I don't know much  about national and international capital markets, but I suppose they work on the basis of market dynamics and equilibria that determine returns to capital. The underlying issues must be: (i) Who has the investable capital? (ii) Where did they get it from? And (iii) Where can they get the greatest return.

‘Capital flight’ suggests illegal movements of monies involved; yet this is not necessarily so. The monies involved may be quite clean. So why do the money owners ship it abroad? The simple answers must be that the home market is unfavourable, especially if the money was acquired illegally or illegitimately, or that the money is genuine, but the market offers comparatively unattractive returns.

Social media reports claim a Kenyan public utility executive picked from USD 24,000pa public university lectureship, acquired USD 11.29mn worth of real estate and top-end vehicles during a single five-year tenure. If such are corruption proceeds, then it is reasonable to assume an internal network that has fleeced the utility of multiples of these amounts during the utility’s management musical chairs since the 1990s. Several such managers have been indicted, but cases remain undecided 30 years on, inducing further financial malfeasance. Local banking of such monies raises questions; hence capital flight.

But capital flight also occurs in the corporate sector, where companies simply decide to invest elsewhere. When monetary policies impose caps o  capital movement, then such corporates adopt methods such as transfer pricing between subsidiary and affiliated companies, and over invoicing whereby foreign prices are inflated. These practices enable shipping more money out of the country than is necessary for the official acquisition being undertaken, the surplus being ‘banked’ with an accomplice.

Some of these formal and informal money laundering transfers enable domestic tax evasion, and complicating any central bank’s money regulating role. While developing country money markets are not fully integrated into the global money markets, individual players on the global market are only too glad to receive extra money that strengthens their competitiveness.

The more domestic money markets espouse international money management standards, the more they should control against capital flight. However, domestic money markets cannot sustainably adopt international standards if the rest of the economy is not on board.  National elites legally banking in off shore accounts, attract others to do the same.

Interestingly, capital flight destinations - for flights sake as opposed to business investment, are often very small economies, such as Seychelles (population 100,000) and Mauritius.