International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
These centers contribute to the economic development of the host
country in the following ways.
1. The offshore banking units can raise foreign currency loans and bonds
for the host country at reasonable interest rates, due to their connections
with well known international banks These foreign currency funds can be
lent to the host countries or invested in onshore projects or even projects
in a third country. Indirectly, the host country gains better access to
international capital markets.
2. The functional offshore centers contributes to the foreign exchange
income of the host country through local operating expenditures, such as
rent paid on leased property, salary paid to local staff, and license
fees/taxes recovered from the offshore units.
3. The presence of functional units speeds up the communication and
transport network in the host country, which helps to upgrade local skills
and technology and constitutes productive assets to the host country.
4. The onshore banking industry in the host country is compelled to
improve its efficiency and skills in order to retain its competitive edge.
5. The local staff employed at the centre develops sophisticated
international banking skills and this pool of highly trained personnel can
be brought in to the host country to attain a faster growth level.
Once an offshore centre consistently offers an attractive package of
incentives, the above benefits will accrue to the host county, which will be
able to induce more and more reputed foreign banks to set up banking units
in its territory.
ROLE OF OFFSHORE BANKS AND INVESTMENTS
In today’s highly integrated global network international Offshore Financial
Centers (OFCs) have come to play a vital role in facilitating investment
worldwide. An offshore centre exists for comfort and convenience. OFCs
are jurisdictions where offshore banks are exempted from a wide range of
regulations, which are normally imposed on onshore institutions. Specially,
deposits are not subject to statutory reserve requirements. Bank transactions
are mostly exempted from tax or treated under a favourable fiscal regime
and they are free of interst and exchange control restrictions. In many cases,
offshore banks are exempted from regulatory scrutiny with effect to liquidity
or capital adequacy.
An important activity in OFCs is offshore banking, which is the cross border
intermediation of funds and provisions of services by banks residing in
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