct Investment as a share of GDP and share of manufacturing that is exported. Meanwhile, Central Bank Independence index is based on the legally stated independence of the central bank. It is based from Cukierman, Webb, and Neyapti (1992) who compiled the index from examination of 16 statutory aspects of central bank operations including the term of office for the chief executive officer, the formal structure of policy f ormulation, the bank objectives, and limitations on lending to the government. Finally, Debt-to-GDP index was compiled from IMF and IFS. Though it is considered somewhat imperfect measure of institutional orientation, it is offset to some degree by the historical perspective it provides since debt is a cumulative measure of a countryà ¢Ã¢â€š ¬Ã¢â€ž ¢s fiscal policies. Based on the similar index framework by Huther Shah (1999) and the economic governance indicators by Mahani (2003), an Economic Governance Quality index capturing broader aspects of economic governance will be developed. The aspects of governance and their sub-indices are likely to be as the following: Macroeconomic management: fiscal policy (debt to GDP ratio à ¢Ã¢â€š ¬Ã¢â‚¬Å" similar to that of Huther Shah (1999)) monetary policy (central bank independence similar to that of Huther Shah (1999)) Inflation Unemployment Investment: size of foreign and domestic investments (domestic investment to GDP, FDI to GDP, FDI growth) capital flows (short term flows as percentage of GDP) Trade regime: trade orientation (similar to that of Huther Shah (1999), export and import as a percentage of GDP, and balance of payment surplus/deficit) Financial sector management:  ­banking sector (bank loan growth, non-performing loans ratio to GDP) capital market (number of instruments, size of markets, growth of public and private debt securities, etc.) Exchange rate regime: fixed vs. floating regime Private sector participation: corporate governance (rate of bankruptcies, fraud cases, etc.) Social development: level of poverty (rate of poverty incidence) income distribution (growth in per capita income vs. rate of poverty eradication) In developing the index, this study would rely on the existing indicators and data sources measuring the salient features in each sub-index based on the identified components of governance in the previous case analyses. 9.3 Analysis of causal and dynamic relationship to growth Barroà ¢Ã¢â€š ¬Ã¢â€ž ¢s (1997) cross-country empirical study on the economic growth determinants employed panel data estimation analysis on around 100 countries from 1960 to 1990, and his findings strongly supported the general notion of conditional convergence. He found that for a given starting level of real per capita GDP, the growth rate is enhanced by higher initial schooling and life expectancy, lower fertility, lower government consumption, better maintenance of rule of law, lower inflation, and improvements in the terms of trade. For a given values of these and other variables, growth is negatively related to the initial level of real per capita GDP (the conditional convergence effect). His panel estimation model not only captured the cross-sectional (between-country) variations, but also time-series (within-country) dimensions which resulted in increased explanatory power of the economic variables like terms of trade and inflation that have varied a good deal over time within the countries. The estimation used an instrumental-variable (IV) technique where some of the instruments are the earlier value of regressors, and employed three-stage least square (3SLS) method. This approach, according to Barro, may be satisfactory because the residuals from growth-rate equations are essentially uncorrelated across periods. In any event, the regressions describe the relation between growth rates and prior values of the explanatory variables. The system has three equations, where the dependent variables are the growth rates of real per capita GDP for 1965-75, 1975-85, and 1985-1990, whereas the independent variables are GDP, male schooling, life expectancy, fertility rate, government consumption ratio, rule-of-law index, terms-of-trade change, democracy index, inflation rate, and dummy variables for sub Saharan Africa, Latin America and East Asia. Different instrumental variables are used for different equations, and they includes five-year earlier value of GDP, actual value of schooling, life expectancy, rule-of-law, and terms-of-trade variables, and earlier values of other variables. This study proposed to employ similar methodology, with similar dependent variable i.e. growth rate of per capita GDP, and rather limited independent variables which captures only economic governance indicators previously identified in Stage Two. The estimation will utilize panel data of the identified economic governance indicators of the four selected Asian countries over a certain number of years presumably divided into two sub-periods, prior and after the 1997 crisis, with sufficient length to capture the booms and slumps of the economies. The result is expected to suggest the importance economic governance indicators during periods before and after the crisis.

