Kushka O., Faculty of international relations, 3-rd year Student,
Financial University under the Government of Russian Federation, Moscow, Russia
This article examines the regulation of international capital flows in the context of globalization; highlights the state measures towards the export and import capital, investment attraction, laws, bilateral agreements, restriction of foreign capital. A detailed description of the trend towards liberalization of international capital flows, international agreements and OECD Code of Liberalisation of Capital Movements, as well as the main issues of capital migration liberalization is given here.
Key words: globalization, regulation of international capital flows, araction of investment, liberalization of international capital flows, OECD Code of Liberalisation of Capital Movements
Nowadays the globalization of the world economy has caused serious changes in all aspects of economic life, strengthening the interrelations between national economies and the impact on them of the world markets of goods, capital and labor.
Regulation of the capital movement is one of the most important issues in which the government intervenes. The capital, in turn, represents the mobile factor of production. Its movement for a short period is speculative, which can lead to unjustified fluctuations in exchange rates, interest rates, as well as possible occurrence of currency crises.
The government of the country can take measures and restrictions either on the export of capital for the territory of the country or for its importation. Among the main reasons for restrictions on the export of capital there can be identified:
- Prevention the transfer of national wealth to the territory of other countries
- Prevention of depletion of the country's gold and foreign currency reserves
- Prevention the deterioration of the balance of payments position
- Elimination of the reasons for the high rate of interest on the territory of the country, which impedes economic growth
Restrictions on the import of capital in most cases are of a political or ideological nature. Thus, in the twentieth century, there were many examples, when the governments of individual countries, especially of the socialist system, prevented the penetration of foreign capital into their countries in order to preserve national independence and complete state control over the economy. In countries with developed market economies, governments resort to restrictions on the import of capital in order to strengthen their economic policies.
At present, most countries pursue a policy of attracting foreign capital, rather than limiting foreign investment. To this end, many countries use such measures as customs and tax benefits, the granting of concessions, the possibility of repatriating profits, guarantees against the nationalization of foreign ownership. In practical activities, governments often use a combination of measures that work both to attract and to restrict foreign capital. This depends on the goals and objectives of national economies for the current period.
One of the important issues of capital flow for the state is the regulation of capital export - the process of export of investments by residents abroad. Officially, capital can be exported in the form of portfolio and direct investments, in loan form - in the form of loans, in the form of placing capital of legal entities and individuals on bank deposits and various accounts. In some cases, the reason for the export of capital is not the increase in profits, but rather the preservation of capital through transfer to stable conditions, which may be caused by a poor investment climate in the territory of a given country. There are also examples of export of capital abroad unofficially. Most often this refers to the movement of illegally obtained capital. Such methods of exporting capital to other countries are connected with the peculiarities of legislation in this sphere. For example, in Russia, such features include the depositing of income from the export of goods and services on the accounts of foreign banks, as well as the underestimation of prices for exports and an increase in import prices, and others. State regulation of the export of capital tends to resolve the issue of reducing illegal export of capital, but to achieve this goal, the investment climate in the country should be improved.
The basis of state international regulation of capital flows is made up of national laws, bilateral agreements, administrative regulations and procedures. In most countries in which the market economy predominates, there are no specific laws for foreign investment, for example in Germany, France, the United Kingdom and the United States of America. But in other countries there are national laws or codes that relate to the use, as well as the attraction of foreign capital. Also a very important role is played by the legislation not only of the host country, but of the country in which it is based.
In recent years, world capital flows have been increased in advanced economies and in some countries with economies in transition, which confirms:
- Availability of such factors as financial innovations, development of access to information
- Increasing the interconnection of countries in the financial sector
- Development of world recycling resources, revenues and foreign exchange reserves, along with some reduction of regulatory barriers and increased transparency, including the increasing the number of non-cash settlements in the economies.
- Decrease in the level of bias based on the resident status, different growth expectations in the developed and developing countries.
