Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
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US$1.1bn. Owing to capital controls, as well as the exchange’s restricted size and poor liquidity
conditions, the BVM has hitherto failed to attract much interest from international investors.
While bond inflows have been inexistent throughout the last decade, in September 2013 a
government agency, EMATUM, issued a seven year government-guaranteed US$500m bond,
the country’s first in international markets, at a yield of 8.5%. Mozambique has thereby joined
the ranks of African countries such as Zambia, Tanzania and Rwanda, which have recently
raised debt on international capital markets.
Policy initiatives to attract capital flows
Fiscal incentives for direct investors have made a significant contribution to boosting capital
inflows in Mozambique. These incentives, which are specified in the 2009 Code of Fiscal
Benefits, Law 4/09 of January 12th (which replaced the 2002 Code of Fiscal Benefits) have
helped to pave the way for a number of mega-projects in Mozambique. Furthermore, the
investor protection guarantees contained in the Law on Investment have strengthened
investor confidence significantly, and have helped Mozambique to be ranked 49th of 186
countries in the investor protection category of the World Bank’s 2013 Doing Business report.
Notwithstanding these advantages, direct investors in the Republic of Mozambique are also
exposed to potentially less favourable economic regulations, including those governing labour.
Labour regulations, in particular the 2007 Labour Law, Law 23/07 of August 1st, limit the
proportion of expatriate staff a company can employ to 5% of the total (or in some cases 10%).
And according to regulations governing land rights, all land is owned by the state and cannot
be sold, transferred or mortgaged. Firms can be granted permits to use land, known as Direito
de uso e aproveitamento da terra (DUAT).
2.2 LOWER-MIDDLE INCOME COUNTRIES
Indonesia
Laws regulating capital inflows
Foreign holdings of listed shares and mutual funds are permitted, following a gradual opening
up to foreign investment in the past decade. Closed-end investment trusts were introduced in
Indonesia in 1995, followed by open-ended funds in 1996. (No data regarding foreign
investments in such funds are published.) In general, the government is keen to diversify the
number and type of investors in the domestic securities market.
Venture-capital firms have yet to recover from the effects of the 1997-98 Asian financial crisis.
In 2012, the Indonesian Capital Market and Financial Institutions Supervisory Agency,
Bapepam-LK, introduced new guidelines and regulations, stipulating that foreign investors
may hold up to 85% in such firms. Venture-capital firms are allowed to provide financial
backing to companies in a variety of ways, including equity participation and convertible-bond