Bell Hooks And The Feminist Movement - 872 Words

Bell Hooks was born in Kentucky on September 25, 1952. She went to all black schools until she was in high school, and after the shift to an integrated school she felt that black students were seen as not â€Å"really belonging† she says this experience â€Å"taught [her] the difference between education as the practice of freedom and education that merely strives to reinforce dominance.†(teaching to transgress 4). After high school she received her bachelor’s degree from stanford university and her master’s degree from UC Santa Cruz. She experienced racial and sexual discrimination throughout her life, and when she was in college, Bell Hooks was exposed to the women’s liberation movement; a feminist movement from the 1970’s that fought for issues that affected women. This movement gave her an outlet to express her ideas about feminism. Bell Hooks fought for women’s rights through literature and created a more inclusive feminist movem ent by exploring how race and class factor into women’s oppression. Bell Hooks is part of the feminist movement but did not feel that the movement represented the levels of oppression that individual women of different groups face, so she introduced new ideas with the concept of intersectional feminism. Intersectionality, a term coined in 1989 by scholar and professor Kimberle Crenshaw, is the interaction between different systems of oppression. Although the term was coined more recently, the idea still existed with other activists like Sojourner TruthShow MoreRelatedCritical Reading Skills : Analyzing The Logic Of Bell Hooks Book914 Words   |  4 PagesCareful and Critical Reading Skills: Analyzing the Logic of bell hooks’ book Use this scaffolding below to help you break the assigned article/chapter for your class presentation Your Name: Chiagozie Harry Okeke Date: 04/7/2016 Chapter #--2 and 3---- Title of Chapter: Consciousness Raising (A Constant Change of Heart Author’s Name: _Bell Hooks Year of Publication: _____________________ Directions: Careful and critical reading of bell hooks’ Feminism is for Everybody. After reading your assignedRead More Expanding Feminist Activism Essay1263 Words   |  6 Pages Expanding Feminist Activism I chose this topic mainly because of interest. When thinking about the idea of feminism aside from all stereotypes one would think the struggle for womens rights. 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They can also beRead MoreThe Black Imagination By Bell Hooks954 Words   |  4 Pages bell hooks, renowned black feminist and cultural critic criticizes the lack of racial awareness in her essay, Representing Whiteness in the Black Imagination (1992). ‘bell hooks’ is written in lower case to convey that the substance of her work reigns more important than the writer. From a marginalized perspective, hooks argues that sites of dominance, not otherness is problematic and critiques the lack of attention that white scholars pay to the representation of whiteness in the black imaginationRead MoreExplanatory And Dig Deep By Sheryl Sandberg793 Words   |  4 PagesExplanatory Synthesis of â€Å"Lean In†¦Ã¢â‚¬  and â€Å"Dig Deep†¦Ã¢â‚¬  Since the beginning of the American feminist movement in 1848 at the Seneca Falls Convention to the present, gender equality has been heavily debated and discussed. The liberties being called for by feminists have changed over the years, but their message has always remained the same; equality for all women and men. â€Å"Lean In†¦Ã¢â‚¬ , written by modern day feminist and COO at Facebook, is a new age telling of the difficulties and inequalities women faceRead MoreRepresenting Whiteness In The Black Imagination By Bell Hooks Summary1519 Words   |  7 Pagesand their feelings. In this case, an intersectional feminist analysis matters because women who are able bodied, cis-gendered, privileged and white are only being considered whereas bell hooks argue that men, women and trans people who oppressed should be fought for. And Peggy McIntosh adds onto this but a white woman who addresses and recognizes her privilege to help other white individuals understand what they have and blacks do not. In bell hooks, â€Å"Representing Whiteness in the Black ImaginationRead MoreFeminism, By Bell Hook And Sheryl Sandberg Essay866 Words   |  4 Pagesmisconception that feminist ideals are outdated has lead modern women to fall short in their desire to accomplish more. Sheryl Sandberg refuels feminist goals in the article â€Å"Lean In: What Would You Do If You Weren’t Afraid.