The export of capital is its outflow from the country, with further functioning abroad. This process is objective in nature, the main purpose of the export is to get the highest possible profit outside the borders of your own country.
Capital migration has a positive effect on the development of the global economy. As a result, this leads to equalization of the welfare of all countries participating in the process. If capital is exported from one country to another, where there is a cheaper labor force, a favorable investment climate and inexpensive raw materials, then both countries win, both the one from which the money is exported and the one into which it is imported.
Why is this happening?
The main reason for the export of capital from a country is its excess in a particular state. In fact, there is no balance between supply and demand for capital. This does not mean that the outflow of capital all the time occurs in one direction. World trends are such that more and more countries are joining the process. Loan, portfolio and direct investments are imported and exported. Often there is a simultaneous process, one businessman is importing capital into the country, and the other is exporting.
But this is not the only reason for the export of capital; the following factors lead to such a process:
- the opportunity to take monopolizing positions in the country where capital is adopted;
- in the recipient country, cheap labor and raw materials;
- stable situation within the state;
- minimum requirements for environmental standards of industrial activity;
- preferential taxation and a favorable investment climate.
The term favorable investment climate is understood to mean the optimal conditions for the economy within the country, and it doesn’t matter if it is a boom or bust, stagnation. The concept includes provisions in the credit and financial, and in the foreign exchange industry, the conditions of the customs regime, the amount of taxes and the attitude of the state to foreign investment.
The essence of migration
No matter how developed the country is, no one can provide a complete production cycle and its improvement within the framework of one state. It is the global exchange of goods and other factors of production activity that allows to achieve maximum results.
Initially, the export of capital is a component of international trade. Then, industrial expansion began in less developed countries, including colonial countries. Today, even a colonial country can act as an exporter and importer of capital. There is even an advance in the growth rate of capital exports over the growth of commodity exports. This factor is fundamental to the globalization of the global economy.
Conditional market division
The global financial market is divided into:
- Money market. The process of buying and selling financial assets is designed to satisfy the short-term need of market participants. World transactions can be in the form of the sale of securities or currency, the issuance of loans and borrowings, speculative transactions.
- The capital market is long-term projects that are implemented within a period of 12 months. Participants in this market can be any persons, private, state bodies, banks and other financial institutions.
Withdrawal forms
Economic theory distinguishes two forms of capital migration:
|
Characteristics |
Forms of capital export |
|
|
Loan |
Entrepreneurial |
|
|
The form |
Bank deposits, international loans and foreign assistance |
Direct and portfolio investments |
|
Where to invest |
Capital is exported through the placement of bonds or the provision of direct loans to any field of activity |
Investments are made in agricultural, industrial, commercial and financial institutions. The investor himself can invest in his own branch in another country |
|
Ownership |
The ownership of capital remains with the creditor, but the right to dispose of it is assigned to the recipient |
The ability to maintain ownership of the exported capital |
|
Process control |
The level of income is quite predictable, due to fixed rates at the stage of signing a transaction |
The ability to control the process of using investment |
|
Income |
Interest income |
The main goal - making a profit |
Sources of origin
The export of capital abroad is classified by its sources of origin at:
- official or state;
- private, that is, non-state.
State capital is the funds allocated from the budget of the country. It may be exported solely by decision of the government or intergovernmental agencies. Investments are presented in the form of loans and borrowings, possibly in the form of foreign aid.
Private capital is funds held by banking institutions and private companies. The movement of capital is based on the decision of the owners of these organizations. However, the transfer of such investments is controlled and the process can be regulated by the government of the country from which the export is made.
Classification by purpose of export
International export of capital is divided into direct and portfolio investments.
Direct investments are real investments in the economy of the recipient country. Most often, export takes place in the form of opening a branch abroad, or acquiring a controlling stake in a foreign company.
Portfolio investments are purely financial transactions; capital investments are made through the acquisition of securities. After the acquisition of securities, the investor loses control rights over them.
Capital withdrawal methods
The export of capital is migration according to legal and illegal schemes. The latter scheme involves circumventing all international and national legal norms. There is also an intra-company method in which capital migrates within the framework of one company to branches located in different parts of the world.
Causes of capital flight from Russia
Naturally, the main reason for the withdrawal of capital from our country is an attempt to save their money from high taxes in the country. This process negatively affects the general economic situation in the state and does not fall under government regulation.
Stable outflow began to be observed in 1994. Only in 2006-2007 there was a decline in the export of capital, but in 2008 a new round began.
However, not only burdensome taxation and inflation is the reason for the export of capital:
- this is instability at the macroeconomic level, that is, businessmen have no confidence in the future;
- owners of companies are completely not interested in developing their own companies; they are only interested in the size of profit;
- there is no confidence in the domestic banking system, both among businessmen and ordinary citizens of the country;
- there are no protective mechanisms of property rights at the state level, that is, there is no guarantee that business will not be taken away tomorrow.
In turn, our businessmen have completely opened offshore zones, banking operations in these countries are practically not regulated, and bank secrets have been kept secure.
How is capital exported from the Russian Federation?
Since the collapse of the USSR, many schemes have been invented, some of them are still valid.
The most popular way is an imaginary deal. From the country exported goods made in China, but under a well-known brand. The difference in cost remains outside the country. It is almost impossible to prove the imaginary deal. Most often, such transactions are conducted through offshore companies. It is a mistake to think that it is offshore companies that are the ultimate recipients of capital, they only provide intermediary services.
Banking structures withdraw capital in almost the same way, providing them to a foreign company, which subsequently refuses to return. The bank may also raise interest rates. The imaginary nature of such transactions is practically impossible to prove.
Some people don’t even strain, they just take out cash. Declaring amounts of up to 10 thousand in foreign currency is not even required.
Tolling operations also allow the successful import and export of capital. The scheme seems completely "clean", one side gets the opportunity to load its production capacity, the other side receives goods with low cost. In fact, there is a redistribution of profit.
