FACTBOX-Potential capital controls in emerging markets

                                
 May 27 (Reuters) - With Nigeria and Sri Lanka loosening
exchange controls introduced at the height of the financial
crisis and the IMF better funded than ever before, the risk of
emerging economies suddenly blocking capital flight looks to be
fading. 
                                
 For an analysis on the prospect for capital controls, click
here [ID:LR176749]
                                
 Below is an overview of proposed, possible and pre-existing
capital control in major emerging markets in Europe, the Middle
East and Africa. For a factbox on capital controls introduced by
Iceland, Ukraine and Nigeria click here [ID:nLK531669] 
                                
     
                                
 RUSSIA 
                                
 -- Russian Prime Minister Vladimir Putin and central bank
chairman Sergei Ignatyev have both said they opposed the idea of
restoring capital controls [ID:nLC964884] following calls from a
number of officials to do so to support the rouble <RUS=MCX>. 
                                
 -- Russia scrapped capital controls in 2006 as it moved
towards a more open economy and free-floating currency.
Previously, non-residents were required to put money on deposit
at the central bank when buying roubles to nominated securities
while Russian exporters had to change 10 percent of foreign
currency earnings into roubles. 
                                
 -- The abolition of capital controls opened the floodgates
for foreign capital into Russia but the trend was sharply
reversed last year in the aftermath of the Georgia war and
general exodus of funds from emerging markets. Net outflows
reached a record $130 billion last year and another $39 billion
in the first quarter of 2009. 
                                
 -- Russia spent around a third of its reserves, some $200
billion, slowing the rouble depreciation in the face of capital
flight.  It has managed so far to hold the currency above a
floor said in January in a trading band of 26-41 against a
euro-dollar basket. 
                                
 -- Calls for capital controls increased, with proponents
including Russia's top senator Sergei Mironov and head of
railway monopoly and Putin ally Vladimir Yakunin. Such calls
were seen as implicit criticism of Finance Minister Alexei
Kudrin, who says controls were not needed. For an analysis click
here [ID:nL2282148]. 
                                
 --The debate has lost some of its potency in recent weeks,
with the central bank succeeding in putting a lid on rouble
depreciation and the currency firmly on an appreciation path
since early February.   
                                
 -- However, analysts do not rule out further downside
pressure on the rouble and the issue of capital controls
continues to bubble on -- earlier this month the Federal Customs
Service suggested returning to compulsory conversion of
foreign-currency earnings.
                                
     
                                
 KAZAKHSTAN 
                                
 -- Kazakhstan's parliament is reviewing a law streamlining
the procedures for introducing capital controls, giving the
president the rights to impose mandatory foreign exchange sales
by exporters and a ban on foreign exchange transfers and
holdings abroad by both firms and individuals. 
                                
 -- Central bank chairman Grigory Marchenko said on May 15
the bank had no plans to introduce currency controls as there
was no need to support the tenge currency <KZT=> after devaluing
it by 18 percent against the dollar in February. The central
bank and the government linked the devaluation to falling oil
prices and the need to keep exports competitive to Russia, which
had also seen its currency sink. 
                                
 -- Kazakhstan used some currency controls such as mandatory
foreign exchange sales in the 1990s after it devalued its
currency following a similar move by Russia. 
                                
     
                                
    EMERGING EUROPEAN UNION MEMBERS 
                                
    -- Emerging European economies including Hungary, Poland
and Romania, saw their currencies fall sharply during the global
financial crisis, which has itself worsened their financial
situations by making it more difficult for borrowers to repay
foreign currency loans. Currency pegs in the Baltic states also
came under pressure. 
                                
    -- Widespread imposition of capital controls by European
Union countries is seen as unlikely.  The European Commission
treaty allows for capital control measures in exceptional
circumstances and for limited periods subject to surveillance by
the Organisation for Economic Cooperation and Development and
European Union Council. 
                                
    -- Analysts say any imposition of capital controls would
be a setback to countries aiming to join the euro, and any such
steps would be only taken as emergency measures by individual
countries rather than on a region-wide basis. 
                                
     
                                
 SOUTH AFRICA 
                                
 -- South Africa gradually scaled down exchange controls over
the past decade, often dismissing calls for faster moves.
Analysts and the Treasury say these controls helped shield
domestic banks from the worst of the financial crisis by
limiting exposure to toxic assets or struggling international
banks.
                                
 -- The Treasury raised foreign exposure limits for
international investors and banks in February 2008. The Treasury
and central bank have repeatedly stressed that authorities will
not intervene to protect the rand, which lost almost 30 percent
against the dollar last year before recovering almost 10 percent
in 2009. 
                                
 -- The central bank closed its loss-making forward foreign
exchange book in 2004 after accumulating billions of dollars in
losses trying to protect the currency during the late 1990s. 
                                
     
                                
 TURKEY 
                                
 -- Turkey imposes no controls on capital flows, and the
option has not been publicly mentioned or considered by economic
policymakers. Turkey also avoided imposing capital controls
during a financial crisis in 2001.
 
 (Reporting by Reuters bureaus, writing by Peter Apps, editing
by Victoria Main and Andy Bruce)