Inter Press Service » Trade & Investment News and Views from the Global South Sat, 30 Apr 2016 22:04:27 +0000 en-US hourly 1 World Farmers’ Organisation Meeting Eyes New Markets, Fresh Investment Fri, 29 Apr 2016 13:52:52 +0000 Friday Phiri 0 Opinion: Increasing Productivity Key to Revive Growth and Support Sustainable Development in Asia and the Pacific Thu, 28 Apr 2016 12:37:28 +0000 Shamshad Akhtar The author is an Under-Secretary-General of the United Nations and Executive Secretary of ESCAP. She has been the UN’s Sherpa for the G20 and previously served as Governor of the Central Bank of Pakistan and Vice President of the MENA Region of the World Bank. The full Economic and Social Survey of Asia and the Pacific 2016 may be downloaded free of charge at]]> Shamshad Akhtar

Shamshad Akhtar

By Shamshad Akhtar
BANGKOK, Thailand , Apr 28 2016 (IPS)

The Asia-Pacific region’s successful achievement of the 2030 Agenda for Sustainable Development needs to be driven by broad-based productivity gains and rebalancing of economies towards domestic and regional demand. This is the main message of the Economic and Social Survey of Asia and the Pacific 2016, published today by the Economic and Social Commission for Asia and the Pacific. Such a strategy will not only underpin the revival of robust and resilient economic growth, but also improve the quality of growth by making it more inclusive and sustainable.

How should Asia-Pacific policymakers go about implementing such a strategy? Approaches by developing Asia-Pacific economies that are tilted more towards reliance on export-led economic recovery will be ineffective under the current circumstances. Despite extraordinary measures, global aggregate demand remains weak and China’s economic expansion is moderating. The impact of further loosening of monetary policy is also likely to remain muted, and is not advisable. The key reason is a confluence of macroeconomic risks that are clouding the economic outlook, such as low commodity prices affecting resource-dependent economies, volatility in exchange rates, as well as growing private household and corporate debt, the impact of which is likely to be complicated by the ambiguous path of interest rate increases to be pursued by the United States.

The contribution of export-led economic growth to overall development of economies, supported by low interest rates and rising private debt, seems to have plateaued, with economic growth in developing Asia-Pacific economies in 2016 and 2017 forecast to marginally increase to 4.8% and 5% respectively from an estimated 4.6% in 2015. This is considerably below the average of 9.4% in the pre-crisis period of 2005-2007.

Along with the economic slowdown, progress in poverty reduction is slowing, inequalities are rising and prospects of decent employment are weakening. At the same time, rapid urbanization and a rising middle class are posing complex economic, social, and environmental and governance challenges. Such conditions can undermine the significant development successes of the region in recent decades, making it more difficult to deal with the unfinished development agenda, such as lifting 639 million people out of poverty. Had inequality not increased, approximately 200 million more people could have been lifted out of poverty in the three most populous countries of the region alone.

To overcome these challenges, revive the region’s economic dynamism and effectively pursue the 2030 Agenda, policymakers are advised to use all available policy levers, including countercyclical fiscal policy and supportive social protection measures, which critically calls for raising domestic resources. Such interventions would not only support domestic demand but also strengthen the foundations for future productivity-led growth by targeting areas such as: labour quality, including knowledge, skills, and health of the workforce; innovation through trade, investment and R&D; adequate infrastructure in transport, energy and ICT; and access to finance, especially by SMEs.

Fiscal measures, underpinning such initiatives, should be accompanied by sustained reforms towards efficient and fair tax systems which deliver the necessary revenues for the required investment in sustainable development

Sustained increases in domestic demand will also require steady growth in real wages. This requires linking labour productivity more closely to wage levels. Strengthening the enabling environment for collective bargaining is one necessary component in the policy arsenal of governments, with the enforcement of minimum wages as another important policy tool.

After increasing significantly over the last few decades, productivity growth has declined in recent years. This is worrying not only because wage growth has lagged behind productivity growth, but also because wage growth ultimately depends on productivity growth. Specifically, compared to the period 2000-2007, annual growth of total factor productivity has declined by more than 65% in developing countries of the region, averaging only 0.96% per year between 2008 and 2014; labour productivity growth has declined by 30%, reaching just 3.9% in 2013.

The recently-adopted Sustainable Development Goals provide an entry point to strengthen productivity. For instance, raising agricultural productivity and thus lifting rural households income must be the center of the focus to end poverty (Goal 1), to end hunger and achieve food security (Goal 2). This is because agriculture accounts for one in four workers in the region and more than half of the region’s people live in rural areas. Efforts to eradicate poverty and increase agricultural productivity would also foster development of the rural sector and encourage industrialization (Goal 9).

Higher levels of productivity in agriculture will also free-up labour, which would be available to work in the non-agricultural sector. It is therefore imperative to consider a broader development strategy that moves towards full and productive employment (Goal 8) to accommodate the “agricultural push” of labour. This will require mechanisms to provide, particularly those with low skills, access to quality education and lifelong learning (Goal 4).The need to provide quality education cannot be overemphasized in view of the skills bias of modern technology, which reduces the pace of absorption of unskilled labour released from the agricultural sector.

Thus, whereas the Goals will contribute to strengthening productivity, importantly, strengthening productivity will also contribute to the success of a number of the Goals, creating a virtuous cycle between sustainable development, productivity and economic growth.


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The Hypocrisy of the West and Fiscal Paradise Wed, 27 Apr 2016 15:17:35 +0000 Roberto Savio Roberto Savio, is founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News]]>

Roberto Savio, is founder and president emeritus of the Inter Press Service (IPS) news agency and publisher of Other News

By Roberto Savio
ROME, Apr 27 2016 (IPS)

The publication of the Panama Papers has now been digested, like any scandal, after just a few days. We are now getting so accustomed to scandals, that it is confusing, and the general public reaction often is: all are corrupt and politics is all about corruption.

Roberto Savio

Roberto Savio

This, of course, plays out well for the right wing, xenophobic parties, numbers of which are ever increasing in every election, from Donald Trump in the United States, to Nigel Farage in Great Britain who promptly asked for the resignation of British prime minister David Cameron, who is among the users of the legal office of Mossack and Fonseca in Panama, which has helped more than 14.000 clients to create 214,488 companies in 21 fiscal paradises.

In some cases, like Iceland, that brought the prime minister to his knees, is a concrete response to the public indignation. By and large the general reaction was similar to the model of Cameron’s style: deny any wrongdoing, and just wait for the fury to go die down.

The Panama Papers had of course a very prominent space in the media, where the issue was alive for several days (but never more than five). The media put very little effort into looking beyond the Panama Papers and to find out the real situation of the fiscal paradise. Had they done so, a very uncomfortable truth would have emerged: the same countries who speak publicly against such paradise, do very little to eliminate them.

For instance, according to the Panama papers, it emerges that more than half of the ghost companies created by Mossack-Fonseca were registered in the British Virgin Islands. It works there like in Panama: a company pays a fee to register and an annual fee after that (always less than 500 US dollars), and by law the company will have to pay taxes only on the activities realized in the country. It suffices to not have any commercial activity in Panama or in any other fiscal paradise to be completely out of the grip of local tax authorities.

It is clear that the Virgin Islands are a British territory, like the Bahamas, Bermuda, Turk and Caicos, and therefore London could oblige these territories to comply with the international laws on transparency and accountability. The Panama Papers are just, “one firm in one place” says the economist Gabriel Zucman, author of “The Hidden Wealth of Nations: The Scourge of Tax Havens.” So, it cannot be representative of what is happening in the whole world”. The total amount of registered firms avoiding taxation is not really known. In fact, Zucman estimates that the tax heavens are now sheltering a staggering 7.6 trillion dollars, or 8% of the world’s financial wealth. And he draws attention to the fact that the United Sates is a major fiscal paradise, just after Switzerland and Hong Kong, according to the Financial Secrecy Index published by the Tax Justice Network, based in Washington.

And here comes a very good example of double standards. After it became evident that Swiss banks were hiding American capital (for which the US Treasury hit them with a heavy fine), in 2010 the US passed the Foreign Account Tax Compliance Act, which requires all financial firms in the world to surrender details about Americans with offshore accounts. But the US has refused to be part of any agreement for exchanging financial information with other countries.

Edward Kleinbar and Heather A. Lowe, of Global Financial Integrity, say that American Banks are awash with money coming from foreign investors. Kleibard, who was chief of staff of the Congress’s Joint Committee on taxation, declares: “ the United Sates demands that the rest of the world tell it when an American holds an account at a foreign institution, but the US does not return the favour by providing similar information on foreign investors, in US banks to their home jurisdiction”.

But in fact, the secrecy of American banks go beyond that. In fact, several states in the US use their constitutional privileges to shelter their banks also from the central government. Heather A. Lowe, the legal counsel and director of government affairs for Global Financial Integrity, Washington, warned that the problem was in any American state, not just in the more notorious one. ”You can create anonymous companies anywhere in the US: The reason people know about Delaware, Nevada and Wyoming is because those states market themselves internationally”.

For instance, Delaware secretary of State has stressed in his annual reports that this marketing efforts have “helped the state to reach thousands of legal professionals in dozens of countries across the globe, to tell the Delaware story”. And Nevada boasted a similar advertisement on the state’s website: Why incorporate in Nevada? Minimal reporting and disclosing requirement. Stockholders are not public records”.

While the legitimacy of taxes as a concept may be up to personal interpretation, what matters in Hillary Clinton’s use of the so-called Delaware loophole, in particular, is her constant harping on the need for corporations and elite individuals to pay their fair share. In other words, Clinton’s employment of North Orange Street amounts to a telling, Do As I Say, Not As I Do. And, as the Guardian notes, both of “the leading candidates for president – Hillary Clinton and Donald Trump – have companies registered at 1209 North Orange, and have refused to explain why.”

John Cassara, a former special agent for the US Treasury Department, reported in the New York Times on April 8where many of the declarations are coming from, about the frustration that fiscal agents have when they try to investigate “who or what is behind that company: you basically strike out. It does not matter if is the FBI, at the federal level, state or local. Even the Department of Justice can’t get the information. There is nothing you can do.” He had to abandon an investigation in Nevada when they found a corporation that had received more than 3700 suspicious wire transfers, totalling over 381 million dollars.

Clearly, one cannot set up rules for global governance, when important rich countries have double standards and cannot even put their own house in order. But the lack of global governance becomes even more evident, when we find out that the debate about global tax negotiations is exclusive to the 34 members of the Organization for Economic Cooperation and Development (OECD), and all the other countries of the world are left out. The Group of 77 and China, which has 134 members, has repeatedly asked that the UN must play a greater role in global tax cooperation but to no avail.

And it is a fact that in the list of account holders in Panama there is a large presence of personalities from Arab Countries, China, Nigeria, Brazil and so on. But there is a cultural problem, for which there is no solution. The fiscal authorities of the OECD countries think that on delicate matters, it is better to exclude the developing countries, because it would create a mechanism of negotiations where they could find themselves in the minority. That of course, would be to recognize that global governance can only be effective with a democratic system of consultation and decision. That is not at all the prevailing mood in an increasingly fractured world. Therefore, it would be normal to expect many more scandals, with spotlight for a few days on the names that could emerge, followed by a total relapse, until the next scandal explodes.

How long this can last without damaging the foundations of democracy, it is difficult to predict. And some defenders of the present system are already maintaining that scandals are proof that democracy is alive. But if the citizen’s growing lack of trust in the political and economic elites continues, it is difficult to see how scandals will help nurture democracy.


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G-77 Should Adopt South-South Climate Change Program of Action: Ambassador Djoghlaf Tue, 26 Apr 2016 18:53:36 +0000 Lyndal Rowlands The beauty of the Paris agreement is that it’s a universal agreement, unlike the Kyoto protocol, said Ambassador Djoghlaf. Credit: Ahmed Djoghlaf.

The beauty of the Paris agreement is that it’s a universal agreement, unlike the Kyoto protocol, said Ambassador Djoghlaf. Credit: Ahmed Djoghlaf.

By Lyndal Rowlands

The 134 members of the Group of 77 and China (G-77) made their mark on the Paris Climate Change Agreement and should now adopt a program of action to implement it, Ambassador Ahmed Djoghlaf told IPS in a recent interview.

Djoghlaf, of Algeria, was co-chair of the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP), together with Daniel Reifsnyder, of the United States, a position which allowed him to “witness very closely” the negotiation of the Paris Agreement.

“As the co-chair of the preparatory committee I can tell you that the G-77 has been a major actor during the  negotiation and a major player for the success of the Paris conference,” said Djoghlaf.

Djoghlaf said that the Group of 77 and China made its mark on the Paris agreement by mobilising a diverse range of countries and sub-groups, to “defend the collective interests of the developing countries.”

The group helped to find balance in the agreement “between mitigation issues that are important for developed countries and adaptation issues that are very close to the heart of the developing countries,” said Djoghlaf.

He also said that the group fought for equity, response measures, loss and damage as well as means of implementation, including financing, capacity building and transfer of technology.

