Barriers and Opportunities for Enhancing Capital Flows
In the COMCEC Member Countries
73
communication lines; foreign investors’ equity stakes in media companies are limited
to 20%, and in domestic and international air transportation services, to 49%. 77
 Limited development of equity markets. Among many countries in the upper-middle
income group, a barrier to increased capital flows is the limited development of the
equity markets. Some markets, such as the Beirut Stock Exchange, are characterised by
a narrow range of securities, limited liquidity, and low market capitalisation. In
Lebanon, this situation reflects, at least in part, high levels of private sector lending,
which in turn are a function of buoyant bank deposit levels. 78
 Business perceptions of the stock market. Perceptions of the stock market in
business may hold back its development. In many cases, businesses are concerned
about the costs and reporting requirements associated with a public listing; they also
worry about the disclosure and transparency that is a requirement of a public listing.
Not least, company owners worry about losing control if they take their business to
market.
Opportunities
General opportunities
 Technocratic government and skilled human resource capacity. A number of UMICs
have technocratic governments that have undertaken a series of structural reforms
with the aim of developing a competitive economy led by the private sector. Public
financial management reforms, banking regulation reforms and market liberalisation
all create new opportunities for private investment. In Malaysia, following reforms, the
financial services industry is now viewed as an important engine of economic growth.
Opportunities relating to financial stability and institutional capacity
 Transparency is relatively high. A number of countries within the upper-middle
income group can bolster investor confidence with high levels of transparency. In a
ranking of transparency based on regulatory and legal measures in 97 places, Malaysia
is ranked 22nd while Turkey is ranked 34th. This is ahead of peers in their own group,
and ahead of the highest ranked HICs, Dubai (46th) and Abu Dhabi (59th).79
 Shelter from currency risk. The COMCEC Member Countries in the upper-middle
income group have opportunities to provide investors with a degree of shelter from
currency risk. For one thing, currencies in these countries tend to be stable, liquid and
freely convertible – in some cases the Gulf currencies are pegged to the US dollar; and
77 “Doing business in Kazakhstan: reach, relevance and reliability”, Deloitte, 2013.
78 Interview with Chief Economist, Banque Audi, September 11th 2013
79 Jones Lang LaSalle Global Transparency Index, available at: