Investment Freedom: Investment Capital Flow and Economic Freedom

Investment Freedom

In an economically free country, there would be no constraints on the flow of investment capital. Individuals and firms would be allowed to move their resources into and out of specific activities, both internally and across the country’s borders, without restriction. Such an ideal country would receive a score of 100 on the investment freedom component of the

Index of Economic Freedom

.

In practice, most countries have a variety of restrictions on investment. Some have different rules for foreign and domestic investment; some restrict access to foreign exchange; some impose restrictions on payments, transfers, and capital transactions; in some, certain industries are closed to foreign investment. Labor regulations, corruption, red tape, weak infrastructure, and political and security conditions can also affect the freedom that investors have in a market.

• No national treatment, prescreening

25 points deducted

• Some national treatment, some prescreening

15 points deducted

• Some national treatment or prescreening

5 points deducted

• No transparency and burdensome bureaucracy

20 points deducted

• Inefficient policy implementation and bureaucracy

10 points deducted

• Some investment laws and practices non-transparent

or inefficiently implemented

5 points deducted

• All real estate purchases restricted

15 points deducted

• No foreign purchases of real estate

10 points deducted

• Some restrictions on purchases of real estate

5 points deducted

• Multiple sectors restricted

20 points deducted

• Few sectors restricted

10 points deducted

• One or two sectors restricted

5 points deducted

• Common with no legal recourse

25 points deducted

• Common with some legal recourse

15 points deducted

• Uncommon but occurs

5 points deducted

• No access by foreigners or residents

25 points deducted

• Access available but heavily restricted

15 points deducted

• Access available with few restrictions

5 points deducted

• No repatriation of profits; all transactions require

government approval

25 points deducted

• Inward and outward capital movements require

approval and face some restrictions

15 points deducted

• Most transfers approved with some restrictions

5 points deducted

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