Capital flows and financial institutions in East and Southeast Asia

Capital flows to East and Southeast Asia have been flourishing since the 19th century, together with the development of capital markets in the region. This paper examines key events of the 19th and early 20th centuries to provide historical insight into how capital flows were facilitated in Asia early on in this period. The role of financial institutions was already strong at the beginning of the 19th century, a trend that still prevails in Asia. A significant, early presence of European banking in East and Southeast Asia, crises, and catastrophic events such as war in the 1930s also contributed to the shape of capital flows. In addition, history reveals a strong connection between natural resources (particularly agricultural and mineral resources), foreign investment and the development of financial systems in Southeast Asia. This paper also explores the variations in development paths across East and Southeast Asian economies throughout the 19th and early 20th centuries.