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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