Management of Capital Flows: Comparative Experiences and Implications for Africa
Total Page:16
File Type:pdf, Size:1020Kb
UNITED NATIONS CONFERENCE ON TRADE AND DEVELOPMENT Management of Capital Flows: Comparative experiences and implications for Africa UNITED NATIONS New York and Geneva, April 2003 Note The views expressed in this book are those of the authors and do not necessarily reflect the views of the UNCTAD secretariat. The designations employed and the presentation of the material do not imply the expression of any opinion whatsoever on the part of the Secretariat of the United Nations concerning the legal status of any country, territory, city or area, or of its authorities, or concerning the delimitation of its frontiers or boundaries. * ** Material in this publication may be freely quoted; acknowledgement, however, is requested (including reference to the document number). It would be appreciated if a copy of the publication containing the quotation were sent to the Publications Assistant, Macroeconomic and Development Policies Branch, Division on Globalization and Development Strategies, UNCTAD, Palais des Nations, CH-1211 Geneva 10. UNCTAD/GDS/MDPB/2003/1 UNITED NATIONS PUBLICATION Sales No. E.03.II.D.20 ISBN 92-1-112594-4 Copyright © United Nations, 2003 All rights reserved iii Acknowledgements This volume contains seven papers that were presented at a workshop on management of capital flows, organized jointly by the UNCTAD secretariat and the Government of Egypt in Cairo on 20–21 March 2001. The authors of these papers, whom we wish to thank for their time and efforts, extensively revised and updated their research papers in the light of the discussions held at the workshop. We would like to express our appreciation to the Government of Egypt for hosting this event and to the Government of Japan for its financial assistance through project RAF/97/A28, without which the workshop and the research presented in this volume would not have been possible. Active participation in the workshop by officials from Egypt and the following African countries enriched the discussions: Algeria, Cameroon, Côte d’Ivore, Ethiopia, Gabon, Ghana, Kenya, the Libyan Arab Jamahiriya, Morocco, Mozambique, Nigeria, Senegal, South Africa, Tunisia, Uganda, the United Republic of Tanzania, Zambia and Zimbabwe. Contributions to the discussions at the workshop were also made by officials from the United Nations Development Programme (UNDP), the Economic Commission for Africa (ECA) and the International Monetary Fund (IMF). This project was directed by Yilmaz Akyüz, Director, Division on Globalization and Development Strategies, UNCTAD, and managed by Shigehisa C. Kasahara. Kamran Kousari, UNCTAD’s Special Coordinator for Africa, was closely involved in all aspects of the project. Heather Wicks provided logistical and secretarial support in preparation for, and organization of, the workshop. Praveen Bhalla edited the final text and Petra Hoffmann was responsible for its layout and overall presentation. The cover was designed by Diego Oyarzun-Reyes. v List of contributors • Xavier Cirera, Fellow at the Institute of Development Studies, University of Sussex, United Kingdom • Wei Ge, Professor, Economics Department, Bucknell University, Lewisburg, United States • Ricardo Gottschalk, Fellow at the Institute of Development Studies and Programme Director, University of Sussex, United Kingdom • Stephany Griffith-Jones, Professorial Fellow at the Institute of Development Studies, University of Sussex, United Kingdom • Chon Pyo Lee, Professor, School of Economics, Seoul National University, Republic of Korea • Francis M. Mwega, Professor, African Economic Research Consortium, Nairobi, Kenya • Léonce Ndikumana, Associate Professor, Economics Department, University of Massachusetts, United States • Indira Rajaraman, Professor, Department of Economics, National Institute of Public Finance and Policy, New Delhi, India • Delphin G. Rwegasira, Executive Director, African Economic Research Consortium, Nairobi, Kenya • Ajit Singh, Professor, Economics Department, University of Cambridge, United Kingdom • Alaka Singh, PhD. Student, University of Cambridge, United Kingdom • Bruce Weisse, PhD. Student, University of Cambridge, United Kingdom vii Contents Abbreviations............................................................................................ xiii Introduction and summary ...................................................................... xvii CORPORATE GOVERNANCE, COMPETITION, THE NEW INTERNATIONAL FINANCIAL ARCHITECTURE AND LARGE CORPORATIONS IN EMERGING MARKETS Ajit Singh, Alaka Singh and Bruce Weisse I. Introduction ......................................................................................... 1 II. The Asian financial crisis and corporate governance ......................... 4 III. The new international financial architecture and corporate governance .......................................................................... 7 IV. Corporate governance in emerging markets: the facts ..................... 10 A. Patterns of share ownership and control of large corporations in developed and emerging markets ........................................... 10 B. Crony capitalism ......................................................................... 16 V. The theoretical foundations of the OECD/World Bank proposals on corporate governance .................................................. 18 A. The LLSV thesis ......................................................................... 18 B. The Berglof and von Thadden critique ....................................... 21 C. The Glen, Lee and Singh analysis .............................................. 22 VI. Corporate governance and corporate finance in emerging markets: the 1980s versus the 1990s ............................................................... 24 A. Corporate finance, the stock market and corporate governance ... 31 B. Corporate governance and takeovers.......................................... 33 C. Developing country corporations and high gearing ................... 36 VII. Conglomerates and economic efficiency .......................................... 38 A. Empirical evidence ..................................................................... 41 B. Policy issues: chaebol reform in the Republic of Korea ............ 43 VIII. Competition and corporate governance: theoretical issues .............. 47 viii IX. Product-market competition in emerging markets ........................... 48 X. Developing countries, the World Trade Organization and competition policy ............................................................................ 54 XI. Summary and conclusions ................................................................ 58 Appendix ..................................................................................................... 65 Notes ..................................................................................................... 66 References.................................................................................................... 67 THE OECD EXPERIENCE WITH CAPITAL ACCOUNT LIBERALIZATION Stephany Griffith-Jones, Ricardo Gottschalk and Xavier Cirera I. Introduction ....................................................................................... 71 II. The Code of Liberalization of Capital Movements: historical background and instruments ............................................. 73 III. Evolution of the OECD Code and patterns of liberalization among the OECD member countries ................................................ 75 IV. Use of derogation and reservations................................................... 83 A. Analysis of derogation in the Code ............................................ 83 B. Analysis of reservations in the Code .......................................... 85 V. Experiences of selected countries with capital account liberalization: a comparative analysis............................................... 91 A. Spain ........................................................................................... 91 B. The Czech Republic, Mexico and the Republic of Korea .......... 93 C. Lessons........................................................................................ 96 VI. Conclusion......................................................................................... 97 Annex tables .............................................................................................. 100 Notes ................................................................................................... 105 References.................................................................................................. 106 MANAGEMENT OF THE CAPITAL ACCOUNT: A STUDY OF INDIA AND MALAYSIA Indira Rajaraman I. Introduction ..................................................................................... 109 A. India and Malaysia .................................................................... 109 B. The issues .................................................................................. 113 C. Outline of the paper .................................................................. 116 ix II. India................................................................................................. 116 A. Introduction ............................................................................... 116 B. The balance of payments: an overview .................................... 118 C. Invisibles in the current account ............................................... 121 D. Capital inflows .........................................................................