China, India and Russia Worst Offenders in Trapping Company Cash -- According to Euromoney's Inaugural Pulse Survey
March 21, 2014 - London, United Kingdom
Treasury professionals of companies with combined annual sales of more than $250 billion have voted China, India and Russia as the worst countries in the world to repatriate company funds from, according to Euromoney's 'trapped cash' pulse survey.
In the first of a series of pulse surveys throughout the year, corporate treasurers and finance directors of international companies across industries voted China the "least efficient" country to repatriate cash from, with India second, Russia third, Argentina fourth and Turkey fifth.
By comparison, the US, Germany and the UK were voted the "most efficient" countries in the survey, which was conducted during February.
India was also ranked top among countries which companies had considered investing in but were dissuaded from doing so by its onerous regulatory and tax regime, with Iran ranked second and the United Arab Emirates and China ranked joint third, according to the pulse survey.
Trapped cash -- money that is legitimately earned overseas, but that is fiendishly tricky to repatriate -- occurs as a result of a number of factors: foreign-exchange controls, capital requirements, restrictions on inter-company lending, and taxation on cross-border flows and dividends paid.
It's an acute problem for companies because it can reduce a company's ability to put cash surpluses in one part of the business to work elsewhere. This can prevent companies from offsetting debt, raising borrowing costs, and could restrict future investment and growth plans.
Trapped cash may be a perennial issue for companies worldwide, but it has become urgent since the 2008 crisis, which elevated the importance of prudent cash and liquidity management for corporate treasurers.
The results reflect some of the longstanding grievances large and mid-sized companies have with doing business in core emerging economies.
While the governments of China, India, Russia and Turkey have made a concerted effort in recent years to ease restrictions on the flow of capital, the results do suggest that greater reform is required to improve a company's ability to repatriate its hard earned cash swiftly and easily.
For more information, please contact Duncan Kerr, Deputy Editor of Euromoney Magazine at firstname.lastname@example.org.
Euromoney is the leading international banking and finance magazine, providing authoritative global coverage of corporate and investment banking, private banking, capital markets, derivatives and treasury.
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