† She addresses lack of females in the work force, as well as, the way society prompts boys compared to girls. Bell Hook, in contrast, provides a deeper understanding of feminist ideals, along with, an in depth analysis of Sandberg’s work. The articles written by Bell Hook and SherylRead MoreFeminism And The Age Of Media1337 Words   |  6 Pages1102 with Dr. Allukian this semester. ENGL 1102, Feminism in the Age of Media, is a course focus on the theoretical world of feminism: feminism definitions and its presentations in real life. Through the reading of various feminist theories by fa mous pioneers such as bell hooks and Sandra Bartky, I gradually understand the concept of feminism. The further practices of integrating my learning with practices such as making videos and presenting Pechakucha allow me to deepen my understanding with theseRead MoreThe Femenine Mystique and Feminist Theory: From Margin to Theory901 Words   |  4 PagesIn the books The Feminine Mystique and Feminist Theory: From Margin to Theory all focus on Feminism. Feminism is a work of movements; theories and ideas all aimed to define, establish equal rights for women. Feminism came in three different waves, 1. The Suffrage, 2) Woman’s liberation movement, and 3) was a continuation of the second wave and its accomplishments and failures. Both of the books focus on the second wave of feminism and take us on a journey on how woman, black and white, survived theRead MoreA Review Of Feminist Theory2248 Words   |  9 Pages A Review of â€Å"Feminist Theory: From Margin to Center† Jessica Arizaga DePaul University A Review of â€Å"Feminist Theory: From Margin to Center† bell hooks’ second book, Feminist Theory: From Margin to Center, was published in 1984. It is one of her more widely known works, pushing her into the forefront as a leading voice between second and third-wave feminism. Third-wave feminism theory is inclusive of elements of anti-racism, lesbian theory, and women-of-color consciousness, brought

Welfare Reform The United States - 1435 Words

In 1935, President Roosevelt signed into law the Social Security Act, sending the United States onto the historically unprecedented path of the welfare of the welfare state. In the wake of his footsteps, aggressive expansion has grown welfare programs to include everything from Medicare to food stamps. Many would say that the US government is not only obligated morally to provide welfare but also that it provides extensive societal economic windfalls. However, critics of welfare argue that the flaws of the US welfare system and its runaway nature outweigh the potential benefits. There are currently two prevalent narratives on the duties, the obligations, of a government, both of which have been used to justify government welfare. The first, and most vocal is that a government, in general and without exception, ought to protect its own citizens from any and all harms. The second popular narrative is where the government is strictly in existence to protect the rights (life, liberty, pr operty, Bill of Rights, et cetera) of its citizens. First, it is first imperative to know that 14.5% of American families are below the poverty line and struggle to even place food on the table and are in a real danger of starving (Bread). Whether it is to protect its citizens from poverty or their lives from the effect of it, most would agree that the government has a moral obligation to act. Thus, it is reproachable for a government to take no action in protecting its citizens from from theShow MoreRelatedWelfare Reform : The United States1457 Words   |  6 PagesWelfare Welfare s purpose should be to eliminate, as far as possible, the need for its own existence. Ronald Reagan said this statement on January of 1970 when the Los Angeles Times interviewed him (Williamson). Federal government funded welfare in the United States started in the 1930s during the Great Depression. Because of the vast numbers of people out of work and with insufficient funds to buy food for their families, President Franklin D. Roosevelt approved a program to giveRead MoreWelfare: The Governments Failure Essay1330 Words   |  6 PagesThe United States Government has pumped more than $3.5 trillion U.S. taxpayer dollars into welfare but, ironically, the poverty rate is higher than when they started (Tanner, Welfare Reform). This outrageous amount of money proves that welfare will lead United States into debt. The original intent of current welfare benefits has failed; therefore the national welfare system must be reformed. To fully understand how to reform the welfare system Americans must know what the history of welfare isRead MoreEssay about Hcr 230 Week 3 Assignment the Welfare Reform Act1018 Words   |  5 PagesThe Welfare Reform Act HCR/230—Claims Prep II Jeana Timmcke University of Phoenix—Axia College The Welfare Reform Act Welfare has been a controversial issue since the 1960s, and continues to be a controversial issue. During the late 1980s, citizens were calling for reform of the Welfare System. Due to citizen concern the Personal Responsibility, Welfare and Opportunity Reconciliation Act (PRWORA) came into effectRead MoreWelfare Reform Essay1040 Words   |  5 PagesWelfare has been around for than six decades. Since the beginning of its creation people have question whether the programs offered is helping the community. As American taxpayers, your funds contribute to welfare for others. Due to the large number of members who receives government assistants, it is not that simple to monitor every individual. But, I propose that welfare should be reformed. Society is abusing the access to social welfare and to change the downfall sure to come, the governmentRead MoreEssay about Immigrants Are Americans Too1405 Words   |  6 PagesThe 1996 welfare reform, also known as the Personal Responsibili ty Work Opportunity Reconciliation Act (PRWORA), was enacted to increase the efficiency of the welfare system but its discriminatory nature has resulted in economic hardship, lack of funds to receive food, and poorer health among new immigrants to the United States. One of the main provisions of the PRWORA was that it repealed Aid to Families with Dependent Children (AFDC) and replaced it with Temporary Assistance to Needy FamiliesRead MoreEssay on Welfare Reform1372 Words   |  6 PagesWelfare Reform Look at our nation! 