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BERMUDA INDEPENDENCE REPORT UNVEILED
The facts are in, the recommendations are made, and the Bermuda Independence Commission Report is available to the public – all 600 pages of it. Bermuda can afford the costs associated with Independence, the report declares, offering an annual cost range of $5.3-$14.7 million, depending on an independent Bermuda’s Government policy. A summary of costs and their ranges is included in the report, however the BIC warned, “The final cost of Independence can only be determined when Bermuda has made the decision to go Independent and the Government of the day has made various policy decisions on the scale upon which an independent Bermuda would conduct its affairs.”
Questions of nationality will have to be considered at a Constitutional Conference in the future, but the BIC recommended that Government explore the question of Bermudians retaining any British nationality as “a matter of urgency”. The report noted that the general British Government policy is to withdraw British nationality from citizens of newly independent nations unless they have family ties. Fears of a mass exodus of international business from an Independent Bermuda need not be entertained, the BIC says – so long as conditions remain favorable and competitive to such business in the country. Those issues may also be decided at a Constitutional Conference.
Such a Constitutional Conference would take place before Bermudians decided any questions on Independence, Premier Alex Scott said yesterday, so that any final questions about how the country would move to self-determination would be decided before any final decisions are made. That, the Premier said, is what a General Election is all about – to answer such detailed questions as the state of a new tax regime or where to open consulates. “It has to be part of somebody’s platform,” he said.Link here.
Is Bermuda ready to cut ties?
White Bermudians are going to have to make more of an effort to understand why independence is so important to black Bermudians, authors of a new report say. The Bermuda Independence Commission (BIC), headed by First Church of God Bishop Vernon Lambe, released the results of an 8-month study yesterday. The report covers the cold facts and figures, such as how much it would cost to go independent – up to $10 million a year – and the fact Bermudians without British family ties would lose their British citizenship, but it also warns the whole discussion is meaningless without better race relations.
One section of the report reads, “Some black Bermudians associate Bermuda’s current colonial status as being only slightly removed from its history of slavery and segregation. An advantage of independence for them is the logical and necessary step towards full emancipation.” It continued, “This may be a difficult concept for some in the white community to grasp but until they do, it is nigh impossible to have a meaningful debate on the subject.”
The 600-page report, available here, is being distributed to schools, post offices, libraries and churches. Premier Alex Scott calls it the “most comprehensive report ever compiled in Bermuda on the subject of independence.” The document sets out what it means to be a British Overseas Territory in terms of constitutional matters like the Governor’s responsibilies and internal and external security. It breaks down what it would cost both financially, and to the nation’s psyche, to sever ties with Britain.Link here. “No instances” of independence referendums? What about Bermuda, ca. 1995? – link.
Opposition leader Grant Gibbons demands referendum in six months.
Parliamentarians ought to prepare themselves to debate the details of Independence referendum legislation during the coming session the Opposition leader declared, as he demanded Government set a date early next year for a test on Bermudian’s desire for statehood. United Bermuda Party leader Grant Gibbons said that if a referendum were held in March, six months from now, there would be more than adequate time to prepare for it. And Dr. Gibbons also demanded that Government present its absentee ballot bill before such a referendum to allow young Bermudians studying abroad a chance to vote.
Discussing the Bermuda Independence Commission (BIC) Report for the first time since its release a week ago, Dr. Gibbons said he felt the ommssion of the UBP’s submission from the Report and other “glaring errors” seriously undermines the credibility and fairness of the Commission and its findings. He said it was hard to believe that the omission of the UBP’s submission to the BIC was “an oversight”.Link here.
Bermuda lags behind Cayman as hedge fund domicile.
Bermuda continues to lose out to the Cayman Islands as a hedge fund domicile, industry insiders at a two-day conference on the Island heard yesterday. Some 600 high net-worth investors and fund managers, as well as fund administrators who provide support services to the trillion-dollar industry were on the Island for the annual MARHedge World Wealth Summit at the Fairmont Southampton. In a special session on offshore domiciles, an accountant, a lawyer, a fund administrator and an industry consultant broke down the attributes of several offshore domiciles – Bermuda, Cayman, British Virgin Islands and the Netherlands Antilles (Curacao) – for a hedge fund audience.
Boris Onefater, who is based in New York as national director of accounting giant Deloitte & Touche’s hedge fund practice, said while there were only minimal differences between Bermuda and the Cayman Islands, the latter continued to attract the bulk of hedge fund incorporations because the industry’s U.S. lawyers are in the habit of recommending it. The Cayman Islands Financial Services Association in June claimed that the jurisdiction was grabbing eight out of every ten hedge funds in the world.