“Those that are suffering the most nowadays are those that have less contributed to climate change crisis and they are using their own limited financial resources to address them, to adapt, to adjust to the consequences created by others,” he said.

Program of Action in Marrakech

“I hope that the G-77 through the leadership of Thailand will be able to take the lead and submit to its partners at the next conference of the parties in Marrakech a draft work program on capacity building for the implementation of the Paris agreement,” said Djoghlaf.

The 22nd meeting of the Conference of Parties (COP22) to the UN Framework Convention on Climate Change (UNFCCC) will be held in Marrakech, Morocco, from 7 to 18 Nov. 2016.

Djoghlaf said the program should address North-South as well as South-South capacity building, which is needed to ensure that developing countries can implement their commitments including on issues related to the finalisation of their nationally determined contributions and preparation of their future contributions.

“It would be important for the developing countries to be able to identify their own capacity building needs and let others do it for them. It will be also important to have a framework to coordinate the South-South cooperation on climate change similar to the Caracas Plan of Action on South-South Cooperation or the Buenos Aires Plan of Action on economic and technical cooperation among developing countries,” he said.

Quoting Victor Hugo Djoghlaf said that “not a single army in the world can stop an idea whose time has come, I do believe when it comes to South-South cooperation on climate change it’s an idea whose time has come also.”

“Within the G-77, the diverse group, you have emerging countries that are now leaders in renewable energy and the energy of tomorrow and the they have I think a responsibility to share their experience and to allow other countries from the same region and the same group to benefit from their experience,” he said.

"It is crystal clear that the Paris agreement will enter into force well before the original expected date of 2020. The clock is ticking and we cannot afford any delay” -- Ambassador Ahmed Djoghlaf

“I also believe that time has come for the G-77 to initiate it’s own program of action on climate change,” he said.

Djoghlaf said that developing countries need capacity building to ensure that they can continue to participate fully in the implementation of the Paris Climate Change Agreement.

Unlike developed countries, which “have fully-fledged ministries dealing with climate change,” he said, “In the South there is not a single country that has a Minister of Climate Change.”

He spoke about how during the negotiations of the Paris agreement many countries of the South had only one focal point and yet sometimes there were 15 meetings taking place at the same time and the meetings also often continued into the night.

It can be difficult for this focal point “to be able to understand and to participate, let alone be heard” when there is a “proliferation of simultaneous meetings,” he said.

Djoghlaf said that countries of the South could help address this disparity by establishing national committees, which include representatives from a number of different ministries.

“There’s not a single sector of activities which is not nowadays affected by the negative impact of climate change,” said Djoghlaf.

“All the sectors need to be engaged and we will succeed to win the battle of climate change when all these ministers, economic ministers and social ministers, will be fully integrating climate change in their planning and in their decision making processes,” he said.

Djoghlaf acknowledged it’s not easy for ministers in developing countries to engage because they have other urgent priorities. “They tend not to see the importance of the impact of climate change because they believe that this is not a priority for them,” he said. Yet there is often evidence that supports a more cross-cutting approach. For example, said Djoghlaf, World Health Organization research, which shows that 7 million people die from air pollution every year, demonstrates that climate change should also be a priority for health ministries.

The beauty of the Paris agreement

Djoghlaf said that the beauty of the Paris agreement is that it’s a universal agreement, unlike the Kyoto protocol. The Paris agreement is “very balanced” and should last for years to come because it takes into in to consideration the evolving capacities and the evolving responsibilities of countries, he said.

“We need a North-South and a South-South global climate solidarity,” said Djoghlaf.

“Without judging the past, who is responsible now, and who is responsible tomorrow, and who is responsible yesterday, I think we are all in the same boat, we are all in the same planet and we have to contribute based on our capacity,” he said.

He described the success of the signing ceremony held here Friday, where in total 175 countries signed and 15 countries deposited their instruments of ratification as “unprecedented”. “This has never happened before,” he said, referring to the developing countries, which also ratified the agreement. “It is a resounding political message and a demonstration of leadership,” he said. “It is crystal clear that the Paris agreement will enter into force well before the original expected date of 2020. The clock is ticking and we cannot afford any delay.”

Djoghlaf also said that he was not concerned about upcoming changes to the United States domestic political situation.

“When you are a party to the Paris agreement you can’t withdraw before three years after its entry into force. In addition I do believe that this historical agreement is in the long term interest of all Parties including the United States of America” he said.

“I believe that this Paris agreement is in the long term strategic interests of every country,” in part because eventually fossil fuel energy is going to disappear.

Investment in renewable energy was six times higher in 2015 than in 2014, he added.

“We tend to ignore the tremendous impact and signal the Paris agreement has already been providing to the business community,” he said.

Another part of the Paris agreement which Djoghlaf is happy about is what he describes as a “fully-fledged article on public awareness and education.”

“It’s to ensure that each and every citizen of the world, in particular the developing countries, are fully aware about the consequences of the climate change and the need for each of us as an individual to make our contribution to address the climate change,” he said.

“There is a need also to educate the people of the world of the need to have a sustainable lifestyle this throw away society can not continue to exist forever and we need to establish a sustainable pattern of production and consumption,” said Djoghlaf.

However Djoghlaf, who was the Executive Secretary of the Convention on Biological Diversity, said that he was concerned that the negotiations in 2015 didn’t adequately reflect the importance of ecosystems and biodiversity.

“Healthy biodiversity and healthy ecosystems have a major role to play to combat climate change,” said Djoghlaf, adding that 30 percent of carbon dioxide is absorbed by forests and 30 percent by oceans.

“For each breath that we have we owe it to the forests, but also to the ocean, also wetlands have a major contribution to make, the peat lands have a major contribution to make, the land itself, the fertile soil of course has a major contribution to play, so biodiversity is part and parcel of the climate global response,” he said.

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Boosting the Future of the Food Movement Sun, 24 Apr 2016 18:11:06 +0000 Fabíola Ortiz Investing in entrepreneurs will help make the food system more sustainable. Credit: Busani Bafana/IPS

Investing in entrepreneurs will help make the food system more sustainable. Credit: Busani Bafana/IPS

By Fabíola Ortiz
WASHINGTON, Apr 24 2016 (IPS)

Investing in new entrepreneurs who bring a holistic approach to food sustainability is one way that the food movement can overcome mounting global challenges from environmental degradation to food waste.

“I grow food, I feed people, body and minds. We must look at the food system at large,” Washington told IPS during the recent Food Tank Summit.

Karen Washington, is a 62 year old community activist who co-foundered the movement Black Urban GrowersAfter decades of working as a physical therapist in the Bronx, New York City, she decided to become a food entrepreneur advocating low-income communities to have inclusive access of to fresh, healthy food and a fair market.

“I am active, it is not about talk, it is easy for people to talk, you can look at my hands, I also talk but I farm as well.”

Washington is a member of a community garden in the Bronx and also grows collectively in a three acre piece of land in Chester, New York. She grows vegetables and flowers selling to local markets and restaurants.

As a health care professional Washington saw her patients having problems with their diet and, ultimately, with their health.

“They were developing diet related diseases like type two diabetes, hypertension and obesity. And all of this had to do with the food they were eating. I looked at my patients holistically and saw they were eating the wrong thing”.

An holistic approach to food systems must also address the racial divide in the production and consumption of food.

The face of agriculture in the United States is a white male farmer. As a matter of comparison, New York state has 55,000 white farmers but only 150 are black. “If you look at some states there are no black farmers, so we felt that this was something we had to bring out and expose, racism that continues to persist in the food system,” said Washington.

“We needed to have our own stories and seek for a black leadership on agriculture. There was no place like it, where black young people could see black leadership in action or have a conversation that affected black neighbourhoods, and also to find out we could get together and look at solutions,” she said.

Activists, entrepreneurs and food experts agree there is an urgent need to reinvent the cycle of food, empowering local based solutions and intersecting with economics, education, health, environment and, of course, “the four letter word ‘race’ that no one talks about”, said Washington. “We have to look to those intersections and move the full system in the right direction”.

Supporting entrepreneurs like Washington is one way that the food system can become more sustainable, experts at the two-day summit agreed.

“We have to create a new alliance of people wanting to ensure sustainability for the present generation and also guarantee the future generations can meet their demands and needs,” Alexander Muller, leader of the United Nations Environment Programme (UNEP) hosted project TEEB for Agriculture & Food (TEEBAgriFood), told IPS during the summit.

“If we look at the whole cycle, we see we cannot guarantee that the future generations can feed themselves and, therefore, we have to act,” said Muller.

Around one billion people suffer from hunger worldwide, and more than two billion have food related health problems like diabetes and obesity. The global food system also relies on increasingly fragile resources. The world is losing 24 billion tons of fertile soils a year because of erosion and the food system is currently losing about 70 percent of all water withdrawn from natural cycles.

“Waiting would only increase the problems. We already see that major agriculture production systems are at risk. We need to know the true price of our food and have clear signals on the markets that sustainable food in the long-run is cheaper than unsustainable food,” said Müller.

The summit featured more than 75 speakers from the food and agriculture fields – such as researchers, farmers, chefs, policymakers, government officials, and students – that came together to discuss on topics including food waste, urban agriculture, family farmers, and farm workers.

They agreed that supporting sustainable agriculture is a a matter of urgency. The food movement is at the beginning of transforming a complex system with multiple actors, the time is now, warned Danielle Nieremberg Founder and President of Food Tank, a research organization dedicated to cultivating individuals and organizations to push for a better food system.

“A lot of innovations that farmers are using in the fields cover a great potential to be scaled up,” Nieremberg told IPS. “We have things like climate change conflicts, and we really need to move forward if we are going to make changes and leave this planet in good enough conditions for future generations,” she said.

For Jason Clay, the senior vice president of Food & Markets at WWF, there is a need to increase efficiency and change the way we value food.

“If we can reduce and eliminate waste, that would be half of the new food we need to produce by 2050. We have to double food production by that year. It also means 10 percent of the greenhouse gas (GHG) emissions and more than 20 percent of water used to produce food that is going to be wasted,” Clay told IPS.

Clay said that bringing efficiency, conscious consumption and infrastructure to food distribution, especially in developing countries, are relevant strategies to help enhance the food cycle.

“Governments should also be investing in rehabilitating land rather than subsidising business as usual. This is an opportunity to do better,” said Clay.

For Clay and also for Muller, it is important to ensure that the positive signals from the food movements are growing faster than the negative signals of destroying the environment.

The attention on food and linking the act of eating to sustainability are the key issues. Without changing the food systems this planet will not become sustainable and the way society produces food cuts across the new Sustainable Development Goals (SDGs) agreed September 2015 at UN headquarters.

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Panorama of Perfidy in the Panama Papers Sat, 23 Apr 2016 06:47:31 +0000 Mohammad Badrul Ahsan panama_papers_0__

By Mohammad Badrul Ahsan
Apr 23 2016 (The Daily Star, Bangladesh)

Ever since the Panama Papers hit the fan, the leak has been working like a series of introductions at a high-profile gathering. It’s putting a bunch of names to a bunch of faces, men and women leading a double life because of their money. It also shows that these folks have something in common with the squirrels. The rodents hide their nuts, and they hide their assets.

Don’t forget that the squirrel hoarding has a purpose for it. The animals collect and store nuts so that they will have food to last through the winter. But their thriftiness has social benefits. The nuts they bury result in trees growing in many new places.

What’s the purpose of hiding money? The simple truth is that anything that can’t be revealed is concealed. And two things are simultaneously concealed when it comes to money. Money and its source are like fire and smoke. If one is visible, the other can’t vanish.

Thus the overriding purpose of creating the shadow network of shell companies and tax havens is to create a conduit for dirty money. Offshore banking, as it appears now, is a huge Mephistophelean enterprise to provide forward linkage to kleptocracy. Capitalism needs it to accommodate greed for the same reason nuclear plants look for disposal sites to dump radioactive waste.

But it’s shocking to see how the world has been shocked by the scandal. Politicians were stealing. Dealers were dealing. Wheelers were wheeling. Banks were billing. And all that time those who know knew already that all of those things were happening. Yet the reaction of the world has been as if it was expected that all these seismic waves shouldn’t have shaken the ground.

Whether capitalism invented hypocrisy or hypocrisy invented capitalism calls for a separate discussion. But these two wheels balance the bi-cycle of modern life relentlessly pedaling itself to create more wealth. And if the president of this country and the prime minister of that country have been caught with their hands in the cookie jar, it only confirms how a runaway system has been running.

It belies the basic principle of double entry bookkeeping. Take the example of the billions of taka that evaporated in this country after stock market manipulation, bank swindling and other forms of embezzlement. While we know how much has been debited, who knows where all that money has been credited? Who knows how much of that missing money has washed up on which shores?

Not to say the Panama Papers can track that missing money for us, but the scandal should shake us out of our pretentious slumber. Some of the stolen money exists around us, flaunted in the lifestyle of crooks and thieves hiding behind their fabulous masks. That flaunting has a hierarchy of its own starting with the baseline perps. Office clerks, police constables and linemen for various utility services like to have their palms greased in their quest for a solvent life.