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The welfare system has evolved over the years someti me for the good and others for the bad. In 1996, PresidentRead MoreThe Welfare System Makes People Dependent Essay1129 Words   |  5 PagesThe Welfare System Makes People Dependent One of the many reasons why America is called â€Å"The Land of Opportunity† is because its citizens can move up in socio-economic status through hard work and dedication. However, when U.S. citizens fall on hard times, government-established programs offer financial assistance. The history of welfare reform reveals that the question of personal responsibility versus assistance to those in need has been a constant in the debate over welfare. In the 1950sRead MoreWhat Is the Evidence of Welfare State Retrenchment ?1444 Words   |  6 PagesWhat is the evidence of welfare state retrenchment in western welfare states? 1. Introduction 1. Crisis of Welfare State At the end of the 1970’s, the welfare state moved into crisis (OECD, 1981; Rosanvallon, 1981). As the period of high economic growth ended and stagflation appeared, governments couldn’t afford the social expenditure which had been expanded before. Fiscal deficit appeared and unemployment rate started to increase with economic depression. The idea shared byRead MoreWelfare Is Not Solving Poverty923 Words   |  4 PagesRonald Reagan said, â€Å"Welfare’s purpose should be to eliminate, as far as possible, the need for its own existence.† Welfare is not solving Poverty in America. Before I start this argument I need to assert that I do not think that welfare is a matter of solving poverty anymore. I agree with Ban Ki-Moon when he says, â€Å"True security is based on people’s welfare.† Welfare has become a way of keeping the impoverished people from becoming desperate enough to commit crimes, but within this system, that

The Refugee Blues And Inside Dachau Essay - 1500 Words

Submission: Ethical Witnessing through Poetic Expressions in the â€Å"Refugee Blues† Experiences, emotional events, and imaginations are often condensed into poetic forms of expression. In Refugee Blues and Inside Dachau, W.H. Auden and Sherman Alexie brought to the fore the struggles and conflicts that characterize humanity through the dynamics of political plots and human biases. A refugee is a psychologically or physically displaced person from their conceived home or country either by reason of tribe, war, religion or politics. Thus, being a refugee means that one has to be displaced and Displacement occurs not just in the physical world, but in the head, in the very language one has to learn again† (Smith 190). The use of the word â€Å"Blues† in the poem is suggestive of resignment and sadness. It is characteristic of the African American musical notes enslaved in the Southern part of America’s plantations. The traumatic events of the European Holocaust and th e American Indian genocides infused in the poems are meant to invoke ethical responses from readers. Ethical witnessing in literature requires three actions from the reader; empathy, consideration of the traumatic portrayal, and a view of the world around the reader (Peterson 76). The speakers in both poems are outsiders who seek to elicit empathy in the readers. The melancholic rendition makes it a plain ballad. This paper looks at the formal analysis and ethical witnessing in Refugee Blues by W.H. Auden alongside

Literature Review on Http Session Hijacking

Question: Discuss about the Literature Review on Http Session Hijacking. Answer: Introduction HTTP session hijacking is a form of hacking into the system for extracting the information regarding the computer web surfing session (Sum Keng Chung et al., 2014). The hackers would exploit the cookie session of the system for gaining the access to services and information in the computer system. Another term, theft of magic cookie has been given to the HTTP session hijacking (Yogesh Mundada et al., 2014). The HTTP cookies that is used for maintaining the particular web server and login session of the users can be hacked into for extracting the information from it. The use of intermediary computers would be used by the attacker for accessing the saved information in form of cookies. The following assignment has been made for forming the literature review on the topic of HTTP session hijacking form the available literatures. It would exclude the technical details and process included for the HTTP session hijacking. The different attacks on the computer session and its vitality would be highlighted in the following report. The available literatures are prone to provide a description on the increased HTTP session hijacking and their impact on users personal data. However, the final section of the review would provide the summary of the complete