Capital Market Development, Start up Finance and Infrastructure Finance in ASIA

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1 Capital Market Development, Start up Finance and Infrastructure Finance in ASIA Naoyuki Yoshino Dean and CEO Asian Development Bank Institute (ADBI) Professor Emeritus of Keio University

3 How to attract private finance? How to achieve high rate of return? Finance, Human capital development Crowd funding (Hometown Trust Funds) Increase domestic Savings

4 Tax compliance Progressive tax rate Land tax, wealth tax, inheritance tax Continental Europe, zero tuition

6 Asian companies are the world s largest users of public offerings (IPOs and SPOs) accounting for 47% of all public equity capital raised in the world. the world s fastest growing trading venues for listed stocks and several domestic investment banks in the region have started to establish themselves as global actors. Chinese companies have also come to dominate the global scene for initial public offerings. Companies from other Asian emerging markets such as Malaysia and Indonesia have also increased their use of public equity markets. growth companies still represent an important share of their public equity offerings in advanced Asian markets such as Korea and Japan.

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14 Injection of Increased Tax revenues Increase of tax revenues by spillover effect actual rate of return for investors user charges (Highway, Railways, water supply) 4

15 Case Study: Southern Tagalog Arterial Road (STAR), Philippines Micro-data The Southern Tagalog Arterial Road (STAR) project in Batangas province, Philippines (south of Metro Manila) is a modified Built-Operate- Transfer (BOT) project. The 4. km STAR tollway was built to improve road linkage between Metro Manila and Batangas City, provide easy access to the Batangas International Port, and thereby accelerate industrial development in Batangas and nearby provinces. 5

16 The Southern Tagalog Arterial Road (STAR Highway), Philippines, Manila Tax Revenues in three cities Yoshino and Pontines (25) ADBI Discussion paper 54 Completion 6

17 () Property tax Treatment D (.263) Treatment D.42** Period t+2 Treatment D Period t+ Treatment D Period t Treatment D Period t- Treatment D Period t-2 Treatment D Period t-3 Treatment D Period t-4, forward (.5).447** (.6).47*** (.28).24** (.674).63* (.645).72* (.8) 2.573*** (.) Difference-in-Difference Regression: Spillover (2) (3) (4) (5) (6) Property Business Business Regulatory Regulatory tax tax tax fees fees (.874) (.36) (.47) (.23) (.46) ***.**.248*** -. (.3).574*** (.8).57** (.223).387 (.728).336 (.54).45 (.578). (.758) (.3).264*** (.45).44*** (.47) 2.256** (.57) 2.226** (.7) 2.785** (.8) 3.428*** (.28) (.45).52*** (.542).64*** (.482).77** (.47).84** (.53) 2.7*** (.544) 2.56*** (.35) (.84).44** (.42).64** (.83).38** (.64).482** (.634).*** (.63) 2.288*** (.563) (.248).55*** (.6).642*** (.8).838* (.448).44** (.43).238*** (.36).5*** (.452) (7) User charge. (.5).48*** (.32).37** (.64).35 (.27).5 (.74).4 (.74).732*** (.58) 2.3*** (.67) (8) User charge.364 (.28) -. (.25).434** (.67).422 (.58).7 (.56).247 (.53).676 (.55).787 (.745) Construction 2.283** * (.72) (.6) (.855) (.28) Constant 4.6*** *** *** *** -.62 (.48) (8.83) (.) (.4) (.87) (6.566) (.64) (7.84) N R Clustered standard errors, corrected for small number of clusters; * Significant at %. ** Significant at 5%. *** Significant at %. 7

GDP year 2 years GDP Term Connectivity spillover effect Launching Effects Regional spillover effect Neighboring spillover effect Short 2.83***[4.48].7[.45].33[.4] Mid 2.5***[6.88].36[.2].27[.

3] Anticipated Short -.54[-.66].42[.78] -.32[-.2] Mid.32[.44].84[.42].3[.3] Long.[.5].[.6].87[.] Postponed Effects -.4[-.2] -.7[-.35].5[.44] Note: t-values are in parenthesis.

18 GDP year 2 years GDP Term Connectivity spillover effect Launching Effects Regional spillover effect Neighboring spillover effect Short 2.83***[4.48].7[.45].33[.4] Mid 2.5***[6.88].36[.2].27[.46] Long 2.6***[3.4] -.42[-.2] 2.2**[2.4] Anticipated Short.[.33].85[.75] -.8[-.2] Mid.3[.5].64[.3] -.2[-.3] Long.7[.3] -.6[-.].5[.67] Postponed Effects.76*[.5] -.4[-.72] 2.58*[2.3] Anticipated Short -.54[-.66].42[.78] -.32[-.2] Mid.32[.44].84[.42].3[.3] Long.[.5].[.6].87[.] Postponed Effects -.4[-.2] -.7[-.35].5[.44] Note: t-values are in parenthesis. t-value measures how many standard errors the coefficient is away from zero. legend: * p<.; ** p<.5; *** p<. Naoyuki Yoshino - Umid Abidhadjaev. Impact evaluation of infrastructure provision: case studies from Japan and Uzbekistan. December 4-5, 25. Islamabad, Pakistan