Then it gradually goes up the totem pole of greed, climbing from necessity to luxury like mercury does in barometer. At the top of the pecking order are those who aren’t satisfied with extravagance alone. They want to steal enough to guarantee the same high life for their future generations.

Thus Panama, the Cayman Islands, the Virgin Islands and similar destinations are sanctuaries for sick money like leper colonies are for lepers. These are the places where capitalism hides its excesses outside national boundaries devoted to the care of dubious money like orphanages are to illegitimate children. These are the exotic places where toxic money takes vacation to get away from the monotony of scrutiny and suspicion at home.

In the ultimate analysis though, these tax havens are boutique shops compared to department stores for financial irregularities. How about those countries which, on the whole, are allowing foreign citizens to invest money in their economies and buy second homes? What about the Swiss banks which until recently refused to divulge the names of people who kept black money in their accounts? What about other places like Beirut, the Bahamas, Uruguay and Lichtenstein, which have taken the Swiss model to heart? Even in the United States, places like Delaware and Nevada have loose regulations and low taxes so that people can hide their activities and assets behind a corporate façade.

The Panama Papers are going to do no more than summer cleaning. It will prepare the ground for new names, new law firms and new destinations for newly stolen money, perhaps to precipitate another scandal umpteen years later. The wave of indignations triggered by the scandal is keeping us busy upstream, while nothing changes at source.

Capitalism and hypocrisy are intimately built on each other. That relationship persists because we’re hopelessly reluctant to tell the face from the façade.

The writer is the Editor of weekly First News and an opinion writer for The Daily Star.

This story was originally published by The Daily Star, Bangladesh

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Opinion: Panama, Secrecy and Tax Havens Fri, 22 Apr 2016 14:12:15 +0000 Jomo Kwame Sundaram Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007. ]]>

Jomo Kwame Sundaram was United Nations Assistant Secretary-General for Economic Development, and received the Wassily Leontief Prize for Advancing the Frontiers of Economic Thought in 2007.

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Apr 22 2016 (IPS)

Unlike Wikileaks’ exposes, the recent Panama revelations were quite selective, targeted, edited and carefully managed. Most observers attribute this to the political agendas of its mainly American funders. Nevertheless, the revelations have highlighted some problems associated with illicit financial flows, as well as tax evasion and avoidance, including the role of enabling governments, legislation, legal and accounting firms as well as shell companies.

Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

The political tremors generated by the edited release of 1.1 million documents were swift. Nobody expected Iceland’s prime minister to resign in less than 48 hours, or that the British prime minister would publicly admit that he had benefited from the hidden wealth earned from an opaque offshore company of his late father.

Panama Papers
The Panama documents are from the law firm Mossack Fonseca, which has worked with some of the world’s biggest banks — including HSBC, Société Générale, Credit Suisse, UBS and Commerzbank — to set up 210,000 legal entities, often to circumvent tax and law enforcement authorities worldwide. Just one law firm in Panama is still the tip of a massive iceberg hidden from public view as many such firms in other locations provide similar services.
High net-worth individuals and corporations thus secure a far greater ability to evade taxes by paying tax advisers, lawyers and accountants. Not surprisingly, Mossack Fonseca insists it has never been accused or charged in connection with criminal wrongdoing, only underscoring that Panama’s financial regulators, police, judiciary and political system are part of the system. Similarly, many clients of such firms claim that they have not violated national and international regulations.

‘Offshore’ Tax Havens
Total global wealth was estimated by a 2012 Tax Justice Network (TJN) USA report at US$231 trillion in mid-2011, roughly 3.5 times global GDP of US$65 trillion in 2011. It conservatively estimated that US$21 to US$32 trillion of hidden and stolen wealth has been stashed secretly, ‘virtually tax-free’, in more than 80 secret jurisdictions, with two thirds in the European Union, and a third in UK-linked sites.

After the Panama Papers leak, Oxfam revealed that the top 50 US companies have stashed US$1.38 trillion offshore to minimize US tax exposure. The 50 companies are estimated to have earned some US$4 trillion in profits across the world between 2008 and 2014, but have only paid 26.5 per cent of that in US tax.
More so now than ever before, the term ‘offshore’ for tax havens refers less to physical locations than to virtual ones, often involving “networks of legal and quasi-legal entities and arrangements”. Private banking ‘money managers’ provide all needed services to facilitate such practices, making fortunes for themselves in doing so. Thousands of shell banks and insurers, 3.5 million paper companies, more than half the world’s registered commercial ships over 100 tons, and tens of thousands of ‘shell’ subsidiaries of giant global banks, accounting firms and various other companies operate from such locations.

Reforming Tax Havens?

In recent years, the global tax-haven landscape has shifted under increased public scrutiny. The OECD (Organization of Economic Cooperation and Development) club of rich nations has been developing a global transparency initiative but Panama is refusing to participate seriously, with the OECD tax chief calling it a jurisdiction “that welcomes crooks and money launderers”.
To get on the OECD’s list of approved jurisdictions, almost 100 countries and other jurisdictions have imposed minimal disclosure requirements. Hence, subject to certain conditions, the Swiss government allows information-sharing about illegal or unauthorized deposits with other countries. Consequently, the flows have moved to new destinations.

Panama, US exceptions
Only a handful of nations have declined to sign on. After all, many countries and institutions actively enable—and profit handsomely from—the theft of massive funds from developing countries. The most prominent is the US. Rothschild, the centuries-old European financial institution, is now moving the fortunes of wealthy foreign clients out of offshore havens subject to the new international disclosure requirements, to Rothschild-run trusts in Nevada, which are exempt. As Panama is another, a large number of accounts have been moving there as well from other signatory tax havens.

The US does not accept a lot of international standards, and can get away with it because of its economic and political clout, but is probably the only country that can continue to do that. To its own advantage, the US has taken steps to keep track of American assets abroad, but not of foreign assets in the US. In his 5 April speech, following the US Treasury’s crackdown on corporate tax ‘inversions’, US President Obama criticized ‘poorly designed’ laws for allowing illicit money transfers worldwide, and noted that “Tax avoidance is a big, global problem…a lot of it is legal, but that’s exactly the problem”.

Following the Panama revelations, most Western government leaders have pledged tough action against tax evasion and avoidance, especially from developing country locations. But since they receive most of the funds in the tax havens in the world, the OECD has limited its efforts. Hence, these same governments have blocked efforts to give the UN a stronger mandate to advance international cooperation on taxation. Meanwhile, as major users of such facilities, many developing country leaders have been conspicuously silent in the face of recent revelations of what they have long enabled and practiced.

What Can Be Done?
Does it really matter that tax avoidance schemes are legal? Just because they are not illegal does not mean it is not a form of abuse, cheating and corruption. To tackle the corruption at the heart of the global financial system, tax havens need to be shut down, not reformed. ‘On-shoring’ such funds, without prohibiting legitimate investments abroad, will ensure that future investment income will be subject to tax.

If not compromised by influential interests benefiting from such flows, responsible governments should support international tax cooperation efforts under UN auspices and enact policies to:
• Detect and deter cross-border tax evasion;
• Improve transparency of transnational corporations;
• Curtail trade mis-invoicing;
• Strengthen anti-money laundering laws and enforcement; and
• Eliminate anonymous shell companies.


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OPINION: Breaking the Grip of Rimbunan Hijau over Papua New Guinea Wed, 20 Apr 2016 16:35:26 +0000 Frederic Mousseau Frederic Mousseau, Policy Director of the Oakland Institute. ]]>

Frederic Mousseau, Policy Director of the Oakland Institute.

By Frederic Mousseau
OAKLAND, Apr 20 2016 (IPS)

James Sze Yuan Lau and Ivan Su Chiu Lu must be extremely busy men. Together, they are listed as directors of some 30 companies involved in various activities and services related to logging or agribusiness in Papua New Guinea (PNG). The former is the managing director of Rimbunan Hijau (RH) PNG and son-in-law of RH’s founder Tiong Hiew King; the latter is executive director of RH PNG Ltd.. All but two of these 30 companies have the same registered address at 479 Kennedy Road, in the national capital, Port Moresby–the headquarter of the RH group in the country.

Frederic Mousseau

Frederic Mousseau

Their ability to magically fit into a relatively small office space on Kennedy Road is not the only puzzling fact about the subsidiaries of the Malaysian group, Rimbunan Hijau. Out of the 30 above mentioned companies, 16 subsidiaries that are directly involved in logging or agribusiness have one other thing in common. According to their financial records , they don’t make a profit. Most of them have been working at a loss for over a decade. During the 12 years for which financial records were available to the Oakland Institute’s researchers, all together, the subsidiaries declared an average loss of about US$ 9 million every year.

How the group – the largest logging operator in PNG – manages to operate at a loss for so many years, and yet still remains in business? If it were unprofitable to log and export timber from PNG, why would these companies continue their operations? These are some of the critical questions raised in a report released in February 2016, The Great Timber Heist: The Logging Industry in Papua New Guinea, by the Oakland Institute. The report exposed massive tax evasion and financial misreporting by foreign logging companies, allegedly resulting in non-payment of hundreds of millions of dollars in taxes.

Recovering tax revenue would be certainly welcomed by PNG given the acute budget crisis the country has been facing in recent months. Yet, it is unclear whether the government of PNG will decide to take action following these revelations. After all, despite the promises made by the Prime Minister, still no action has been taken two and a half years after the damning report on recent land leases, produced by the Commission of Inquiry (CoI), which identified all sorts of malpractices and irregularities and concluded that most leases were illegal.

A first step for any government would be to start monitoring the declared sale prices of exported timber. PNG prices are much lower than those of other exporters of tropical timber (nearly 50% cheaper in 2014), which suggests that logging companies undervalue their exports and therefore their profits. But the recent statements by the Forest Minister in denial of the findings of the report, and given the well-documented deficiencies of the PNG Forest Authority, there is little hope of decisive action by this agency.

Another level of action is the enforcement of tax compliance by the Internal Revenue Commission (IRC), the government agency in charge of tax collection. However, although many RH companies are conveniently located at the same address, it may prove difficult for tax auditors to ascertain the extent of their wrongdoings. The Group has been built as a complex and opaque financial structure: almost all RH holding companies–the parent companies of those operating in PNG–are located in tax havens, primarily the British Virgin Islands, known for facilitating illicit financial flows.

Moreover, the use of multiple subsidiaries in logging operations makes auditing even more complex to conduct. For instance, in one single project in West Pomio, Gilford Ltd.’s records indicate financial transactions with 16 other RH subsidiary companies. This interrelation facilitates transfer pricing as companies of the same group can charge each other an artificially high price for goods, equipment, and services, thereby increasing the sister company’s operational expenses, and artificially reducing their profits. This interrelation would require investigators to not just focus on individual logging companies but to extend their audits to the larger RH Group. But who would they go after?

RH is controlled by Tiong Hiew King, one of Malaysia’s richest men. Although logging is the core business of the group – ‘Rimbunan Hijau’ ironically means ‘forever green’ in Malay, his empire covers a multitude of sectors, and all continents from fisheries in New Zealand, timber in Siberia, to Chinese speaking newspapers in California. RH’s grip over PNG goes far beyond the forests, as it is present across all sectors of the economy. The company’s most recent investment in the capital Port Moresby is a project known as Vision City, which contains the largest shopping mall in the Pacific Islands region and is expected to be expanded to include an office tower block, service apartments, a hotel and convention centre. It also owns the National, the largest of the two daily newspapers in PNG, an airline, Tropicair, as well as shipping and logistics companies.

Whereas the group appears as PNG’s superpower, citizens are left powerless. As documented in 2013 Oakland Institute’s report and film, logging in PNG hides a multilayered tragedy of daylight robbery, whereby local communities are being deprived of their resources and their rights, with the complicity of their own government. RH has often been accused in the past of connections within the political elite in the country and of involvement in corruption and violence in relation to its logging operations. In a number of occasions, local police forces have been used to intimidate and arrest local landowners opposed to logging and land grabbing by RH subsidiaries.

A single corporate group, RH, thus materializes the betrayal of the unique constitutional protections that PNG citizens are supposed to enjoy. The 1975 Constitution guaranteed people’s land rights and upheld national sovereignty, self-reliance, and the preservation of natural resources as key principles for the country. It called on the State “to control major enterprises engaged in the exploitation of natural resources.” Ironically, today a major enterprise has turned the statement around and appears to be controlling the state and the country’s natural resources. Will Papua New Guineans eventually decide to put the things back in place?


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Opinion: The Empire’s New Clothes? Conjuring Growth from the TPP Tue, 19 Apr 2016 09:50:13 +0000 Jomo Kwame Sundaram Jomo was an Assistant Secretary-General responsible for analysis of economics and development in the United Nations system during 2005-2015, and received the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought. ]]>

Jomo was an Assistant Secretary-General responsible for analysis of economics and development in the United Nations system during 2005-2015, and received the 2007 Wassily Leontief Prize for Advancing the Frontiers of Economic Thought.