The number of hedge funds – privately owned, cash-rich investment vehicles boasting high returns – has doubled in recent years bringing funds under management to more than $1 trillion. “In many respects Bermuda and the Caymans are very similar jurisdictions,” Mr. Onefater said, dating back 30 years when both attracted hedge funds as the then fledgling industry got off the ground. By now, he said, Cayman easily attracts 45 percent to 65 percent of all funds registered.Link here.
NEW ZEALAND LEADER AHEAD IN VOTING
Prime Minister Helen Clark will begin talks with other parties to form a coalition government after her Labour Party held a slender plurality over the main opposition National Party in the election on Saturday. Labour won 40.7% of the votes cast on Saturday, according to the Chief Electoral Office Web site. National garnered 39.7% of the vote and its leader, Don Brash, would not concede defeat on Saturday. More than 218,000 votes still have to be counted from people who were not in their voting districts on Saturday, a process that may take as long as 10 days. These votes have the potential to alter the final count.
Ms. Clark, seeking an unprecedented third term as a Labor prime minister, has governed since 2002 in a minority coalition with the Progressive Party, relying on the Green Party and United Future for support of its spending plans and laws. After her election showing, she may have to enlist the support of three or more minor parties to govern again.Link here.
THE COMPLETE TRAVEL GUIDE TO THE BAHAMAS
Whether you prefer hippy chic hotels or high-octane water sports, this northern Caribbean island chain has a turquoise-fringed, white-sand beach for you. Start at the beach. These islands boast great swathes of powdery white sand, but some of the best is quite far off the beaten track. The Bahamas comprise around 700 islands and 2,000 cays, only 1% of them inhabited, running in a scattered, 650-mile line down the northern Caribbean. Although formerly a British colony, the country takes its name from baja mar, Spanish for “shallow sea”, a reference to the reefs and sandbars that snake through its emerald waters. Over the centuries, infinite numbers of ships have found themselves snagged on this jagged, watery landscape but today the same features sustain a lively tourist industry.
There are three main centers. The first is the capital, Nassau, on New Providence, where most international flights arrive. Next is Paradise Island, just offshore from Nassau and linked by two bridges. Finally, on the island of Grand Bahama, is Freeport. Nassau has more colonial charm than Freeport, which is only a 40-minute flight from Miami, so has been heavily Americanized. At the opposite extreme are the “Out” islands, some of which are now well set-up for tourism. These include the Abacos, highly regarded for fishing, Andros, the closest the Bahamas gets to jungle, historic Eleuthera, and the yacht-packed Exumas. Most are characterized by quiet tropical landscapes, tangled mangroves and the odd resort pushing up, incongruously, from the sand. All the inhabited islands are connected by air. Apart from the fast ferry between Nassau and Eleuthera/Harbour Island (see above), local ferries are only really useful for getting out to the more remote islands.Link here.
ANDORRA A HAVEN IN THE PYRENEES
What tiny princedom contains some of the most spectacular scenery and the best skiing in the Pyrenees? Where are remote hiking trails and quaint mountain villages just a few minutes away from urban sprawl, luxury shopping, and traffic jams? The answer is Andorra. Located between France and Spain, the Principality of Andorra comprises 468 square kilometers of glorious mountains and rivers coupled with a booming economy. Tourism is the major industry of this democratic princedom along with duty-free shopping, sheep, timber, tobacco, and banking. For a kaleidoscope adventure of mountain sports, shopping, and thermal water leisure, Andorra is the place to go.
The only way to reach Andorra is by road, either from France or Spain. Not for the faint-hearted, the trip itself is part of the fun. Any valid passport is acceptable and the border crossing typically presents no problem or delay. One simply drives through the checkpoint unless flagged down by a customs official. Driving is not recommended during the fall and winter months as the mountain roads, although very well maintained, are nonetheless treacherous due to the high altitudes and unstable weather. Even in the summer fog, trucks, cars and bicycles can create challenging conditions. There are passing lanes throughout, but be prepared for delays as one passes through a series of small towns with traffic circles.
The population of Andorra, comprised mostly of Spanish followed by Andorran and French, speak Catalan, Spanish and French. Most service personnel in hotels and shops understand and speak some English but it is wise to know a few basic greetings in Catalan. Using the telephone is not cheap. To make a call one must purchase a telephone card for €6 (apx. $8) which is good for 100 units. Placing a call to the U.S. will cost three units plus another one every six seconds! A rather complicated, expensive system that we eventually gave up on. Internet access is no joy, either.
Andorra is a place that has grown on us, making each new visit a journey of discovery. But it is not for everyone. The juxtaposition between urban development and nature may be too jarring for some to make the strenuous trip worth the effort.Link here.