literature on HTTP session hijacking. Preventives for HTTP Session Hijacking on users The HTTP session hijacking has been the most prominent issue for the users and it has affected the operations of the user sessions (Weaver et al., 2013). The web session would have to be controlled for protecting the occurrence of attack. The use of SALT (sequence number alteration by the use of logical transformation) would be useful for protecting and defending the HTTP session hijacking (Nishanth Babu, 2014). Different types of methods should be used for protecting the HTTP session hijacking for different users. Selection of Research Topic The selection of any research topic is based on the interest of the individual doing the research. It is important for making sure that the topic selected for the research purpose must be collateral and there should be ample amount of previous literature available on the research topic (Raymond Lukanta, 2014). There are some principles that must be followed for selecting any topic for research and performing research on it. They are: Brainstorming of ideas- it helps in forming an overview of the research plan of collaborative environments and forming frontline techniques for vulnerabilities of web application (Shashank et al., 2013). The brainstorming of ideas would form a cognitive research overview of how an individual should proceed with the research topic. Accumulation of background information- The accumulation and collection of available information and data on the research topic is another important factor for the development of the research paper and forming a review on the available information. Focusing on crucial aspects- The research should focus on important facts and figures of the research topic. Unnecessary data and information (mere statements without any proof of existence) should be omitted from the research. Flexibility in research methodology- It is important for being flexible in the research methodology used (Mei et al., 2013). As it is possible that sometimes the research would require practical data analysis while on the other hand theoretical data should have to be used. Making a theory discussion- The important data and information should be accumulated and used for making a thesis discussion. The discussion should be elaborated to cover all the important and crucial points of the research on preventive measures for HTTP session hijacking. Available Literatures on HTTP Session Hijacking The HTTP session hijacking would be more formidable for attacking the progress of user web server utilization (Bursztein et al., 2012). The secure web server login would be helpful for dealing with the HTTP session hijacking. The goal of the secure login would be to deal with the hacking of users session along with personal data and information (Hanmanthu et al., 2015). The discussion of the report would be based on the analysis of the available literature and articles on the HTTP session hijacking. The discussion would be ordered on the basis of its importance and proof of statements. The analysis of the preventive measures is conceptual and it has been done by analyzing the various facts and data collected from different sources. The generation of session ID, encryption and comparison of cookies would be helpful for forming the security of wireless networks. A strong and encrypted session would help in formation of prevention models (Manivannan Sathiyamoorthy, 2014). The sections headings that would be used are the title of the 3 articles that would be used for forming the literature review. The client authorisation process for the modern web surfing structure can also be used for protecting the occurrence of HTTP session hijacking (Mundada et al., 2014). The New apparatus works the treats sets into two for testing. One set is the login treats and the second set is the non-sign in cookies. Newton tests the treats sets from top and the second treat set from the base in a rotating pattern. The Newton calculation stops where there are no more treat sets left to test. Newton decides the confirmation treats from the client sign in and client log out example Relation of Available Literature on HTTP Session Hijacking The use of automatic and robust protection for cookie based sessions would be helpful for providing the client side protection. The solution has been named as the one time cookies and it can be used for preventing the attacks on users information (Dacosta et al., 2011). The session of the user would be kept and stored secretly without any expensive synchronization requirement. The implementation of O. T. P. would be plugged in on the platform of word pres. The issue of HTTP session hijacking could be dealt by improving the security of web applications session management (De Ryck,P et al., 2014). The solution of the problem is based on the light weight mechanism. An unknown key value is infused between the server and the program and it keeps an attacker from assuming control over the client's session, as the key can't be transmitted or acquired easily. The security properties are observed to be upgraded and raise the level of security for HTTP organizations. The components like HTTP session, flags, browser model, and feather