By Jomo Kwame Sundaram
KUALA LUMPUR, Malaysia, Apr 19 2016 (IPS)

While the main US motivation for the Trans Pacific Partnership (TPP) has been to counter China’s influence in the region, it has also been used to undermine the Doha ‘Development’ Round of trade negotiations to better advance politically influential US corporate interests. Hence, it has become all the more necessary to legitimize the TPP in terms of its ostensible benefits. Touted as a ‘gold standard’ 21st century trade deal, it is nonetheless necessary to ascertain what gains can really be expected and whether these exceed its costs.

Jomo Kwame Sundaram. Credit: FAO

Jomo Kwame Sundaram. Credit: FAO

Modest trade gains

The only US government study of the TPP’s likely impacts found very modest growth gains from tariff reductions of only 0.1% over a decade. In fact, all studies so far project negligible direct economic growth gains from TPP trade liberalization.

Instead, the Peterson Institute of International Economics (PIIE) has provided the fig-leaf for the empire’s new clothes with far more inflated projections of supposed gains. In 2012, it projected growth of 0.4% after a decade. In January, the PIIE came up with greater gains from the TPP by claiming more, albeit still modest growth gains from trade, at 0.5% after 15 years. Incredibly, using the same PIIE study, the World Bank’s January 2016 Global Monitoring Report managed to more than double the same study’s growth gains to 1.1%!

If it used more conventional methods for estimating gains from trade, the benefits would have been much more modest, as in the US government study. The PIIE studies claim greater growth gains due to ‘non-trade measures’ (NTMs) and related foreign investment surges.

Cost-benefit analysis?

This is justified by the presumption that the TPP will place all participating countries in the top 10 percent of the World Bank’s Doing Business ranking, despite ambiguous evidence of such effects. The 2012 study arbitrarily assumed that every dollar of FDI within the TPP bloc would generate additional annual income of 33 cents, divided equally between source and host countries, without any theory, modelling procedure or empirical bases for these suppositions.

Provisions allowing foreign investors to sue governments in private tribunals, or those undermining national bank regulation, become trade-promoting cost reductions, ignoring the costs and risks of bypassing national regulations and taxation. The huge gains claimed have little, if any, analytical bases in economics, evidence or experience.

To make the case for the TPP, the PIIE understates costs and risks, while exaggerating benefits. Very diverse TPP provisions were fed into the trade model as simple cost reductions, with little consideration of downside risks and costs. Although such costs and risks are not seriously considered, the projections are nonetheless presented as cost-benefit evaluations.

By understating crucial costs, and exaggerating projected benefits, net gains are overstated. For example, provisions to strengthen, broaden and extend intellectual property rights (IPRs) become simple cost reductions that will increase the trade in services. Such analysis ignores impacts on consumers or on governments subsidizing the prices of medicines to patients.

Paltry benefits

Thus, the PIIE and World Bank studies greatly overstate benefits from the TPP. Tariff-related trade benefits are the only quantifiable benefits consistent with economic theory and evidence, but make up a very small share of the projected gains. Many benefits involve one-time gains, and do not raise the economies’ annual growth rates. Also, these gains need to be compared against the costs ignored by the study as well as the actual details of the final deal.

Even unadjusted, the gains are small relative to the GDPs of TPP partner economies. But even these gains are still modest, and need to be revised downwards as many assumptions made for these projections are not in the final deal. While projected trade benefits will take time, not least because of the TPPA provisions, the major risks and costs will be more immediate.

Also, any impact of the TPP on workers’ incomes is excluded by assuming that all economies operate constantly with full employment while income distribution, trade and fiscal balances remain fixed over time. If the paltry gains from the TPP mainly go to a few big businesses, with the losses borne by others — workers, consumers or tax payers — the TPP would worsen inequality.

Our own study — using a Keynesian macroeconomic policy model, more realistic specifications and the PIIE’s 2012 trade projections — found more modest growth, net job losses, greater pressure on wages, declining labour shares of income and greater income inequality.

Net gain or loss?

The TPP goes much further to redefine the role of government than necessary to facilitate trade. TPP ‘disciplines’ will significantly constrain the policy space needed for governments to accelerate economic development and to protect the public interest. The dubious larger benefits projected by TPP advocates make it all the more critical to consider the nature and scale of costs and risksignored by available modelling exercises. The TPP will impose direct costs, e.g. by extending patents and by blocking generic production and imports.

The TPP’s investor state dispute settlement (ISDS) provisions will enable foreign investors to sue a government in an offshore tribunal if they claim that new policy or regulations reduce expected future profits, even if such regulations are in the public interest. As foreign investors are already well protected by other available means, ISDS provisions are completely unnecessary.

Even advocates of free trade and trade liberalization have criticized inclusion of such non-trade provisions in free trade agreements. Instead of being the regional free trade agreement it is often portrayed as, the TPP seems to be “a managed trade regime that puts corporate interests first”.

Thus, the TPP, offering very modest quantifiable benefits from trade liberalization at best, is really the thin edge of a wedge which will undermine the public interest in favour of powerful corporate interests. Net gains for all in TPP countries are a myth. Only a full, careful and proper accounting based on the full text can determine who benefits and who loses.


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Developing countries left out of global tax decisions Tue, 19 Apr 2016 06:02:44 +0000 Lyndal Rowlands Global tax rules mean companies pay taxes where their headquarters are located not in the countries where they operate. Credit: Thembi Mutch/IPS

Global tax rules mean companies pay taxes where their headquarters are located not in the countries where they operate. Credit: Thembi Mutch/IPS

By Lyndal Rowlands
Apr 19 2016 (IPS)

Over one hundred developing countries continue to be left out of global tax cooperation negotiations despite leaks such as the Panama papers showing the high cost of tax avoidance.

“Rich countries (get) together in a closed room and decide on what they call global tax rules,” Tove Maria Ryding a civil society representative on the Financing for Development (FfD) Group told journalists here Monday.

The current process which is coordinated by the 34 member Organisation for Economic Cooperation and Development (OECD) is “extremely undemocratic,” said Ryding, who is also tax justice coordinator at the European Network on Debt and Development (Eurodad).

The Group of 77 and China, which represents 134 UN member states has “repeatedly called” for the UN to have a greater role in global tax cooperation. It argues that this would “(strengthen) international cooperation in tax matters,” and “allow all member States, including developing countries, to have an equal say on issues related to tax matters.”

However this proposal was rejected at the UN’s important 2015 summit on Financing for Development leaving the OECD with continued control over global tax matters.

Ryding says that the rules which continue to be written by the OECD disadvantage developing countries. For example, she said, when a company operates in more than one country, the OECD rules decide that the taxes should mainly be paid in the country where the company has its headquarters. This advantages OECD countries, she said, where headquarters are normally located, and disadvantages developing countries where companies perform substantial parts of their operations.

Ryding said that developing countries were being asked to follow these rules despite not being given a chance to participate in making them.

After the UN Financing for Development summit in 2015 she said that the OECD “adopted almost 2000 pages of new decisions on what they call global tax rules.”

Developing countries are often left out of these meetings, or when they are asked to participate they are charged an expensive bill, said Ryding. By comparison all UN members already had representation at the United Nations, she said, so participating in these talks within the UN would be less costly.

She said that World Bank President Jim Yong Kim suggestion, reportedly made last week, that a UN tax body would be funded by aid money was incorrect.

Ryding spoke during a press conference at the beginning of a three-day follow-up to last year’s Financing for Development conference.

Other development financing issues being discussed during the follow-up include developing country debt and changes to aid money given by developed countries.

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A Cash-Strapped Nation on a Splurging Spree Mon, 18 Apr 2016 20:42:24 +0000 Editor Sunday Times By Editor, Sunday Times, Sri Lanka
Apr 18 2016 (The Sunday Times - Sri Lanka)

In our student days there was a commonly used Sinhala phrase – “clean suit empty pocket”. That succinctly conveyed the image of a well-clad individual without a cent on his person.

If this pithy Sinhala phrase came to mind last week it is on reading three news reports that suggest that empty pockets do not stop our politicians and officials who cling to them like blood-sucking leaches, conducting themselves as though this country is so richly endowed that we can spend at will without the qualms of a disturbed conscience.

What is so disgusting and regrettable about this approach of the big spender is that those responsible for doing so are the very people who promised before the January 2015 presidential election and the parliamentary elections of August the same year that they would act prudently, that they would eliminate waste, that they would prune the cabinet and other ministerial positions and transparency would underlie all their public actions.

Now, 15 months after a president was installed and eight months after a National Unity Government (NUG) took office those promises and pledges are nothing but tattered remnants and the public increasingly the victims of what they perceive as political chicanery.

It is disturbing how the political climate has changed. The public enthusiasm that manifested itself after the presidential election during which I was in Colombo had waned when I returned to Colombo last September. With a new government in power there still seemed to be public hope that at least some of the promises would be fulfilled and not discarded within a few months.

When I returned to Colombo a month ago public faith had dissipated. Those who had enthusiastically canvassed, supported and voted for a new President because they wanted a change and believed that the common candidate would engage in radical reform as his platform demeanour and commitment seemed to indicate, were very vocal in their denunciation of the political let down. The seeming sincerity that won votes had vanished like a discarded face mask.

Since my early secondary school days I have followed the vicissitudes of Sri Lanka politics. In that time I have yet to see such a change in public mood and sentiment – from hope to despair.

If the Venerable Maduluwawe Sobitha Thera who led the movement that called for the establishment of clean and responsible government, is said to have passed away disillusioned and possibly embittered at the turn of events as some claim, it is surely a sign that his vision of a new Sri Lanka ruled by honest and dedicated men and women had been quickly discarded by those who had faithfully promised so much.

The more the public that pinned their faith on the creation of a new environment in governance and Sri Lanka’s political culture follows the daily occurrences in the country the more they feel the essential truth of that French saying “plus ça change, plus c’est la même chose” – the more it changes the more it remains the same.

In recent months the public have been told by the Prime Minister and other knowledgeable members of the government that financial profligacy by the previous government has not only created a balance of payments crisis but also that the country faces a fiscal deficit.

Hence new taxes, direct and indirect have been imposed on a public already burdened by a cost of living that is making life virtually unbearable for a wide section of the populace.

The fact that little was left standing of Finance Minister Karunanayake’s 2016 budget and an interim budget had to be introduced in March to try and offset this fiscal deficit is proof of the crisis.

This newspaper’s economic analyst Dr. Nimal Sanderatne wrote a couple of months back: “The tough question facing the government is whether collectively it is ready to take the necessary steps to increase revenue and to cut back on government spending by a process of rationalisation that could call for curtailment of public enterprises that are soaking in government revenue.”

But instead of cutting back on government spending, the government seems more determined to go on spending sprees as though money is plucked from trees that presidential sibling now heading Sri Lanka Telecom, was looking after when he was managing the Timber Corporation.

The three news reports referred to above relate to uncontrolled or uncontrollable government spending. • The Rs.15 million a month office space rented by the Ministry of Agriculture costing Rs.958 m for five years.

An estimated Rs.30 million allocated for a one-day conference for farmers organized by the Ministry of Irrigation and Water Resources Management.

• Three more appointments of State and Deputy Ministers now approaching the century mark.
Does the Agriculture Ministry require such expensive office space in seemingly luxurious buildings in Colombo when some of that money could be more profitably spent on improving facilities in the rural areas that actually produce the food the country needs.

It is the farming areas that need attention and resources. In mid 1960s and early 70s the Daily News devoted much space to reporting and writing on agriculture which came in for quite some praise from then Prime Minister Dudley Senanayake.

I often visited agricultural research stations in the country such as Maha Illuppallama, Batalagoda, the two research centres in Gannoruwa highlighting their work and spending some days with farming communities reporting on the difficulties faced by farmers thus focusing public and official attention.

Some of those reports were even raised in parliament and corrective measures swiftly taken.
The point here is that the ministry was located in a rather dilapidated building at the bottom of Union Place almost opposite the YWCA. The then ministers M.D.Banda and Felix Dias Bandaranaike backed by highly dedicated officials – one of whom was Gamini Seneviratne of the former civil service one of few still around – will recall those early days.

Those ministers and officials did not sit on ceremony. They sat not in air conditioned offices but in offices that today senior public officials would shun for their comfort seems the priority.

Would it not be more sensible to spend those millions on developing agriculture in the rural areas and helping those struggling farmers than renting out premises at rates which the Auditor General points out exceeds the government valuation for a square foot of space by Rs.17.50 each.

A government that promised transparency before it took office should go public and announce who owns this building so that an interested public might look into how it came to pass that this expensive property with conditions that benefit the owner/s was rented and whether tenders were called as is the normal practice. Let the promised transparency prevail.

Besides two badly written statements including a brief speech to the F.A.O conference in Rome, Agriculture Minister Duminda Dissanayake’s ministry website announces what it called the Wadduwa Declaration on a national agricultural policy.

