Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
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4.6. OBSTACLES AND OPPORTUNITIES AMONG THE COMCEC MEMBER
COUNTRIES
Drawing on the discussion of capital flows among the COMCEC members, it is possible to
identify a number of barriers to stronger capital flows among these countries, as well as a
number of opportunities to enhance capital flows among them. These barriers and
opportunities are analysed below in accordance with the World Bank’s classification by
country income groups.
4.6.1. LOW- INCOME CONUNTRIES
Barriers
The barriers that a country faces to enhancing capital flows are related not just to institutions
and policy frameworks, but also to the fundamental characteristics and asset endowment of
that country. In the low-income group of the COMCEC Members, most countries face a number
of challenges in each area. Attracting financial capital flows presents an acute challenge, given
that many of these countries attract rather moderate levels of FDI.
Eleven of the 17 member states in the low-income group are classified by the OECD as fragile
states. The OECD remarks that a fragile state “has weak capacity to carry out basic governance
functions, and lacks the ability to develop mutually constructive relations with society. Fragile
states are also more vulnerable to internal or external shocks such as economic crises or
natural disasters.”67
In addition, only three of the 17 countries in the lower-income group are defined by the IMF as
being resource-rich developing countries (RRDCs) – Chad, Guinea and Niger – suggesting that
the majority of the countries in this group have few assets that are attractive from an investor
perspective and that they are increasingly locked out from international trade.
Despite the fact that several fragile states are making progress in lessening their dependence
on aid by reforming their tax administration and policies, further tax potential remains, in
particular among those endowed with abundant natural resources. The barriers to attracting
capital flows remain plentiful and challenging.
General barriers
 Government controls on capital transactions. Mozambique has implemented capital
controls with the aim of insulating the economy from volatile and potentially
destabilising capital flows; the authorities have not signalled any intention to review
this policy choice in the foreseeable future. Requiring approval for all capital account
transactions may add complexity to these transactions.
67 Fragile states 2013: Resource flows and trends in a developing world”, OECD, 2013.