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SESSION 2: The role of the financial sector in attracting FDI

SESSION 2: The role of the financial sector in attracting FDI . Inna Golodniuk CASE Ukraine CASE Ukraine www.case-ukraine.kiev.ua. www.case-ukraine.kiev.ua. Rudimentary development of the domestic capital markets. Hinders implementation of core policies and reforms Monetary policy

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SESSION 2: The role of the financial sector in attracting FDI

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  1. SESSION 2: The role of the financial sector in attracting FDI Inna Golodniuk CASE Ukraine CASE Ukraine www.case-ukraine.kiev.ua

  2. www.case-ukraine.kiev.ua

  3. Rudimentary development of the domestic capital markets • Hinders implementation of core policies and reforms • Monetary policy • Pension reform • Monetary policy – lack of instrument for OMO, inflation targeting challenged • Pension reform – restriction on investment possibilities for PPFs and insurers www.case-ukraine.kiev.ua

  4. Capital Market Development • Liquidity • Competitiveness • Need for proactive and consistent government • as market participant • as the Regulator www.case-ukraine.kiev.ua

  5. Market Liquidity • Supplying new instruments to the organized market • Privatization through IPOs for most attractive enterprises • Channeling mortgaged backed securities to the market • Free float of stocks of state-owned enterprises (with state ownership) • Government bonds www.case-ukraine.kiev.ua

  6. Liquidity • Abolish limitations regarding exclusive listing at “stock exchanges” • Obsolete regulation of derivatives • Administrative interventions in the commodity markets www.case-ukraine.kiev.ua

  7. Competitiveness • Ukrainian securities are listed on western stock exchanges • Foreign investors cannot or unwilling to penetrate • Joint Stock Law • Overregulated Capital Account www.case-ukraine.kiev.ua

  8. Capital Account Liberalization • Restrictions: numerous, legislative acts of different level, lack of systemic approach • Securities trading (stocks, bonds, instruments of investment funds) • Money market operations • Operations with derivatives • Foreign investments, real estate transactions • Bank credits, guarantees, account opening • Allocation of investment fund asset www.case-ukraine.kiev.ua

  9. Capital Account Liberalization • Double asymmetry: • Outflows are more restricted than inflows • Residents more than non-residents • Ukraine, Belarus and Moldova – CEE remaining capital account restriction areas • Russia and Kazakhstan – liberalization by 2007 www.case-ukraine.kiev.ua

  10. Capital Account Liberalization • Need to coordinate with transition to inflation targeting • Announce clear liberalization sequence and implement it, 2-3 years • Stock market operations, FDIs, investment in real estate – early stage • Money market operations – final stage www.case-ukraine.kiev.ua

  11. Thank you CASE Ukraine www.case-ukraine.kiev.ua 10 Starokyivska Str., Suite 15 04116, Kyiv, Ukraine T/f: (38-044) 483-2614

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