The first undertaking given in this declaration promises the “doing away with the shortage of officers by filling vacancies.”

Does one really need a declaration announced as though it sounded like the ten commandments to do what is routinely expected of a state institution – filling vacancies. Why should it take a major conference held in a Wadduwa Hotel to come up with the obvious?

Surely the necessary officers could be appointed if the ministry diverted some of the massive monthly rent it has agreed to pay over five years to the filling of vacancies by persons committed to helping farmers and not political stooges with little knowledge of the undertaking.

Not to be outdone by an allied state institution, the Ministry of Irrigation and Water Resources Management organised a one-day conference for farmers which was initially estimated to cost Rs.31 m but appears to have been reduced by Rs.10 million after this charade was exposed.

For an institution whose task includes water resource management it seems somewhat hazy on managing allocating Rs 480,000 for what it calls “water bottles” which I suppose were not empty as implied by the said item.

“We prepared the basic estimate draft to keep the event within a budget framework,” the Director General of the Irrigation Department is quoted as saying, whatever that means

With the power shortage and intermittent power cuts still possible and consumers asked to save on electricity using it only when and where necessary this one-day conference was to cost rupees eight million for lighting etc. This is how state institutions ignore the warnings that the public are asked to abide by.

Unfortunately space does not permit further elucidation but one cannot end without commenting on the recent additions to ministerial ranks. This country was promised a cabinet of 25 which then increased to 38 with signs of more to come.

Today we are nearing the stratosphere. One of the charges made against the Rajapaksa clan and its acolytes was the abuse of state finances and how this will be corrected through good governance and transparent conduct in the interests of the nation.

How does the utterly unprincipled expansion of ministerial posts serve the national interest? Surely the perks and privileges attached to such appointments only increase the cost to state and not a reduction.

Is it the national interest that is being served or the personal desire of leaders trying to consolidate their tenuous hold on power by distributing state assets to kith, kin and unprincipled politicians ignoring their own preachings on thanha.

This story was originally published by The Sunday Times, Sri Lanka

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Matrix of Biometrics Mon, 18 Apr 2016 14:10:06 +0000 Adnan R Amin By Adnan R Amin
Apr 18 2016 (The Daily Star, Bangladesh)

Biometrics is the science of using physical (and behavioural) features for identification purposes. The most ubiquitous biometrics we encounter is ‘the face’. Every individual has a distinct face, which is used by others to identify/ recognise him or her. Human beings also start recognising voices from the age of three months. Handwriting recognition is part of behavioural biometrics. The most versatile and reliable biometric data possibly comes from human genes.

biometric_system_Fingerprints were used as signature as early as the 3rd century BC in China. It wasn’t until late 17th century that Europeans learnt what the Chinese had known for centuries: fingerprints could be used for identification. In the subcontinent, British colonials demanded natives’ fingerprints on documents as early as 1858. It was later adopted as a standard practice for document endorsement. In fact, Bangladeshi rural anecdotes and literature are rife with examples of swindled, poor people who were tricked into giving their fingerprints on deeds and documents they could not read.

By the 18th century, it was known that thanks to unique physical features of humans, biometrics could provide a comprehensive identity management solution. In the nation state, community-based administration models were in decline, giving rise to the need to register and make searchable each and every citizen. French researcher Bertillion developed a short-lived method of identifying individuals through physical measurements. But his method was superseded by fingerprinting after a cousin of Charles Darwin wrote a full book about fingerprint techniques; and by the end of WW1, the science had been adopted by major militaries and law enforcement agencies of the developed world.

Since 1969, US detectives have used an ‘identikit’ (a tool that uses photos of foreheads, eyes, noses, mouths and chins) to reconstruct a face with the help of an eye witness. Biometrics thus became central to the development of criminal history and databases. In 1974, the first commercial biometric device was released. At the 1996 Olympic Games, these devices were widely used for security purposes. Today, biometrics are widely used for identification and security in offices, labs, cultural venues, VIP residences, etc.

Over the decades, three things changed with biometric imprints. First, the types and forms of biometric information, methods of data management and reliability underwent a technological transformation. Today, computer-based fingerprinting, retina scans and voice-controlled electronics are virtually infallible. Facial recognition technology is being rolled out in law enforcement and social media alike. The Japanese company NEC is working to commercially produce a patented, ear scanning technology that could provide round-the-clock surveillance and data flow from wearers.

The second change concerns the ‘meaning’ of a biometric imprint. What probably started as a personal signature gradually grew into a legal instrument and then to a mass identification and search tool. With the growing threats of cyber security and identity theft, biometric data has become at least as sensitive as our bank signatures.

Notions about the ‘ownership’ of biometric data represent the third major change. With growing computing power dedicated to biometrics, many questions have arisen: who owns biometric data? Can it be obtained without one’s knowledge or a warrant? Can it be freely replicated? Can it be used for sweeping surveillance? Can it be sold to corporations? In 2013, the USA saw a lawsuit that challenged people’s right to own their own genetic information. This all points to the need for better understanding of biometric property rights, associated privacy norms and security threats.

While it is quite foreseeable that a Bangladeshi biometrics database will become central to elections, taxation, public services, the legal process, law enforcement and health services – commerce, finances, travel and entertainment and geo-targeted advertising will not be too far behind. With biometrics-enabled, location-enabled smart devices, a steady stream of citizen data will be available to actors in the public and private sectors.

With biometrics, it is the sensitive nature of the data that raises concerns. The technology links our biological data to computer programmes. Many argue that this opens the doors to Orwellian surveillance by turning our very organs into location and activity trackers. Another grave concern is that once imprinted one’s biological features and identifiers stop belonging to him/her. Thirdly, modern technology can easily capture such imprints without the knowledge of people and there is no known safeguard against this. Fourthly, we have the issue of data security. The NSA whistleblowing incident revealed porous borders between government and corporate databases (in the case of Bangladesh, it will be going straight to corporate databases). How will these corporations use biometric data? What oversight will the government retain? What policies/directives will guide it? Given allegations of pilferage of customer data to advertisers, what safeguards have been put in place to ensure data security? How are hacking threats assessed and mitigated?

Not two weeks ago, some 70 million citizens’ fingerprints and passport information was hacked in the Philippines (BBC, April 11). The Bangladesh Bank heist also shed light on the risks of rapid digitalisation. As our commerce, our transactions, our culture, our romances and our entertainment move online, the risk of an attack will only get higher. Noting that a smart, biometric national identity card (NID) will soon be assigned to Bangladeshi citizens, one can conclude that the issue of biometric data in Bangladesh has not been resolved, it is only beginning.

Owing to low literacy, low Internet penetration, lack of Bangla informational content and invisible control of ICT opinions, Bangladesh’s digital journey is cheered on by little citizen enthusiasm. More needs to be done to inform and reassure citizens about regulation of online spaces, surveillance of social media, collection of biometric data and information security. It has also become incumbent upon corporate houses (and their regulators) to raise public awareness on how and to what end the collected data will be used. It is simply not enough and/or mature to claim that critics of biometrics or surveillance have something to hide, or are political rivals. It is high time that domestically, we expanded these discussions from the ICT sector into the mainstream. If a defense of privacy, security and online freedom is to be mounted, it has to start now.

The writer is a strategy and communications consultant.

This story was originally published by The Daily Star, Bangladesh

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No Free Chinese Takeaway but Chinese Takeover on the Menu Sun, 17 Apr 2016 18:48:24 +0000 Editor Sunday Times By Editor, Sunday Times, Sri Lanka
Apr 17 2016 (The Sunday Times - Sri Lanka)

There is no such thing as a free Chinese takeaway; and, if the visiting Lankan high powered delegation led by Prime Minister Ranil Wickremesinghe fancied otherwise, the Chinese hosts made pretty certain the guests got the message crystal clear when the fortune cookie, opened after the diplomatic feast of niceties was over, revealed the thumping bill of fare.

FRIENDS AGAIN BUT ON WHAT TERMS?: Visiting Lankan Prime Minister Ranil Wickremesinghe with China’s President Xi Jinping at Great Hall of the People in Beijing on Friday.

FRIENDS AGAIN BUT ON WHAT TERMS?: Visiting Lankan Prime Minister Ranil Wickremesinghe with China’s President Xi Jinping at Great Hall of the People in Beijing on Friday.

In a special report published in China’s state owned Global Times on Thursday, the article warned that Pakistan could no longer provide China a strong foothold due to its “calamitous state” of security and ominously stated that, as a result, Lanka was of great strategic importance to China.

“Currently, the China-funded constructions in Pakistan cannot serve as a strong foothold for China, given the calamitous state of Pakistan’s security. Sri Lanka can be of great importance for China in the security strategic layout in the Indian Ocean. It will not only provide security assurances for nearby navigation channels, but will also promote the 21st Maritime Silk Road,” the Globe Times stated on the day the Lankan Prime Minister was to kick of his begging mission in Beijing where he was expected to ask the Chinese government to waive off certain loans and restructure some of the $8 billion Chinese debt.

This was the first time that Beijing had underscored its concerns and publicly made plain that its interest in Lanka went beyond mere trade gains. There was no mistaking the siren blare of the Chinese government authorised report when it stated the great importance of Lanka for China in ‘the security strategic layout in the Indian Ocean’. This was not a Chinese takeaway but a Chinese takeover. To further her strategic security aims in the region, China will provide assistance was the underlining message. With the Lankans’ clamour for alms rising in Tiananmen Square, China conveyed through its print media what it expected as its quid pro quo. They knew they had Lanka by the short and curlies.

The Chinese have memories as long their great wall. The pre presidential election anti China rhetoric soured relations once sweet. During the presidential election campaign the then opposition politicians successfully appealed to national sentiments by creating the vista of how the Rajapaksa government had sold the country lock, stock and barrel to the Chinese for a song in order to remain in power.

They pointed to the non functional Hambantota Port which had been built with Chinese aid and painted it as a future Chinese naval base to further China’s ‘String of Pearls’ policy in the Indian Ocean to gain regional hegemony. They pointed to the non operational Mattala Airport – again built with Chinese aid and situated only a few miles from the Hambantota harbour – and tarred it as a future Chinese Military Air base. They pointed to the exorbitant costs of the roads and highways built with Chinese aid and claimed the Rajapaksa regime members were lining their pockets with millions of dollars by inflating the project expenditure with Chinese collusion.

And then they directed the nation’s attention to the Colombo Port City, the US$ 1.4 billion project funded by the Chinese to claim 233 hectares of land from the sea and Mahinda Rajapaksa‘s arbitrary decision to give 88 hectares of it on a lease for 99 years and a further 20 hectares to be given on freehold to be owned by the Chinese in perpetuity. This, they pointed out most persuasively, was a sell out of Lanka’s sovereignty: The ultimate Rajapaksa treachery.

Two weeks before he became Prime Minister under the Maithripala government Ranil Wickremesinghe pledged to scrap the Port City Project, China’s biggest investment in Lanka. China was tainted with the Rajapaksa grime and any association with her was to be kept at arms’ length lest it soil the nation’s new suit of American bespoke tailoring. Lankan eyes which had squinted furtively at the West for five years now stared direct and ogle-eyed; and blinkered their vision to Eastern light.

Thus with Lanka beginning to conduct herself in a manner that made her once more the darling of the West and the pin up girl of India, the dalliance with China had to come to an end. Or it had to be ostensibly shown to the world that China had got the heave ho, had been given the boot.

But geopolitical reality also meant the superpower of the region China, with the second largest economy in the world and the world’s most populous state, could not be ignored at the drop of a hat. The mega projects begun under Chinese patronage and funded by Chinese capital could not be abandoned totally. The massive loans obtained by the government of Lanka could not be unilaterally revoked, liability denied and payment defaulted.

Though politics had demanded an initial anti Chinese sentiment to be expressed to pacify the troubled paranoia of India, the penurious state of the Treasury’s coffers, the depletion of the nation’s foreign currency levels and the plight of those who had worked at the now suspended Chinese mega projects which were politically exploited by the straggling opposition led by the people deposed former president in his campaign to return to power, could not be ignored. Economic and geopolitical reality demanded that genuflection had to be paid to China once more, whatever the political rhetoric may have been during the first few weeks of the post election euphoria.

But before the penitent tramps the hard ground to Beijing with begging bowl in hand to the door of a friend he once scorned, whose help he now seeks, the dried up soil of goodwill must first be watered, must first be softened and made ready for prostration to expurgate past sins. In February two top UNP ministers, both of them Prime Minister Ranil Wickremesinghe’s closest confidantes, namely Development Strategies and International Trade Malik Minister Samarawickrema and Law and Order and Southern Region Development Minister Sagala Ratnayake, headed a senior delegation to China.

Minister Malik Samarawickrema returning from China last month announced some of the highpoints of his visit. He said that the Government has sought new loans from China to carry out various projects Government proposes and to set up a joint venture with China to develop the Mattala International Airport and the Chinese investors will have a say in the operation of the Mattala Airport operations. He also said the Government had sought financial co-operation to implement several of the projects in the pipeline and that projects have been outlined and China’s support had been sought on funding. Furthermore, joint ventures had been proposed between the two sides to develop the Hambantota Port and the Mattala Airport and that the Port City project will proceed with the original agreement to reclaim 233 hectares of land from the sea and work will soon resume.

