Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
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radio and TV broadcasting, transport, education and electricity generation and distribution.
The Commission does not, however, make any criticisms related to movements of financial
capital, such as portfolio investments.
Policy pays off: how the introduction of pragmatic policies put Turkey at the top of the
table
Insofar as Turkey’s experience in attracting capital flows represents the achievement of a
policy goal, two factors which merit highlighting are:
--Policy-makers’ understanding of the importance of attracting foreign investment, setting
aside considerations of nationalism or sovereignty, and empathising with the interests of
the investor. Foreign investors are almost always treated equally with domestic investors in
Turkey, under the same laws, and without any discrimination. International arbitration is
accepted. In 2001, a harsh IMF belt-tightening programme was preferred over external debt
default or restructuring. Despite the volatility of the lira, capital controls have not been
considered since they were liberalised in 1989.
While foreign investments have sometimes faced legal difficulties, and problems may persist
in areas such as work permits, there have also been many cases of favourable treatment. In
some respects, such as taxation of securities earnings, conditions for foreign investors are
arguably more attractive than for local investors. Policy-makers have sought to facilitate
foreign investments because they are convinced that they are good for their own economy.
--The professionalism and competence of government bodies with responsibilities in areas
related to capital movements. By and large, areas such as public debt management, bank and
utilities regulation, capital markets regulation and general business law and regulations
have been the reserve of qualified technocrats, both in terms of day-to-day implementation
and in terms of the development of policies, laws, regulations and institutions.
With respect to capital markets, for example, this has made it possible to overhaul the
Capital Markets Law and to establish the Borsa Istanbul, its technology agreement with
NASDAQ OMX, and its ongoing effort to encourage entrepreneurs to list their companies on
the stock exchange, and to introduce various innovations in trading.
3.1.4. HIGH-INCOME COUNTRIES
Bahrain
With respect to international standards on capital account liberalisation, Bahrain can be
considered to be setting something of a benchmark for the other countries in this World Bank
income group and beyond. Given its relatively low level of natural resources compared with its
high-income and GCC peers, Bahrain has long had to adopt more innovative policies to support