The country's capital is not just material savings, but the key to its long years of prosperity. If the country has enough material resources, this means that they can be directed not only to development, but also used during the crisis. Therefore, a significant outflow of capital is a big problem for any country. The most common reason is the excess of imports over exports and the export of funds due to the unfavorable investment situation in the country. In today's article, we will consider the nature, forms and consequences of the “flight” of capital.
The essence of the concept
The system of economic concepts that characterize modern foreign economic relations between countries remains controversial. There are different approaches to assessing the nature of foreign investment. In general, capital outflow is the transfer of funds from the territory of one state to place them in another country. At the same time, this situation does not include the change of ownership, when the enterprise actually passes into the possession of a foreigner, since in this case the assets remain at home. The new owner continues to pay taxes and provide jobs, that is, his personal capital serves the good of the domestic economy. Similarly, the conversion of money into foreign currency is not included if it remains in the country, regardless of whether it is stored in a bank account or at home in stocking.
The capital of the shadow economy
“Gray” money is a rather significant component of the national economy of many developing countries, including Russia. They accumulate as a result of illegal entrepreneurship and banking, illegal obtaining a loan and illegal actions in case of loss of solvency. Nevertheless, these funds cannot be attributed to the capital of the country, therefore they should not be included in the “flight” of money from the country. In the Russian Federation, they are subject to national and international legislation on countering the legalization of assets obtained by criminal means.
The reasons for the "flight" of capital
There is a fairly wide range of opinions on why cash outflows occur. But most experts consider it unstable economic or political situation, corruption, high taxes.
So, the main reasons that the personal capital of legal entities and individuals goes abroad are the following:
- Adverse economic and investment climate in the country (political instability, small market capacity, ruble devaluation, underdeveloped infrastructure).
- Excessive liberalization imposed by global financial institutions.
- The economic course conducted in the country, which stimulates investments in foreign currency.
- Tax inefficiency.
- Lack of cooperation between the business sector and government.
- Distrust of the population in the banking sector.
- The criminalization of economic activity and the high efficiency of laundering illegal proceeds.
- The risk of depreciation of money and tangible assets.
Types of cash outflows
Money transfer abroad or non-return from there is carried out in various ways. The main ones are the following:
- Investment in foreign banks of funds that were previously held in accounts in the Russian Federation.
- Export of currency on cards and traveler's checks and securities when crossing the border.
- Non-return to the country of profit from economic activity received abroad.
- Use of non-bank transfers.
The practice is that several methods are often used simultaneously. If we separate them from the point of view of legality, then we can distinguish three main groups:
- Legitimate methods. These include the export of currency on cards or the creation of enterprises abroad.
- "Gray" ways. These include non-return of profits from abroad, smuggling of foreign currency, which is not subject to the Criminal Code.
- Illegal ways. These include the actions described in articles 188 and 193 of the Criminal Code.
The negative effect of leaving money abroad
The “flight” of capital is far from a new phenomenon for the Russian economy. The outflow of capital was observed during the Great Troubles, Peter's reforms, serfdom and the socialist revolution. This phenomenon is characteristic of all unstable national economies. Owners seek to protect their commercial interests, so they choose the best conditions for placing funds. The effect of capital flight is reduced to risks in the following areas: economic, political and social. In addition, this leads to an increase in corruption and crime. The main problem is that the negative effect tends to accumulate, and the situation tends to escalate in the future.
Capital export from Russia
The volume of funds that come to the Russian Federation is less than those that leave the country. The official "flight" of capital is carried out in the form of increasing foreign assets by domestic commercial banks, buying foreign shares, as well as currency for sale to the business sector and individuals. This component is easy to calculate and control. Illegal capital outflow is the balance of untranslated export earnings, payment for non-existent imports, as well as money lost in barter operations.
In 2014, according to the Central Bank of Russia, the official figure grew 2.5 times compared to the previous reporting period and amounted to more than 150 billion dollars. USA. At the same time, all preliminary forecasts indicated a lower outflow by at least 20 billion. Experts agree that at such a low oil price, it will be difficult for banks to maintain the necessary reserve volume, and economic problems are structural rather than cyclical.
