Restrictions on foreign access to capital bond markets

Many obstacles remain to the flotation of foreign bonds by developing countries on national capital markets. These include: ingrained market imperfections, restrictions on institutional portfolios, legal balance of payments difficulties, and low credit ratings for many developing countries.

Bond issues on international capital markets were once the main channel for foreign private investment. They are now much less important than direct investment, and even than export credits. The annual flow of gross savings in industrialized countries is very large compared to the current external requirements of developing countries, so that it is not a question of capital availability but of policy. Policy may dictate such discriminatory measures as prior permission needed to enter bonds by one or more regulatory agencies; excessive disclosure of information requirements; timing limitations on bond issues, and higher taxes or lower tax exemptions on foreign bond interests.