Barriers and Opportunities for Enhancing Capital Flows

In the COMCEC Member Countries

3 – COMPLINACE WITH INTERNATIONAL FRAMEWORKS

GOVERNING CAPITAL ACCOUNT LIBERALISATION AMONG

THE COMCEC MEMBER COUNTRIES

While the meaning and understanding of the liberalisation of private capital flows continues to

evolve over time, liberalisation in its most generic sense is widely understood as the

elimination of barriers, direct and indirect, to capital flows. Among the various international

instruments and frameworks aiming to ease restrictions and boost international private

capital flows, three frameworks stand out.

OECD Code of Liberalisation of Capital Movements

The first international framework is the

Code of Liberalisation of Capital Movements

of the

Organisation for Economic Co-operation and Development (OECD). The OECD has historically

played a key role in fostering progressive liberalisation of current and capital account

operations among its members. The concept of liberalisation, as described in the Code, focuses

on the equal treatment of non-resident-owned assets and the removal of restrictions to the

liquidation of all non-resident-owned assets.

Specifically, the Code builds on three key principles:



Standstill

: Subscription to the general undertaking of liberalisation and avoidance

from taking new restrictive measures or introducing more restrictive measures;



Non-discrimination

: Granting the benefit of liberalisation measures to all other

adherents and applying remaining restrictions in a non-discriminatory fashion;



Transparency

: Reporting up-to-date information on barriers to capital movements

and trade in services which might affect the Code’s obligations and the interests of

other adherents.

The framework’s general undertakings are outlined in Article I. According to the Code,

“members shall progressively abolish between one another, in accordance with the provisions

of Article II, restrictions on movements of capital to the extent necessary for effective

economic co-operation.”

This tenet, usually referred to as the “rollback” principle, allows

member countries to achieve liberalisation progressively and cumulatively. The second tenet

is an obligation towards non-discrimination. Countries adhering to the Code are expected to

grant the benefit of open markets to residents of all other member countries alike, without

reciprocity requirements or any other discrimination.

Countries undergoing a process

leading to a special system of regional integration (such as the EU) are partly exempted and

the non-discrimination principle does not need to be extended automatically. The third tenet

aims to ensure that full information is readily available to members.