19 Japanese Bullet Train

21 Total tax revenue, mln. JPY mln. JPY Group 7 Group 5 Group 3 Group 2 Previous period [82-] Construction [-23] Operation [24-2] Operation 2 Group 8 [2-23] 2

22 Impact of Kyushu Shinkansen Rail on CORPORATE TAX revenue during 2 nd PHASE OF OPERATION period {2-23}, mln. JPY (adjusted for CPI, base 82) Variable Regression Regression 2 Regression 3 Regression 4 Regression 5 Treatment ** [2.2] Number of tax payers *** *** *** *** *** [3.3] [3.4] [3.4] [3.4] [3.7] Treatment * [2] Treatment ** [2.] Treatment ** [2.34] TreatmentCon 7632 [.58] Constant ** ** ** ** ** [-2.7] [-2.8] [-2.8] [-2.] [-2.] N R F COMPOSITION OF GROUPS Group2 Group5 Kagoshima Kagoshima Kumamoto Kumamoto Fukuoka Group3 Oita Kagoshima Miyazaki Kumamoto Fukuoka Group7 Kagoshima Kumamoto Fukuoka Oita Miyazaki Saga Nagasaki Note: Treatment2 = Time Dummy {-23} x Group2. etc. t-values are in parenthesis. Legend: * p<.; ** p<.5; *** p<.. Clustering standard errors are used, allowing for heteroscedasticity and arbitrary autocorrelation within a prefecture, but treating the errors as uncorrelated across prefectures 22 GroupCon Kagoshima Kumamoto Fukuoka Osaka Hyogo Okayama Hiroshima Yamaguchi

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24 Financing for Infrastructure and Energy Projects Accumulation of long term domestic saving is required Tax on CO 2, NOX, Spillover tax revenue Institutional Investors (Pension Funds, Insurance) Individual contributions Hometown Trust Fund long term bond Revenue bonds (rate of return)

Infrastructure & Steady state equation in logarithmic form NOTE: Context: 44 developing countries, -2 Methodology: Production function approach Point of novelty and findings: Study incorporated

25 Infrastructure & Steady state equation in logarithmic form NOTE: Context: 44 developing countries, -2 Methodology: Production function approach Point of novelty and findings: Study incorporated infrastructure variable into neoclassical growth framework and demonstrated that controlling for share of working age population with university level of education infrastructure investment to GDP ratio constituted statistically significant determinant of accumulated growth rate of GDP per capita Estimation of The Neoclassical Growth Model with Infrastructure Investment Dependent variable: log difference GDP per capita in - 2 Regression number REG. REG.2 REG.3 Variables Coef. Coef. Coef. lny_ (-.54) (-.35) (-.38) ln(n+g+d) (-.5) (-.23) (-.77) ln(kg) (.7) (2.) (3.3) ln(sec). (.46) ln(kg)xln(sec).2 (.5) ln(uni).2 (2.7) ln(kg)xln(uni).24 (2.76) Constant (-.33) (.6) (.57) Number of observations R-squared F-statistic

26 Hometown Investment Trust Funds A Stable Way to Supply Risk Capital Yoshino, Naoyuki; Kaji, Sahoko (Eds.) 23, IX, 8 p. 4 illus.,2 illus. in color Available Formats: ebook Hardcover Springer Japan, Cambodia Vietnam, Peru 26

27 Hometown investment trust funds a new way to finance for Wind power generators, solar power panels etc. /4/26 27

28 Investment in SMEs and start up businesses 28 28

29 Financial Scheme of Wind Power Collected by Individuals

30 Scheme of Financing Power Panels

31 /4/26 3

32 Supply of Solar Powers in Japan

33 4 th Industrialization and Financial Technology 33

34 E-Trading, E-commerce high cost of sending money to overseas traditional banks are so expensive SONY and YEON retail store enter the business Finger print identification by mobile phone Individual identification SS number 34

35 Currency Diversification of Assets, Much more frequent flows of capital across countries 2, Large share of foreign participation into capital market 3, Exchange rate volatility may be larger 4, Circulation of domestic savings to domestic investment 5, long term and patient institutional investors (insurance and pension funds)

40 Population aging reduces output and aggregate consumption in the long-run due to the decline in total labor supply. Retirees receive pension benefits that are financed by taxes imposed on workers and issues of government bonds. Given a fixed amount of pension benefits per retiree, population aging raises the tax paid by each worker. This reduces consumption of a workers. a decline in working population pushed down the total labor supply, decreasing output. the decline in working population also reduces aggregate investment. Population aging weakens the effectiveness of fiscal policy as the retired people increases who are not affected by fiscal policy. 4

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Spillover Effects of Infrastructure and The Way to Achieve High Rate of Return

Spillover Effects of Infrastructure and The Way to Achieve High Rate of Return Naoyuki YOSHINO Dean, Asian Development Bank Institute (ADBI) Professor Emeritus Keio University, Japan nyoshino@adbi.org