Capital restrictions and the cash flow challenge

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Capital restrictions that prevent the movement of locally denominated currencies abroad are a challenge for corporate treasurers in many emerging markets.

India, Bangladesh, Sri Lanka and Vietnam have the strictest restrictions currency movements in Asia, while countries like China, the Philippines, Thailand, Korea, Indonesia, Malaysia, and Taiwan are semi-restricted.

In India, for example, overseas remittances are actually based on an import payment; and in Taiwan, the regulator sets a limit per entity and each payment must be verified on a terminal by the regulator to advise the position against that limit.

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Sandip Patil, Citi

Sandip Patil, Citi

“In countries where exchange control regulations restrict cross-border movement of funds, there are a number of repatriation strategies that can be adopted,” says Sandip Patil, head of cash management services for the Asia region. -Pacific and responsible for sales for financial institutions, treasury and business solutions at Citi.

“Examples include intercompany loans, dividend payments, transfer of management fees to a parent company, royalty payments from subsidiaries, prepayment of invoices on planned future exports, authorized capital repatriations and changes in transfer pricing to optimize key cash performance indicators. ”

According to

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