draining development.pdf - Khazar University

344 Draining Development?that is incommensurate with the size and the financing of its domesticeconomy” (Zoromé 2007, 7).He proposes to identify such OFCs by examining the ratio of netfinancial service exports to gross domestic product (GDP) from IMFbalance of payments data and by looking at jurisdictions with especiallyhigh values. 5 In practice, the limited data availability on these flowsmeans that the data search must be supplemented with data interpolatedfrom stock variables using proxy indicators created from data on variablesreflecting crossborder holdings of portfolio investment assets (theIMF Coordinated Portfolio Investment Survey) and international investmentpositions (using data from International Financial Statistics). 6The key difference between the IMF’s existing list and Zoromé’s findingscan be seen by comparing the columns denoted “IMF (2000)” and“Zoromé (2007),” respectively, in table 11A.1. Most of the definitionscoincide (for those jurisdictions for which Zoromé had data), but animportant addition to the latter’s list is the United Kingdom. While thereare some issues with the proxy indicators and the interpolation fromstock to flow data, the approach illustrates clearly the value of usingobjective criteria: a level playing field (including politically uncomfortablefindings) may be more likely to emerge.In keeping with the emphasis on the OFC discourse, Zoromé (2007)relies on the relative intensity of the provision of financial service tononresidents by scaling for jurisdictional GDP. Alternative criteriainclude the following:• Openness to international trade in financial services (that is, takingthe sum of exports and imports as a ratio to GDP, which might capturemore about the role of jurisdictions as conduits)• Net exports of financial services (exports, minus imports as a ratio toGDP), as an indicator of specialization• Netted trade in financial services (the lower of exports and imports,as an indicator only of the extent to which the jurisdiction acts as aconduit)• The absolute contribution to the global provision of financial servicesto nonresidents (that is, each jurisdiction’s provision of financial servicesto nonresidents as a ratio to the total global provision of servicesto nonresidents across all jurisdictions, rather than as a ratio to thejurisdiction’s own GDP)