Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
50
Some features of Bangladesh’s securities markets set it apart from other countries such as the
current rules governing the pricing of initial public offerings (IPOs) - the lottery method of
share allocation of oversubscribed IPOs is in contrast to the widespread practice of allocating
shares on a pro rata basis. This has the potential to dampen the appetite of institutional
investors to participate in the country’s securities markets.
Mozambique
According to Mozambique’s Law on Foreign Exchange, all capital account transactions must
have prior approval from the central bank. Under current regulations, these controls are
permanent. In line with this, Mozambique has yet to adhere to international frameworks on
capital liberalisation and has further room for alignment with the requirements of such
standards. In general terms, however, capital movements do receive authorisation and are not
subject to discriminatory taxes.
In its 2012 Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), the
IMF notes that Mozambique has controls in place for all types of capital account transactions
that are tracked. Mozambique also has specific provisions in place for institutional investors,
commercial banks and other credit institutions. However, the AREAER defines capital controls
in their broadest sense, meaning it reports that a majority of countries – even OECD members
– as controlling at least some capital transactions.
Benchmarked against the OECD’s Code of Liberalisation of Capital Movements, Mozambique’s
regulations have the potential to slow long-term and short-term capital flows. There is
openness with regard to FDI, however. As highlighted by the World Bank’s Investing Across
Borders indicators, most economic sectors in Mozambique are fully open to foreign investors –
in contrast to many of its peers. Nevertheless, although Mozambique’s regulation of capital
flows is transparent, the central bank maintains discretionary powers in its assessment of
applications.
In the current context, it appears that there is much scope for Mozambique to adhere to the
OECD Code. For now, Mozambique has implemented capital controls with the aim of insulating
the economy from volatile and potentially destabilising capital flows, and the authorities have
not signalled any intention to move away from this in the short term.
3.1.2. LOWER-MIDDLE INCOME COUNTRIES
Indonesia
At Indonesia’s latest Article IV consultation with the IMF, in September 2013, the Fund praised
the government for the passage of legislation that created the Financial Services Authority
(OJK) and the accompanying plan to transfer supervision of capital markets to the new
organisation.