Capital flows, however, declined from 2003 to 2007, as a result, have subsequently declined sharply, which was one of the consequences of the global financial crisis.
At the same time, the liberalization of capital flows in a broad sense is the elimination of measures that are the cause of the difficulty of international capital flows movement. Full convertibility in relation to them often implies the absence of any restrictions of capital movement, including transactions related to payments and transfers. However, the very concept of "liberalization of capital flows" is interpreted in different ways.
The Capital Flow Liberalization Code, which was developed by the Organization for Economic Cooperation and Development (OECD), is the only legal document focusing exclusively on the international capital flow and consisting of comprehensive agreements and commitments with respect to the international capital flows. The Code serves to liberalize domestic and foreign investment, covers almost all the types of capital transactions, and the obligations discussed in this document are extended not only to transactions, but to all payments associated with them. In addition, this document allows the members to deviate from their obligations and, in some cases, impose restrictions on the import or export of capital to stabilize the country's balance of payments, and also resorts to such control in the wake of "serious economic and financial shocks".
In addition to the Code of Capital Flow Liberalization, there are other agreements and obligations in relation to capital flows. While many of these agreements offer sufficient flexibility in managing cash flows, others provide less flexibility and thus limit the ability of some countries to introduce capital flow management measures (CFMs), as opposed to the Code liberalization of capital. Also, many countries have concluded regional agreements, which consist of agreements and commitments regarding capital flows, with varying degrees of flexibility. This applies, for example, to the members of the European Union, the Association of Southeast Asian Nations (ASEAN) and the East African Community (EAC).
Foreign economic liberalization includes the development of unimpeded movement of goods and services, as well as capital flows and information; in addition, liberalization involves the removal of customs barriers, various restrictions in trade between countries, and hence the import and export of capital.
In the period from 1986 to 1995, 72 countries decided to liberalize trade regimes, resulting in a rapidly growing foreign trade quota in those countries. Also, one of the main signs of the development of liberalization of the international capital flow is the growth in the volume and role of foreign direct investment, that is, investments in the real sector of the economy.
In the period of globalization, the concept of the liberalization of capital flows, which represents the lifting of restrictions on the withdrawal and import of capital in any form, namely direct and portfolio investments, loans and borrowings, has become one of the main financial trends. But even with full liberalization of capital, in some cases, restrictions are possible, for example, when problems arise with balance of payments. It is in these cases that world legislation allows one or another state to act in a similar way.
1. Анисимова А.А. Стратегическое бюджетное планирование: опыт Норвегии и Швеции // Финансы. No 5. 2015. С. 72–77.
2. Гершанович, Е.А. Валютная либерализация: за и против// Известия Томского политехнического университета. 2007. Т. 310. No 1.С.228-233.
3. Фодоря А.Ю., Середина М.И., Третьякова Г.В., Лебедев К.А., Лебедева О.Е. Формирование англо-американской модели социально-экономического развития; Экономика и предпринимательство. 2016. № 12-2 (77-2). С. 128-132.
4. Обзор. Кодексы либерализации движения капиталов и текущих невидимых операций ОЭСР. URL: http://urlid.ru/anrc; OECD Code of Liberalization of Capital movements. URL: http://goo.gl/g7G8H3
5. Seredina M.I., Tretyakova G.V., Oberemko T.V., Kozhina V.O., Lebedev K.A. Impact of external labor migration on labor market development; Journal of Advanced Research in Law and Economics. 2017. Т. 8. № 2. С. 596-600
6. Швандар К.В. Безналичные платежи в экономике: актуальные проблемы и их решение за рубежом // Финансовая аналитика: проблемы и решения. 2015. No 25. С. 2–10.
7. Швандар К.В., Плотников С.В., Бородин А.Д. Возможности моделирования при прогнозировании конъюнктуры мировых товарных рынков (на примере рынка нефти) // Деньги и кредит. 2010. No 4. С. 63–69.