weight Firefox would be helpful for protecting the cookie based session (Bugliesi et al., 2014). The session is the most vital sort of assault in systems. These assaults are propelled by fake get to focuses. The fundamental target of this paper to recognize the fake get to focuses with the utilization of server hubs in the system. We likewise propose in giving security for IP satirizing utilizing scrambled calculation. Another method that can be used for protecting the IP spoofing and session hijacking is by using the sensor nodes (Abhishek Kumar Bharathi, 2014). The specialists have concentrated the broken verification assaults and the sessions administration assaults in awesome profundity and clarified the procedure of the interruptions that occur. The preventive measures have additionally been proposed by the analysts in the review which is a choice of existing preventive measures accessible today. Hence, it can be said that all the literatures available are based on the verification of designs and adaptability of new tools for the prevention of HTTP session hijacking. It would result in extraction of personal information from the user web session. According to Thiago Rocha (2014), the web surfing store the information in forms of cookies and the hackers get into the webs server system for accessing the information and use it for their personal use. Justification of the Assignment with the Research Available The research paper has been able to assist in making and distinctly analyzing the preventive measures for HTTP session hijacking for the operations of the business organizations and human use. The study has been done by concentrating on the development of the preventive measures for HTTP session hijacking and support ease of web server processing. The assignment has been done by focusing on the issues faced by the users due to the issue of HTTP session hijacking on the web service storage. The study had shown the critical evaluation of the issues of HTTP session hijacking. The research done in this assignment would be helpful for providing an overview on the preventive measures for HTTP session hijacking. Conclusion The review of the various literatures would result in finding the implementing methods for the preventions of HTTP session hijacking. The use of preventive methods plays a crucial role for considering all the safety measures, achieve the security considerations, supported the foundation of solutions for preventing HTTP session hijacking. The use of different source routed packets for IP configuration would be helpful for supporting the network participation and encouragement of IP packets to pass through Bs machine. The study would be helpful for the development of an idea of the preventive measures for HTTP session hijacking and its implications in the development of commercial operations. The research has been done in conceptual methodology for the study purpose. The conceptual analysis of the HTTP session hijacking was based on the available studies and articles. The critical analysis on the topic has yielded the benefits and drawbacks of the commercial usage of preventions for HTTP session hijacking. The structure for the research includes a basic introduction for defining the topic of study, data collection methods, evaluation of the available literature, forming a thesis of the topic, and concluding the topic. References Abhishek Kumar Bharathi, m. c. (21014). prevention of session hijacking and IP spoofing with sensor nodes and cryptographic approach. International Journal of Sciences: Basic and Applied Research (IJSBAR). Bugliesi, M., Calzavara,S., Focardi, R.,andKhan,W.(2014) Automatic and RobustClient-Side Protection for Cookie-Based Sessions,pp:161-168,Pdf.,retrieved on Dec 9th 2016 Bursztein,E.,Soman,C.Boneh,D. Mitchell,J.C.(2012) Session Juggler: Secure WebLogin From an Untrusted Terminal Using Session Hijacking,978(1) 321-330 Pdf. retrieved on Dec 8th 2016 Dacosta, I., Chakradeo, S., Ahamad, M., Traynor, P. (2011). One-time cookies: Preventing session hijacking attacks with disposable credentials. De Ryck,P., Desmet,L., Piessens,F., Joosen,W.(2014) Improving the Security ofSession Management in Web Applications,pp:1-13,Pdf. retrieved on Dec 8th 2016 Hanmanthu, B., Ram , R., Niranjan , P. (2015). Decision tree classification. SQL Injection Attack Prevention Based on Decision tree classification, 1-5. Manivannan, S. Sathiyamoorthy, E. (2014). A Prevention Model for Session Hijack Attacks in Wireless Networks Using Strong and Encrypted Session ID.Cybernetics And Information Technologies, 14(3). Mundada, Y., Feamster, N., Krishnamurthy, B., Guha, S., Levin, D. (2014). Half-Baked Cookies: Client Authentication on the Modern Web. Nagpal, B., Chauhan, N. Singh, Nanhay., Shatma,P.