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Ukraine's financial wealth in the offshore countries and offshore capital of the banking system

S. Shumska

Economy and Forecasting, 2016, issue 4, 25-47

Abstract: The article focuses on the fairly large amount of financial wealth of the countries with different levels of economic development extracted to the offshores, which is a result of the growing trend of increasing the role of offshore in the global economy. Given the presence of a national shortage of developmental resources, author emphasizes the importance of evaluating the amount of the extracted to the offshores financial wealth for the developing countries. The offshore financial capitals are considered in the context of lost or presently unexploited potential for a country's development, which, with favorable conditions and mechanisms created by the national policy, could become a resource for development in the medium and long term. The article presents expert estimates of the amounts of illicit financial flows from Ukraine and offshore financial wealth of the developing and CIS countries. The author notes that, with the growing trend of capital flight from Ukraine to the offshores, part of it returns to the country in the form of loans and foreign direct investment. Analysis of the dynamics of the structure of direct investments in individual countries shows the role of offshore investment in supporting business development in Ukraine. Author summarizes the main factors supporting the development of offshore activities worldwide and singles out the factors that encourage the growth of the offshore sector of domestic economy. Given the benefits and costs of offshore companies, the article highlights the thesis that, in modern conditions of globalization, the objective need in offshores will remain, as shown by the experts' predictions of the increase in the global offshore private wealth by 2020. The article presents author's assessment of the dynamics of the offshore part of capital in Ukraine's banking system in 2012-2016 as a share in its total authorized capital. Calculations made in two versions based on the analysis of the NBU's available official information about the bank owners and data presented on the banks' websites, taking into account the current official list of offshore countries and financial centers by the IMF and OECD. Presented a geographical distribution of the offshore ties of Ukrainian banks. Author emphasizes the risks and the need to strengthen regulation of the offshore activities, gives the main guidelines of international anti-offshore policies and describes Ukraine's first steps in this field.

Date: 2016
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