2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16
The problem of capital flight is a hot topic for emerging economies. The outflow of money from the country almost always pursues one goal - to obtain a higher income in another country.
Capital flight: causes
In order to understand how the outflow-inflow of capital works, it is necessary to identify the reasons for the export of funds:
- The lack of a commensurate relationship between capital and its demand, which leads to excessive accumulation of finance. Therefore, it would be more rational to transport it to where there is a demand for it and there is an opportunity to receive good dividends.
- No competition for products from the host country.
- Cheaper resources needed to make a product.
- Favorable economic and political climate in the host country.
If several decades ago countries were divided into those who import and export capital, then in today's realities one country can immediately be both an exporter and a host.
Types of capital flows
Capital outflow can be sharedinto two types, depending on the source of funds.
State capital
Money resources of this kind are owned by the state. The government or interstate organizations themselves decide when, where and how to invest finance. These can be loans, loans with a subsequent return in the form of interest on use, or international financial assistance.
Private Equity
This industry differs from the state one in that any individual or company can import money from their own funds, which the state does not control on the territory of their country. But on the other hand, the control of funds is within the competence of the government abroad, if they were not hidden from the authorities. This can be, for example, investments in foreign production of something, opening your own company, interbank relations of an investment nature.
Capital outflow statistics
The outflow of capital from the Russian Federation, according to statistics, after the previous year is declining. This situation is quite justified, and it would be logical to link the outflow of capital with the economic situation in the country and the stabilization of the ruble exchange rate.
According to the forecasts of the Central Bank, the outflow of capital from the country in 2015 will average $118 billion, plus or minus $10 billion.
According to the data, compared with the outflow of capital in the first three months of last year, this year there is a positive trend. It amounted to $33 billion, in contrast to $47.7 billion in 2014, which is almost 1.5 timesless. And these figures will decrease. Thus, in 2016 it is planned to take out of the country money in the amount of $87 billion, and in 2017 - $80 billion.
In the early spring of this year, the head of the department, Alexei Ulyukaev, noted that as long as sanctions from Western countries remain in place, the outflow of capital will continue.
The export of funds in 2014 amounted to a record maximum amount of $150 billion, compared to $61 billion in 2013. The Central Bank, focusing on the cost of one barrel of oil, makes a forecast that the import of money this year will be about $120 billion And if the price on the world oil market drops to the critical $40 for 159 liters of oil, then there is an option to increase the outflow of capital to $130 billion.
Sometimes you can hear that in fact there is no export of funds abroad, but there is only tax evasion and, according to the exporters themselves, finances return after a certain time.
For countries with developing economies, it is quite typical that both capital outflows and cash inflows occur at the same time. This is affected by the disproportionate taxation between foreign offshore companies and domestic investors. Another reason could be just plain money laundering.
Is it necessary to combat capital flight and how?
Most experts naturally believe that the mainThe reason for the outflow of capital lies in the low attractiveness of investments in domestic producers compared to foreign ones. In order to understand where, in your home country or abroad, it is more profitable to invest money, you need to take into account the level of taxation, the economic condition of the country, the stability of the exchange rate, and so on.
It would be appropriate to draw a parallel between the export of capital and the evasion of the population from money investments in their own business in the country. And as long as there are more attractive conditions for investment abroad, it will be impossible to force an investor to invest in the local economy.
As mentioned above, capital flight can be associated with the laundering of money obtained by criminal means or unpaid taxes. All this illegal activity is piqued by the interest of the state authorities in the fight against crime and increased control over the export of capital.
Causes of the consequences of capital flight
The flight of capital from the country causes serious economic losses for it. First of all, the state loses its financial resources, which it itself has developed. The money that could be invested in domestic production, raising the economic stability of the country, “floats away” abroad.
The supply of currency on the Moscow Exchange drops to a minimum, which entails the establishment of an unrealistic ruble exchange rate against foreign currencies. If that part of the monetary resources that was exported to neighboring countries were returned back, then thiswould increase the money supply and stabilize the ruble exchange rate.
The lack of necessary financial resources negatively affects the level of employment in the country.
The lack of a real amount of money undermines the ability to cover the main external debt of Russia and does not allow paying interest on it.
The export of capital seems to be a normal process at the state level, regulated by the government at the level of the export of goods and services and the creation of jobs. But when this volume exceeds all permissible norms, as was the case in 2014, this fully shows the decline in the economic situation in the country, where the opportunity to invest in a domestic producer of goods and services is lost.
The more money is exported abroad, the more difficult it will be to resist it. And the solution to this problem is not limited to administrative measures. It is necessary to create such conditions for investing in our country that will encourage investors to develop the state economy, create additional jobs, and not enrich foreign countries.
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