The liberalisation of capital outflows in CIBS: what opportunities for other developing countries?

This paper examines the implications of the liberalization of capital outflows in China,
India, Brazil, and South Africa (CIBS) for other developing countries. It focuses on their
prospects of attracting not only foreign direct investment (FDI), but also portfolio capital
flows from CIBS. To inform the discussion, two steps are taken: first, in order to identify
the type of capital flows that might come from CIBS, the paper briefly describes capital
account liberalization measures undertaken by CIBS to date and future intended
liberalization. Second, it maps geographic distribution of outward FDI and foreign portfolio
investment in the recent past, which are taken as possible predictors of future flows. The
paper shows that portfolio investment goes mainly to OECD countries and offshore
financial centres, and only a small share to developing countries. But, within developing
countries, CIBS’ neighbouring countries have shown a greater ability to attract this type of
investment, compared with other developing countries.

Published as a WIDER working paper, 2008.