‘Trapped cash’, or more precisely, cash that cannot be transferred from a country due to capital or currency controls, is not a new problem for treasurers. It’s also not a problem that is going away. Cash sitting securely in an account or investment that is generating a return, in a currency that is quietly appreciating, may not cause treasurers too much of a headache. However, this is rarely the reality in locations where trapped cash is an issue, typically ‘emerging’ markets, such as in parts of Asia, on which this article is focused. In writing this article, I am delighted to introduce Ann Lin Khoo, Asia Pacific Head of Market Management – Liquidity Structures, Treasury and Trade Solutions at Citi, and Shi Wei Ong, Head of Cash Liquidity Management Products at Standard Chartered Bank.
A worsening situation?
Although trapped cash has been going up the list of treasury priorities over the past two years or so, Shi Wei Ong, Standard Chartered explains that the regulatory fundamentals that result in trapped cash remain largely unchanged,
“Trapped cash has been a long-standing issue in parts of Asia, and while there may be regulatory changes that deepen the challenge in individual countries in the short term, in the longer term this issue is not going away. Countries that have been liberal in the past, such as Australia and Singapore, are likely to remain as such, while cash will continue to be trapped in countries such as Vietnam, Sri Lanka and India. Similarly, we don’t expect to see any fundamental change in semi-regulated countries, such as Malaysia and Indonesia, where foreign currency can be moved cross-border but local currency is retained in-country.”