( 2014) Preventive Measures for Securing Web Applications using Broken Authentication and Session Management Attacks: a Study, 24(81) 1-3, Discovery, retrieved on Dec 9th 2016 Nishanth, N. Babu, S. (2014). Sequence Number Alteration by Logical Transformation (SALT): A Novel Method for Defending Session Hijacking Attack in Mobile Ad hoc Network. International Journal Of Computer And Communication Engineering, 3(5), 338-342. Raymond Lukanta, Y. A. (2014). Scanning tool for session management vulnerabilities. A Vulnerability Scanning Tool for session management vulnerabilities, 6. Shashank, K., Shah, P., Bhavsar, K., Gandhi, S. (2013). Frontline Techniques to Prevent Web Application Vulnerability. International Journal Of Advanced Research In Computer Science And Electronics Engineering (IJARCSEE), 2(2), 2-5. Sum Keng Chung, Ow Chee Yee, Manmeet Mahinderjit Singh, Rohail Hassan. (2014). Preventing session hijacking. SQL Injections Attack attack and session hijacking on E-learning systems, 5. Thiago S. Rocha, E. S. (2014). ETSS detector tool. ETSSDetector: a tool to automatically detect CrossSite scripting vulnerabilities. Weaver, N., Kreibich, C., Dam,M., PaxsonV. (2013)Here Be Web Proxies,PP: 1-10,Pdf., retrieved on Dec 9th 2016 Yogesh Mundada, Y. Feamster,N., Krishnamurthy,B, Guha,S. Levin,D.(2014) Half-Baked Cookies: Client Authentication on the Modern Web, pp1-6 pdf.,retrieved on Dec 9th 2016

How Authors Affected the Frontier Movement Essay Sample free essay sample

The Frontier Movement is a period in American history that refers to the westbound motion of Americans toward the Pacific Ocean during the mid-1800s lasting until the early 1900’s. This motion was characterized by an expansionist ardor for chance and escapade. but was besides to a great extent characterized by widespread societal subjugation and reform. It was during this clip that both writers and reformers were inspired to compose and portion their thoughts. many of which called attending to the frequently ignored societal unfairnesss of the clip. These author’s thoughts non merely were inspired by the motion ( the beginning of American Literature ) . but besides to a great extent fueled and contributed to the motion in return. Writers Mark Twain and Susan B. Anthony. for illustration. played an of import function in the frontier motion through their Hagiographas as they used these to convey the feelings they held toward America’s crooked societal favoritism an d socio-economic disparities. We will write a custom essay sample on How Authors Affected the Frontier Movement? Essay Sample or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page Mark Twain and Susan B. Anthony are considered to be two of America’s first American Literature writers. Mark Twain. known as the â€Å"Father of America Literature† . became an writer in the West after the terminal of the Civil War. Susan B. Anthony. known as one of the first women’s militants. plants focused chiefly on the gender inequality customary of the clip. Both of these author’s plants are recognized as being bold and reflecting much of the American frontier movement’s attitude and complaints. Their plants helped fuel their readers understanding of who they were and helped animate their audience in the spirit of the frontier motion. Mark Twain’s works frequently embodied the freshly discovered American frontier spirit of individualism and escapade. His plants were both entertaining and bucked up Americans to make their ain fate. This was both a popular and important impression during the frontier motion as it embodied the idea’s Americans had about spread outing due west in hunt of a new life. In add-on to his inspirational and humourous plants. his Hagiographas besides addressed the societal favoritism he witness during the epoch of the frontier motion. Many of his plants. like Huckleberry Finn for illustration. showed the possibility of conveying alteration to a universe dominated by racism and folly. His works both captured American’s imaginativeness. inspired American’s frontier attitude. and called attending to societal wrongs. Susan B. Anthony’s works focused more on the daring of the American. Rather than idolising the spirit of America. she frequently called Americans out on the societal unfairnesss prevalent throughout America during the frontier epoch and promoted alteration. She called attending to both American racism and particularly gender inequality. While Americans were get downing to place the distinctly American features they took pride in. Susan B. Anthony identified the facets of American life that Americans came to recognize they should be ashamed of. Her Hagiographas and causes were bold. reflecting the rugged American Spirit. but her plants besides helped determine the societal facets of the American Frontier motion. The frontier motion of America marked the beginning of American individuality. and therefore the beginning of American Literature. It was this motion that influenced the plants of going writers. many. who in bend. influenced the frontier motion. Mark Twain and Sarah B. Anthony both contributed to the frontier motion through their Hagiographas in that they helped Americans recognize their individuality. During the frontier motion. Americans began to see themselves as an adventuresome and bold people. and it was these writers who helped Americans addition and develop an apprehension of who they were. even though their thoughts were frequently negative. In short. by supplying Americans with literature about who the American people were. the writers helped animate Americans to show this new attitude of escapade and acknowledge American societal values in the Frontier Movement.