All in all, China had been awarded everything she had asked for. But it appears that, while hiding her ire behind the bamboo curtain of oriental charm and discretion, she wants more, which, as the report in China’s Globe Times indicate, may possibly include demands that verge on infringing Lanka’s sovereignty.

The giant panda had borne every irksome slap but knowing the ways of the world with more than five thousand years of history behind it, had waited with legendary patience for beggared Lanka to come crawling to its feet to extract the maximum for her pauperised impotent state. Lanka has gone carrying with her naught but the weight of vilifications hurled against the regional superpower and now the contemptuous Chinaman is demanding his pound of flesh in return. That is the price Lanka must pay for lacking a far sighted, coherent and credible foreign policy.

As China’s President Xi Jinping said on Friday, “the Chinese government only considers Sri Lankan people and its policies and not personalities and political parties when assisting Sri Lanka and a third party cannot harm the friendship between Sri Lanka and China.” That’s a valuable lesson Lanka must learn that only the permanent interests of the nation must dictate foreign policy.

Unlike many nations in the world, Sri Lanka still hasn’t gained the political maturity to realise the value of having a long term foreign policy formulated in the best long term interests of the nation.

Instead the country’s foreign policy has often been decided on an ad hoc basis and has often depended on the passing whims of its political leaders in power; and has often been dictated to by what was most politically expedient at that relevant time.

After the end of the thirty year long terrorist war in 2009, Lanka’s foreign policy took a paradigm shift. And this was to move away from India’s sphere of influence and look to China for succour. This was done not because the country’s long term interest so demanded it but because the short term interest of Lankan President Rajapaksa whose political survival depended on it, so compelled it.

The abandonment of its traditional ally and closest neighbour India and the attendant hostility of the West such a drastic movement invoked, coupled with the West’s professed concern over the Lankan government’s nonchalant approach and arrogant attitude to human rights violations and its intransigence to display transparency and accept accountability to war crimes allegedly committed by its armed forces during the last days of the terrorist war soon led to Lanka’s isolation; and the subsequent unofficial branding of Lanka as an international pariah state exiled from the community of civilised nations.

The island nation, with its anti Indian, anti West stance, had no friend in the world except the region’s superpower aspirant China. The interests coincided and the resurrection of the historical Sino-Lanka relationship proved once again to be of mutual benefit to both parties. In other words, it was the ideal basis for a lasting friendship – in normal times.

But these were not normal times; and while China could afford to indulge it and gain a foothold in the strategically placed Indian Ocean island which had been a major hub and port of call in the Silk Route hundreds of years ago, Lanka soon found the crippling measures taken by the rest of the unfriendly world threatening her very economic survival.

True, China had the pockets deep enough to finance mega projects in Lanka and the ability to extend millions of dollars in credit lines. She had a permanent seat in the United Nation’s Security Council and thus could veto any vote to place worldwide economic embargoes against Lanka.

But though the Yuan kept the Lankan economy afloat and built her roads and created the impression of vast development taking place in Lanka to impress the citizenry and keep the Rajapaksa regime politically stable; though China’s veto vote in the UN enabled the Rajapaksa regime to drag their feet when it came to answering the international community’s demand for human rights accountability in the confidence that the UN could not do their worst without Chinese acquiescence; yet the fact remained that the West and India were Lanka’s biggest customers and could individually impose their own trade sanctions with crippling effect.

China’s role, which had propped up the Rajapaksa regime and cocooned it from western vengeance, also in the end contributed to the downfall of Mahinda Rajapaksa from his Chinese built pedestal of presidential existence. His ousting by the Lankan electorate earned for the nation the goodwill of the international community. America, which had publicly announced she wished to see a regime change in Lanka, applauded and cheered Lanka’s return to democracy. India rejoiced and hailed the people of Lankan for their wise decision and welcomed the nation back into the familiar family fold.

One year later a new foreign policy is evolving not at its natural Foreign Ministry dwelling but at the Prime Minister’s office to where it had been transferred. In January this year the Prime Minister appointed a new body under his authority called the Global Affairs Committee headed by Charitha Ratwatte, a former Treasury Secretary and currently a senior Advisor to the Prime Minister, to oversee the working of the Ministry of Foreign Affairs and to give directions on foreign policy and all related matters.

It appears to have recognised that though the West had been profuse in its praise for Lanka and had liberally hailed the new playing field of politics, cheered the return to democracy, appreciated the willingness to entertain a war crimes probe even with international judges, admired the independence of the judiciary, valued the upholding of human rights, it had remained tight fisted and had stinted when it came to meaningfully assisting Lanka in terms of dollars and euros. There concern for Lanka had come to reflect the acronym of their US-European North Atlantic Treaty Organisation. NATO: No Aid Talk Only.

Thus in these last few months the realisation has dawned in the echelons of power that it is time to do business with China again. That merely to satisfy Western aspirations that Lanka cannot look askance at the regional superpower. That to align with the West totally would be to commit the same fundamental mistake the previous regime made by aligning exclusively with China. The time has come,perhaps, to return to the ideals of non-alignment, the self same principles which moved Lanka to become one of the original members of the Non Aligned Movement in 1961, and to woo China with gusto.

Today the wheel seems to have turned full circle and China seems to be on track with her famous virtue of patience justly and amply rewarded. Though historically the Chinese have been noted to think in terms of centuries, even they must agree in wonderment that with Lanka, what a world of difference a year makes.

The Lankan Government appears to have finally come to terms that even at the risk of antagonising India, the dominant position of China as an emerging world power cannot be ignored or trifled with. It would have taken into cognizance that she is a superpower in the region, the most populous state with nearly 1.4 billion people; the second largest country by land area; the world’s largest exporter and the largest importer; the second largest economy in the world; a permanent member of the United Nation’s Security Council with the all important veto vote; and currently a member of the UN Human Rights Commission till the end of this year.

But this is not done at the cost of India’s friendship. The same strategy of accommodation is being followed when it comes to the new trade agreement that India is pushing for Lanka to sign. Called the Lanka Economic and Technology Co-operation Agreement (ETCA), the Government’s plans to sign it have met stiff opposition from the public, including lawyers and doctors, who fear loss of employment with an Indian influx of manpower. But the Prime Minister has shown that he is prepared to weather the local storm and this has won for him the goodwill of the Indian Government and perhaps allowed him an opportunity to persuade India that in return the Lankan Government’s decision to allow the Port City Project and other Chinese projects should be viewed with understanding and not opposed.

What emerges from recent political and diplomatic activity accompanied as it is by backchannel discussions and understandings reached, is that Lanka’s evolving foreign policy now looks set to charter a course that seeks to balance Indian and Chinese interests with greater understanding and with greater accommodation, expecting the same in return from the countries concerned to help Lanka emerge from the ashes of a thirty year war and a ten year misrule riddled with unprecedented corruption. As China’s grand progenitor of culture the great Sage Confucius say:” They must often change, who would be constant in happiness or wisdom.”

This story was originally published by The Sunday Times, Sri Lanka

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Maquilas Help Drive Industrialisation in Paraguay Sat, 16 Apr 2016 01:59:21 +0000 Mario Osava Texcin, the garment plant built by Brazilian company Riachuelo near the airport in Asunción, under Paraguay’s maquila law, which offers tax exemptions and other incentives for export-oriented production. In the foreground a garment worker in training (“entrenamiento”). Credit: Mario Osava/IPS

Texcin, the garment plant built by Brazilian company Riachuelo near the airport in Asunción, under Paraguay’s maquila law, which offers tax exemptions and other incentives for export-oriented production. In the foreground a garment worker in training (“entrenamiento”). Credit: Mario Osava/IPS

By Mario Osava
ASUNCION, Apr 16 2016 (IPS)

“There were cases of people who stopped coming to work after receiving their first wages and then came back a few days later to ask if there was more work,” because they were used to casual work in the informal economy, said Ivonne Ginard.

Ginard, a human resources manager in the textile firm Texcin, was in charge of hiring the plant’s 353 employees and helping them make the transition from informal labour to working in a factory with set schedules, uniforms, safety measures and medical certificates to justify absences.

Texcin, a garment factory near the Asunción airport, is emblematic of the incipient industrialisation process in Paraguay, which is still an agriculture-based economy, where soy and beef are the main exports and informal employment is predominant in the cities.

The plant is a joint venture between members of the Paraguayan business community and Riachuelo, one of the biggest clothing brands in Brazil, where it has 285 stores and two industrial plants. Riachuelo decided to take advantage of the incentives provided by the law on maquila export plants, in effect in Paraguay since 2000, to produce clothing in this neighbouring South American country instead of importing from Asia.

The aim is to increase the number of workers twofold by the end of 2016 and to continue to expand, since the company has the space to build a new plant.

“Paraguay offers abundant, young, easily trained workers, cheap energy, and tax incentives for maquilas and duty-free zones, which make it possible to import raw materials tariff-free,” said Andrés Guynn, one of the Paraguayan partners, who heads Texcin.

“Our production is competitive with costs similar to those of Asia, with a big advantage in terms of time: it takes 90 days for products to be shipped from China to Brazil, while ours get to (the Brazilian city of) São Paulo in 72 hours, by truck,” he said.

“Under the maquila regime, 108 companies set up shop in Paraguay, 62 of them in the last two years, and 80 percent of them come from Brazil,” the director of the maquila sector in the Ministry of Industry and Trade, Ernesto Paredes, told IPS.

Maquila or maquiladora plants are built by foreign corporations, generally in free trade zones. They import materials and equipment duty-free for assembly or manufacturing for re-export, and enjoy other tax breaks and incentives, as well as more flexible labour conditions.

Texcin human resources manager Ivonne Ginard (right), next to the woman who trains the garment workers, Rosa Prieto. “Texcin changed my life,” said Prieto, who was a self-employed seamstress in the informal sector of the economy for 15 years, before she was hired by the company in January 2015. Credit: Mario Osava/IPS

Texcin human resources manager Ivonne Ginard (right), next to the woman who trains the garment workers, Rosa Prieto. “Texcin changed my life,” said Prieto, who was a self-employed seamstress in the informal sector of the economy for 15 years, before she was hired by the company in January 2015. Credit: Mario Osava/IPS

“The maquiladora industry is dynamic, but it does not accept trade union freedom, it does not allow unions to be organised in its factories, which violates constitutional rights,” the president of the Confederation of the Working Class (CCT) labour federation, Julio López, told IPS.

Auto parts factories are predominant in the industry, in terms of both revenue and jobs generated by maquiladoras in Paraguay, Paredes said. He said the sector uses the “just-in-time” delivery system developed by Japan’s auto industry, which is an inventory strategy employed to boost efficiency and reduce waste by receiving goods only as they are needed in the production process, which cuts inventory costs.

The Japanese company Yasaki and Germany’s Leoni have recently set up plants in Paraguay, employing thousands of people, nearly all of them women, in the production of electrical car cables.

And Paraguay now has its first car assembly plant. A national company, Reimplex, began to assemble J2 cars for Chinese auto maker JAC Motors on the outskirts of Asunción on Mar. 28.

Clothing factories also employ large numbers of women.

In addition, the plastics industry is expanding fast in the eastern department of Alto Paraná, on the border with Brazil, Paredes said.

Cheap local labour, which he said is “low-cost not so much because of the wages paid, but due to the low social charges” and low taxes, are especially attractive for Brazilian companies. To that is added the cost of electricity, which is 63 percent cheaper than in Brazil, according to the head of the maquila sector.

One limitation is transport and energy infrastructure. “Roads, ports, highways, real estate – all of this is lacking, although Paraguay has been investing heavily in airports, hotels, and office buildings,” he said.

One solution would be to widen the two-lane highway between Asunción and Ciudad del Este, the country’s two main economic hubs. However, the plan is not to expand the existing road, but “to build a second highway exclusively for trucks and trade,” as well as a second bridge to Brazil, said Paredes.

Texcin’s textile warehouse seen behind a sign announcing the expansion of the plant which was built by Brazilian company Riachuelo with partners in Paraguay on the outskirts of Asunción. Credit: Mario Osava/IPS

Texcin’s textile warehouse seen behind a sign announcing the expansion of the plant which was built by Brazilian company Riachuelo with partners in Paraguay on the outskirts of Asunción. Credit: Mario Osava/IPS

Investment is also needed in another route for the transportation of heavy loads, the Paraguay-Paraná waterway, used to export soy.

“Better signalisation would double its capacity and speed up river traffic,” Gustavo Rojas, a researcher at the Center for Economic Analysis and Dissemination in Paraguay (CADEP), told IPS.

This land-locked country of 6.8 million people has the world’s third-largest river barge fleet, as well as shipyards that build them, which favours an increase in river traffic, Paredes said.

