Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
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The corporate bond market, which is based at the IDX, has expanded markedly in recent years.
Generally, there are no restrictions to foreign and domestic investments in corporate bonds.
Indonesian companies are permitted to sell and list foreign-currency-denominated debt in the
domestic market, although most firms continue to sell such debt, usually in US dollars and
euros, in London and Singapore.
Policy initiatives to attract capital flows
Investors in the Republic of Indonesia have seen progress in the country’s efforts to improve
business conditions. For instance, in late 2011, parliament passed legislation creating the
Financial Services Authority (OJK) to monitor and regulate the country’s financial system. In
January 2013, the OJK replaced the Bapepam-LK and assumed the role of watchdog for the
banking system from the central bank, Bank Indonesia (BI). The OJK has inherited existing
rules governing the movement of capital from BI and Bapepam-LK.
In the past two years Indonesia has introduced several measures aimed at increasing the
stability of the financial account and the local currency, amid high volumes of capital inflows
and rapid domestic credit growth. For example, in mid-2011 parliament mandated that the
Indonesian rupiah be used for all financial transactions within the country. Locally based
banks have limits imposed on their foreign-currency activities, and all businesses must comply
with foreign-exchange reporting requirements. Foreign companies must repatriate earnings
through BI, and export profits must be deposited in a local-currency bank account. Indonesia
otherwise has liberal rules regarding capital transfers and the repatriation of profits; all major
currencies are freely convertible.
In June 2012, BI launched a one-month programme offering US-dollar term deposits. The
facility is targeted at Indonesian financial institutions that have parked US dollar funds with
overseas lenders, to help ensure that US dollars are available in the onshore market. When
launching the facility, BI said it might unveil further, though unspecified, measures to ease
volatility in the foreign-exchange market; but strict foreign-exchange controls are not likely to
be introduced in the near future.
Nigeria
Laws regulating capital inflows
The financial regulatory environment in Nigeria has benefited significantly from the
liberalisation of the capital and foreign exchange markets in the mid-1990s. Foreigners can
invest and participate in any enterprise in Nigeria, although restrictions apply to both local and
foreign investors with respect to certain industries involved in national security, such as
firearms, ammunition, military apparel and coastal and inland shipping.
The Nigerian Investment Promotion Commission Act 1995, which is the main law regulating
foreign investment in the country, allows 100% foreign ownership of firms. It also guarantees
unconditional transferability of dividends or profit, and capital repatriation in the event of