Electricity is, potentially, Paraguay’s biggest comparative advantage, since the country owns half of the energy from two huge hydropower dams: Itaipú, shared with Brazil, and Yacyretá, on the border with Argentina, with the capacity to produce 14,000 and 3,200 MW, respectively.

But it only began to use part of that energy when a power line from Itaipú to Villa Hayes, near Asunción, was completed in October 2013. The power line was financed by a Brazilian fund aimed at narrowing the development gap between countries in the Southern Common Market (Mercosur) trade bloc, made up of Argentina, Brazil, Paraguay, Uruguay and Venezuela.

Without an adequate distribution network, however, the new energy supply did not eliminate problems like the February blackout that left 300,000 homes without power in Greater Asunción.

Achieving a more secure energy supply “is a question of time,” said Guynn, who tried to place his company near the new power line.

The problem is that the national power utility, ANDE, does not have investment capacity, and “distribution is not secure and steady,” said Fernando Masi, founding director of CADEP, which carries out research on public policies and provides graduate studies in economy.

But the broad availability of energy is a new element drawing industries to Paraguay, since the other advantages, such as low labour costs and tax incentives, already existed before.

Cheap energy also tempted the British-Australian multinational metals and mining corporation Rio Tinto, which studied the possibility of producing aluminum in Paraguay, even if it had to ship in the raw material, bauxite, from far away, because electric power is the main cost of the aluminum industry.

But a major public campaign, which collected more than 100,000 signatures, managed to block the project, “which would consume more energy than all of the national industries combined,” while requiring subsidies and employing a relatively small number of people, Mercedes Canese, an engineer who was deputy minister of industry during the government of Fernando Lugo (2008-2012), told IPS.

However, another engineer, Francisco Scorza, who studied the case, said the Rio Tinto project became unviable because “China began to produce very cheap aluminum, at 1,200 dollars a ton, 40 percent less expensive than here, and Paraguay can’t afford to subsidise energy.”

CADEP’s Masi said attracting small and medium-sized industries is better for development and employment, but the maquila sector has limits. The auto parts industry, for example, is limited to producing wiring, “because there is no bilateral agreement with Brazil on the car industry,” he said.

Brazil demands that Paraguay stop imports of used automobiles, “a very high cost for Paraguay to pay,” as it has a large fleet of used Japanese vehicles known as the “Vía Chile” cars because they come into Paraguay through that neighbouring country.

The maquila industry only exported 284 million dollars worth of goods in 2015 – very little in comparison to Paraguay’s overall industrial exports of 3.0 to 3.5 billion dollars, said Masi.

Industrialisation in Paraguay “has taken off, but not at the fast pace that was expected,” he said, adding that improving energy and logistics infrastructure could help.

Edited by Estrella Gutiérrez/Translated by Stephanie Wildes

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Plugging Asia’s Infrastructure Gap Thu, 14 Apr 2016 18:55:32 +0000 Ajay Kanwal The Asian Development Bank forecasts that Asia needs $8 trillion in the decade to 2020 to plug the infrastructure deficit. Photo: Star

The Asian Development Bank forecasts that Asia needs $8 trillion in the decade to 2020 to plug the infrastructure deficit. Photo: Star

By Ajay Kanwal
Apr 14 2016 (The Daily Star, Bangladesh)

Investors have an appetite for Southeast Asia’s infrastructure projects, but poor structuring of deals keep them at bay.

The year 2016 is to defy herd instincts and pack behaviour, and seek opportunities that will prove worthwhile for when financial markets bounce back from the trough.

If investment in infrastructure seems too daunting to undertake at a time when Southeast Asia’s economies are cooling, now is precisely the time to pursue it. For infrastructure financing, when structured right, could make for an attractive asset class for the institutional community with a huge positive impact on the region’s economies.

Better-linked physical infrastructure, which promotes the seamless movement of goods and services, will also edge the 10 members in the Association of Southeast Asian Nations (Asean) a step closer to achieving its goal of seamless regional connectivity.

For too long, institutional investors have shied away from emerging market infrastructure development, in part because they naturally prefer mature projects with steady cash flows in a stable legal and regulatory environment.

The Asian Development Bank forecasts that Asia needs $8 trillion in the decade to 2020 to plug the infrastructure deficit. As countries move up the value chain and urban populations expand, demand for transport, logistics and utilities will only continue to grow, increasing the burden on public funds.

Rising urbanisation in countries such as Indonesia and the Philippines will spur greater need for physical infrastructure and power generation. Indonesia’s planning commission is focusing its projects on mass transit, toll roads and airport development, while the priorities of President Benigno Aquino III’s government are in the development of ports, expressways and energy projects.

Given the massive requirement, the region may still face a funding shortfall even if the newly-launched Asian Infrastructure Investment Bank (AIIB) provides annual loans of $10-$15 billion for the first five or six years.

It is, however, a misconception that private investors are not interested in infrastructure projects, and that this is to blame for the deficit. Instead, it is often the poor structuring of such initiatives that keeps private money at bay.

Commercial banks can provide the missing link in the infrastructure development picture. Not only do these banks have the ability to take on greenfield project risks and provide liquidity, they can also work with governments to create the right conditions for financing, which help in the creation of a sustainable pipeline of bankable projects.

Commercial banks’ ability to structure transactions appropriately, so that risks sit with the most suitable party, is key to unlocking new sources of capital for infrastructure development.

The money management community, which lacks the appetite for diverse risks generated from projects in their initial phase, is more likely to provide longer-term infrastructure financing if short-term bank loans have been used to fund the early phases of the initiatives.

This mechanism works both ways. Greater institutional investor appetite will enhance the interest of commercial banks, which will then have greater surety that their capital can be recycled within an acceptable timeframe. Similarly, a deeper infrastructure bond market will also provide an additional source of liquidity for the region’s infrastructure development.

Multilateral development lenders, such as the AIIB, can still play a critical and complementary role in Southeast Asia’s infrastructure ecosystem. By providing assistance and guarantees, which have the effect of reducing risks, AIIB can make capital projects more attractive to commercial banks and institutional investors. Commercial banks also play a leading role in the coordination of regional projects, enabling cross-border projects to take root and bear fruit.

Not only will higher-quality infrastructure catalyse trade and investment ties among Asean members, greater physical connectivity will also attract more visitors to the region, increasing consumption and growth.

The World Bank estimates that a 10 percent increase in capital investment into infrastructure projects contributes to a 1 percent growth in GDP.

Still, the basics have to be set right. Governments need to create an environment with a consistent legal and regulatory framework, alongside transparent governance and decision-making processes. Without these conducive conditions, investment in emerging economies will be viewed as more risky than similar opportunities in more developed countries. In the infrastructure financing world, the concept of the zero-sum game is real.

Governments will be well-placed to engage experienced business advisors, such as commercial banks, to help in the development of clear and consistent frameworks and transparent procurement arrangements that safeguard private investors’ interest.

Infrastructure development is not a silo initiative. It calls for a coordinated approach involving collaborative governments; multilateral development lenders; commercial banks with well-established global networks and expertise in appropriate risk structuring; viable capital markets and cash-flushed institutional investors. And commercial banks are the fabric that binds all these parties together.

The time is ripe to develop infrastructure as an attractive asset class. If infrastructure projects are structured efficiently, and private funds brought in at the optimum time, the region’s infrastructure gap can be narrowed. And institutional investors will have a new opportunity to put their funds to work for a worthy cause with potential long-term returns.

The author is the regional CEO, Asean and South Asia, at Standard Chartered Bank.

This story was originally published by The Daily Star, Bangladesh

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Timor-Leste Brings Maritime Dispute with Australia to United Nations Thu, 14 Apr 2016 02:28:18 +0000 Lyndal Rowlands A view of the sea from the Timorese island of Atauro. Credit: Lyndal Rowlands / IPS

A view of the sea from the Timorese island of Atauro. Credit: Lyndal Rowlands / IPS

By Lyndal Rowlands

Timor-Leste which won independence from Indonesia in 1999 is now engaged in a new struggle with Australia over rights to oil and gas reserves in the Timor Sea.

Former Timorese Prime Minister and independence leader “Kay Rala” Xanana Gusmao met with UN Secretary-General Ban Ki-Moon here Wednesday to discuss his country’s plans to use the compulsory conciliation provisions under the UN Convention on the Law of the Sea to settle Timor-Leste’s maritime boundary dispute with Australia.

“We fought a long struggle for 24 years for our independence and for sovereignty over our land, now we are in a new struggle to secure sovereign rights over our seas,” Gusmao told journalists after his meeting with Ban.

Gusmao said that Timor-Leste could not take Australia to the international courts because two-months before Timor-Leste gained independence Australia withdrew from the relevant binding jurisdiction. “They did this because they knew they were wrong,” he said.

Gusmao said that Australia took advantage of Timor-Leste’s vulnerability as a young and inexperienced nation to enter into an unfair agreement over the maritime boundaries between the two countries.

The boundaries have a significant impact on the half-island nation’s economy due to revenues from oil and gas reserves in the disputed area.

The Timorese government uses the money raised from oil and gas revenues to provide essential services to its young population. Sixty percent of Timor-Leste’s 1.2 million people are aged under 25 years of age and the country continues to struggle on key development indicators, including hunger. According to the UN Children’s Fund, UNICEF, malnutrition is major concern for Timor-Leste with 44.7 percent of children under five years old underweight.

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Panama and Pajama Games Tue, 12 Apr 2016 22:07:19 +0000 Ashraf Jehangir Qazi By Ashraf Jehangir Qazi
Apr 12 2016 (Dawn, Pakistan)

Offshore accounts are nothing new. Their semi-legal and unethical status is well known. Corporate and crony capitalism produce outrageous inequality and concentrations of economic and political power. The wealthy and powerful of the world have secretly stashed away in excess of $20tr in offshore and other tax havens. Moreover, the vast majority of such activity is criminal, illegal or politically unacceptable. Even the inimitable Donald Rumsfeld might agree all this is a “known known.”

The writer is a former ambassador to the US, India and China and head of UN missions in Iraq and Sudan.

The writer is a former ambassador to the US, India and China and head of UN missions in Iraq and Sudan.

Pakistan has long been rated as one of the most corrupt countries of the world especially if its corruption is measured as a proportion of its economic size. The financial probity of the leadership of at least two of the country’s three major national parties is reputed to be very dubious. No institution that wields power and authority in Pakistan, whatever degree of national reverence it may command, has been a paragon of virtue. There are no innocents.

So our embattled prime minister can well say he is in good (or bad) company both at home and abroad. His jiyalas may well ask ‘what else is new?’ Pakistan’s ‘political norm’ has long embraced criminal and self-serving political leadership. The general chorus has been ‘God will somehow take care of the country He brought into being!’

Accordingly, the frequency of such ‘political and ethical crises’ has risen to almost one a week. This, of course, accounts for the brief shelf-life of any scandal no matter how egregious it may appear to the untrained eye. It also explains why at any one time several such scandals occur making it extremely difficult for moral outrage to focus sufficiently on any one of them. Thank heaven for small mercies!

The Panama outcome will be of national consequence for the people of Pakistan.

After all, the prime minister has not been named although his daughter was reportedly described as “politically exposed” by Mossack-Fonseco. His elder son has owned up to owning substantial properties in London and elsewhere — al Hamdulillah! His explanation of how and from where he got the money to buy these properties and invest in shell companies set up in international tax havens may be somewhat wobbly. But then whose explanations of undeclared and untaxed billions are not? Ask David Cameron. However, in his case the sum involved — £30,000 — is frankly ‘peanuts’ for our political leaders and their brilliant business tycoon offspring. It is possible some Pakistani or non-Pakistani admirers of the statesmanship and foreign policy leadership of the elder Sharif gifted the younger Sharif millions if not billions which he had no legal reason to refuse or obligation to declare to Pakistani authorities as he was living abroad — Mashallah!

As for the ‘judicial’ commission to be set up to inquire into the matter, apart from legal and procedural quibbles, the question arises: what is there to inquire into? Is it the business acumen of a non-Pakistani who may be related to a Pakistani politician? If so, a whole lot of us could become liable on that basis! There has to be something more to justify the cacophony of national indignation without reading the small print.

Some incorrigibles insist there is. Pakistan has around 200 million people. According to revised methods those living in poverty add up to considerably more than a third of the population. The national social indices are the worst (Afghanistan excepted?) in South Asia which has the worst regional indices in the world.

Pakistan has five different class-based educational systems which collectively produce an inability for its people to understand and communicate with each other, mutual animosity, and collective dysfunction despite an abundance of talent and love of country. Higher or tertiary education is minimal and almost devoid of creative field work and conceptual innovation. Globally productive and gender-inclusive jobs — essential to survival and success in the 21st century — are not being generated by the educational, vocational and economic systems in Pakistan. No money equals no priority.

The population will reach 350 million by 2050. Environmental, economic, population, nuclear, sectarian, gender and cultural challenges threaten to overwhelm the country much before 2050. No priority is given to averting the prospect before us. Human resource development and fundamental policy reforms over a broad range are of little or no concern to most political leaders, except in speeches and policy declarations. The country is engaged in a conventional and nuclear arms race with a much larger and more resourceful neighbour without considering the inevitable longer term implications.

The country has no consistent and viable strategy for handling issues and relations with India which could offset its disadvantage in numbers and size without relying on doomsday scenarios. This in turn is because the country’s foreign and security policies have largely been hijacked by unaccountable, unqualified and unimaginative domestic constituencies that equate their institutional agendas with the national interest. A rampantly corrupt, indifferent and fearful political leadership can never risk challenging and rectifying this situation. None of this bothers them in the least. What could be more hostile?

It is in this context that the latest dereliction of our ‘elected’ political plutocrats reaches us. The fate of David Cameron is a matter of political importance for the UK. The fate of our political delinquents is of ‘existential’ significance for Pakistan. The effectiveness of legal hair-splitting and political sleights of hand to escape consequences may be of personal significance for the UK prime minister or, at most, his party. The Panama outcome will be of national consequence for the people of Pakistan.

International bookies reportedly rate the chances of our prime minister surviving the Panama leaks as roughly 90pc. It is not clear whether this is an assessment of his innocence or the state of political development in Pakistan. However, it does suggest that politics in Pakistan as pajama games including zero-sum games against the people entails costs that will eventually overwhelm the country. Remaining spectators of the endgame is no longer an option.

The writer is a former ambassador to the US, India and China and head of UN missions in Iraq and Sudan.

This story was originally published by Dawn, Pakistan

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What the Panama Papers Mean for Global Development Tue, 12 Apr 2016 17:01:06 +0000 Tharanga Yakupitiyage Tax justice campaigners in Kenya. Credit: Zahra Moloo/IPS

Tax justice campaigners in Kenya. Credit: Zahra Moloo/IPS

By Tharanga Yakupitiyage

The financial secrecy and tax evasion revealed by the Panama Papers has an extraordinary human cost in developing countries and threatens the realisation of the UN’s ambitious Sustainable Development Goals.

The ongoing leak — made public by media outlets including German newspaper Süddeutsche Zeitung, the International Consortium of Investigative Journalists (ICIJ) – has already prompted protests and investigations around the world. The papers connect thousands of prominent figures to secretive offshore companies in 21 tax havens and reveal the inner workings of the offshore finance industry.

The documents focus on Panamanian law firm Mossack Fonseca, with its 210,000 entities, and has led to allegations that the firm aided public officials and multinational corporations to avoid taxes. Mossack Fonseca say that media reports have misrepresented the nature of their work and its role in global financial markets.

In one case, leaked emails contained in the Panama Papers suggest that the Heritage Oil and Gas Ltd Company (HOGL), sought help from Mossack Fonseca to sidestep tax laws in Uganda. According to ICIJ, upon the sale of an oil field, the company received a tax bill of $404 million. In an effort to avoid paying the taxes, the entity fought the Ugandan courts and meanwhile tried to relocate to Mauritius, according to the leaked emails.

Mauritius has a double tax agreement with Uganda, allowing companies such as HOGL to only pay taxes in one of the two countries. In 2000, the International Monetary Fund (IMF) listed Mauritius as a preferred location for companies due to its minimal tax laws.

These havens deny developing countries such as Uganda of much needed tax revenue for essential services, Oxfam’s Senior Tax Policy Advisor Tatu Ilunga told IPS.

“Tax havens are at the heart of a global system that allows large corporations and wealthy individuals to avoid paying their fair share, depriving governments – rich and poor – of the resources they need to provide vital public services and tackle rising inequality,” said Ilunga.

In Uganda, approximately 37 percent live on less than $1.25 per day. The East African nation also has one of the highest rates of maternal and under-five mortality rates in the world. According to the World Health Organisation (WHO), Uganda is one of the top ten countries that account for the majority of global maternal deaths.

In a country that lacks access to health services, HOGL’s $404 million in taxes represents more than the country’s health budget.

Former governor of Nigeria’s oil-rich Delta State James Ibori was also implicated in the Panama Papers,allegedly using Mossack Fonseca as an agent for four offshore companies in Panama and Seychelles. These entities provide anonymity, hiding true owners’ names and actions and thus allowing for finances and assets to be undeclared and untaxed. 

Though he was detained in 2012 for diverting up to $75 million out of the country, Nigerian authorities estimate that Ibori stole and stored over $290 million in tax havens.

Like Uganda, Nigeria ranks low in health indicators, contributing to some 10 percent of global maternal, infant and child deaths. Poverty has increased in the country with 61 percent living below the poverty line, according to the most recent Nigerian Bureau of Statistics report.

The Niger Delta region in particular, despite being a significant contributor to the country’s economy through oil production, remains the poorest and least developed region in Nigeria. In Ibori’s Delta state alone, 45 percent of people live in poverty. The UN Development Programme (UNDP) report found that the majority of people in the region lack access to potable water, electricity, health facilities and infrastructure including roads and telecommunications.

“Have you seen any taps here?…Water used to run in public taps, but that had stopped 20 years ago. We basically drink from the river and creeks…hygiene is secondary,” a Niger Delta Resident told UNDP.

Though Ibori’s stashed money represents only a slice of Nigeria’s budget, it is indicative of a global and pervasive problem that goes beyond Mossack Fonseca.

Transparency International’s Senior Policy Coordinator Craig Fagan told IPS: “If you think about the millions of files that have been released and the number of high profile individuals [in the Panama Papers], this is just one law firm in Panama.” .

“We can be certain that there are many other law firms whether in London, Hong Kong, New York, Miami that are operating similar structures,” he said.

According to Oxfam estimates, at least $18.5 trillion is hidden in tax havens worldwide. The organisation found that two thirds of this offshore wealth is hidden in European Union related tax havens while a third is in UK-linked sites where it is left undeclared and untaxed.  Oxfam said that their estimate is a conservative one.

The Swiss Leaks, also released by ICIJ in 2015, revealed how over 106,000 clients from Venezuela to Sri Lanka hid more than $100 billion in Swiss HSBC bank accounts.

Another analysis from Tax Justice Network (TJN) reveals that between $21 to $32 trillion is being diverted into offshore companies.

This has enormous effects in developing countries, costing poor nations over $100 billion in lost tax revenues every year, according to Oxfam. The charity also found that tax dodging by multinational corporations alone costs the developing world between $100 billion and $160 billion per year. Added with profit shifting, approximately $250 billion and $300 billion is lost.

This “missing” money could lift every person above the $1.25 per day poverty threshold three times over, according to Brookings Institution calculations.

Oxfam added that for every $1 billion lost through commercial tax evasion, 11 million people at risk across the Sahel region could have enough to eat, 400,000 midwives could be paid in Sub-Saharan Africa which has the highest maternal mortality rates, and 200 million insecticide-treated mosquito nets could be purchased to reduce child mortality from malaria.

In addition to lost development finance, Ilunga also noted to IPS that such actions have exacerbated inequality in the world, stating: “This is the same rigged system that has created the situation where…the wealth of the richest 1% surpasses the combined wealth of the rest of the world.”

Though the use offshore companies is not illegal, Ilunga asserted that the legality of such actions is precisely the issue.

“Tax dodging exists in a legal gray area with some activities clearly violating the spirit of the law even though those activities are not technically illegal. But the fact that these activities are legal is precisely the scandal we are most concerned with,” Ilunga said.

Fagan told IPS that it does not matter whether it is legally acceptable to have tax avoidance schemes.

“Just because it’s not illegal does not mean it is not a form of manipulation, form of corruption,” he said.

Ilunga and Fagan noted that the Panama Papers are a wake-up call and urged governments to end harmful tax practices and close loopholes. They highlighted the need to institute a public registry which lists companies’ true owners, where money is being earned and how much is being earned.

Ahead of the United Kingdom’s anti-corruption summit to be held in May 2016, Oxfam and TJN also called on the U.K. to lead the fight by halting their large network of tax havens including in the British Virgin Islands and the Cayman Islands.

“The anti-corruption summit provides an opportunity to dismantle the financial secrecy that threatens the [Sustainable Development Goals’] progress against poverty before it even begins,” said Oxfam Policy Advisor Luke Gibson and TJN’s Director of Research Alex Cobham in a briefing paper.

Cobham told IPS that though global reforms are essential, domestic stakeholders must ensure that tax revenues will be used to help meet the recently adopted Sustainable Development Goals (SDGs).

Included in the SDGs are commitments to reduce illicit financial flows and corruption by 2030 and to strengthen domestic resource mobilization including improving capacity for tax and revenue collection.

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Opinion: Africa, the Need for Greater Integration Tue, 12 Apr 2016 15:17:13 +0000 Roberto Azevedo Roberto Azevêdo is WTO Director-General ]]>

Roberto Azevêdo is WTO Director-General

By Roberto Azevêdo
CAPE TOWN, South Africa, Apr 12 2016 (IPS)

There is a misconception, by some, that the World Trade Organization (WTO) is a barrier to regional integration. It is one of a number of misconceptions that do not match up with the facts like the perception that the WTO is a rich man’s club. Today the WTO has 162 members and rising at all stages of development. 43 of those members are African countries and rising. The organization now covers around 98% of world trade. It is a truly global organization, one where everybody has an equal say. And it is an organization which supports regional integration in Africa. Indeed, I would say that the need for better integration across the continent is indisputable.

Roberto Azevêdo

Roberto Azevêdo

It’s clear in the fact that intra-African trade remains just a tenth of Africa’s total trade. Or in the fact that the cost of moving goods within Africa is twice the global average. Or in the fact that an African company faces an average tariff of 8.7% when selling within Africa, against 2.5% elsewhere.

We need to tackle these barriers. And I would argue that doing this will help drive Africa’s integration globally. The statistics I just quoted show that the vast majority of Africa’s trade is with the rest of the world. And existing WTO rules give a great deal of flexibility for members to pursue regional agreements. This is plain in the proliferation of such agreements that we have seen in recent years. But they are not a new phenomenon.

Indeed, regional initiatives such as the Southern African Customs Union predate the multilateral system by some decades. Different kinds of trade initiatives have always co-existed with the multilateral system. It is important that they are coherent and compatible, so that they can all help to spread the benefits of trade.

The economic map of Africa today is defined by these efforts: from Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA), Economic Community of West African States (ECOWAS), and the East African Community (EAC) to the Tripartite Free Trade Agreement and, in due course, the Continental Free Trade Area.

The WTO supports these efforts. And the WTO’s Trade Facilitation Agreement provides a very practical mechanism for taking them forward. This Agreement, finalised in 2013, is about simplifying and standardising customs procedures, thereby reducing the time and cost of moving goods across borders. We expect that, when fully implemented, the Agreement could reduce trade costs by an average of 14.5%.

The East African Community has already applied a range of trade facilitation reforms, which have delivered remarkable results in cutting the time and expense of moving goods between countries. Rolling out such measures would unlock the potential of many traders across the continent especially small and medium-sized enterprises. But, in order to benefit from the Agreement, first it must be ratified.

The Trade Facilitation Agreement is notable for the benefits it will deliver but also because it was the first multilaterally agreed deal in the WTO’s history. We held another ministerial conference in December last year, in Nairobi and WTO members agreed to eliminate agricultural export subsidies. This helps to level the playing field, so that farmers in developing countries may compete on better terms.

Of course domestic subsidies still exist, so there is much work still to do. But that doesn’t change the fact that abolishing export subsidies is a big step. This is something which developing countries have been fighting for over many years.

In fact, it is the biggest reform of agricultural trade rules for 20 years. And it is a key target of the United Nations’s new Sustainable Development Goals delivered just three months after the goals were agreed. In the context of regional integration it is important to recognise that results like this could only be delivered at the global level. That’s why we need trade initiatives on all levels to be working well.

And this brings me to the other topic before us today the Doha round of world trade negotiations. This action on export competition was part of the Doha round as were other elements that were delivered in Nairobi, relating to food security and Least Developed Countries (LDCs).Notwithstanding these outcomes, clearly progress on the round as a whole has been too slow. It has not delivered as we had hoped when the round was launched in 2001.

The future of Doha was a major feature of the debate in Nairobi, and in the end members could not agree on a common position. Members are committed to keeping development at the centre of our work. They are also committed to addressing the remaining Doha issues, such as agriculture (particularly domestic subsidies), market access for industrial goods and services.

But, they do not agree on how to tackle them. And, at the same time, some members would like to start discussing other issues, in addition to the remaining Doha issues. Members have wisely decided to reflect on how these differences might be overcome and how we might collectively move the agenda forward.

So we are in a very important period right now. Members are talking to each other about how to advance the Doha issues and, potentially, how to move forward on other issues as well. Of course the economic outlook is tough at present, not least given the slump in commodity prices.

To recall Nelson Mandela’s words, there is much ’wise work’ to be done.


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Interoceanic Canal Bogged Down in Nicaragua Fri, 08 Apr 2016 23:58:54 +0000 Jose Adan Silva 1