INVESTMENT BANKS SWOOP ON GULF ARAB OIL BOOM CASH
Foreign investment banks are rushing to cash in on the oil boom in Gulf Arab states with the region’s capital market surging and local investors scouring the globe for deals. Some banks are gearing up for the launch on September 26 of the new Dubai International Financial Exchange (DIFX), trumpeted by local officials as a project that will transform the Gulf emirate into another New York or London. Even for those who are cautious about such ambitions, there is no denying the surge in share issues, mergers, and other business for investment banks. Bankers estimate there will be more than $150 billion in project finance alone over the next five years, if oil prices remain strong, from Gulf Arab states – Saudi Arabia, Qatar, the United Arab Emirates, Bahrain, Kuwait and Oman.
In the UAE, trading volume soared 343% on the Abu Dhabi stock market in 2004 and 1,238% on the Dubai market. The price of a barrel of crude has doubled in a two-year rally, driven by U.S. and Asian demand, to touch levels in real terms not seen since 1980, the year of the Iran-Iraq war. Middle Eastern oil exporters are estimated to have netted over $1 trillion in oil revenues in the past five years. There are questions about how long the boom will last but many banks find the potential rewards irresistible.[
While foreign banks have always vied for a piece of the pie in the world’s biggest oil-exporting region, a mix of factors, including soaring crude prices, is changing where bankers sit. “Traditionally, investment banking has been done by top tier international banks offshore, based in London,” said Omar Al-Salehi, Middle East head at UBS Investment Bank. “The region is changing and there are more deals, with the higher oil price and more privatization, so now people are reviewing whether to put bankers on the ground.”
Foreign banks are already big players in the region, taking up most of the top 10 positions in areas such as project finance, debt capital markets and merger and acquisitions advisory, according to data provided by Dealogic. But recent growth in these businesses is unprecedented. Volumes in regional project finance and merger and acquisitions in 2005 have already surged past the 2004 total and are double that of 2001. Nearly $11 billion has been raised in debt capital markets so far this year, more than double the 2001 figure, Dealogic data shows.Link here.
ENLARGING PANAMA CANAL IS ENGINEERS’ CHANCE OF LIFETIME
To the world, the Panama Canal is a 51-mile long wonder slicing between two continents, carved by American ingenuity, money and mettle. To engineer Andy Harkness, of Bethel Park, it is a passageway to dreams, a reason to pore over drawings for 11 hours a day 7 days a week for three months straight, a reason to battle through pneumonia while fretting over the potential effects of an earthquake or runaway freighter. Harkness is among a team of local engineers anxiously waiting to see whether Panama, which took over control of the canal in 1999, will approve adding a third set of locks, a project that would cost $5 billion to $10 billion and take 10 years to complete. Voters in Panama are expected to decide the issue next year.
The U.S. Army Corps of Engineers tabbed Harkness and 19 others from its Pittsburgh office three years ago to help design new locks, more than a century after America launched its epic effort to build the canal. The canal’s two “lanes” are operating at 93% capacity and are expected to reach their limit by 2012. That and the fact that many of today’s massive freighters are too big for the canal’s 110-foot wide locks are spurring the push to add new locks and creating a third “lane” for the canal.
The canal took 10 years to build and cost America $352 million. Only wars had cost the country more. Some 5,600 workers, most of them from the West Indies, died working on the project. But the practical impact reverberated. The canal cut the trip from New York to San Francisco by 18,000 miles and meant sailors could bypass South America’s treacherous Cape Horn. The deployment of U.S. warships around the world has lessened the canal’s military importance, but it remains a vital economic cog for America and the world. More than 14,000 ships traveled last year through Panama’s locks, hauling 266 million tons of goods, including 135 million tons shipped to and from the U.S. The Panama Canal Authority, which is still weighing whether to expand, will compare the Army Corps’ conceptual design with that of a competing European consortium before making its final recommendations.Link here. Panama’s Torrijos remains in ratings slump – link.
BOOMERS CAN RETIRE CHEAPER IN MEXICO AND COULD HELP REDUCE ILLEGAL IMMIGRATION
By one estimate, almost 20% of GDP will go to seniors by 2030. Baby boomers are the first generation of grasshoppers in U.S. history. Their parents and grandparents, scarred by the Depression, scrimped and saved. The boomers put it on plastic. With private household savings rates near all-time lows, bills are coming due and the facts are increasingly clear. Some boomers not only will not be able to afford the retirement they dream of, many will not even be able to afford the retirement they fear. The cost of retirement is also going up. In 1940, the median price for a house in Arizona was less than half the national average. Today, with two generations of retirees swelling its population, Arizona’s housing costs are well above the national average. Prices at assisted-living facilities are rising at more than twice the rate of inflation.
There are simple, though not painless, steps individuals can take to improve their prospects. Put the plastic away for a while, pay down debts, build up savings. Delaying retirement a few years gives you higher Social Security payments, lets you squirrel some money away and allows any investments you already have more time to grow. And you can always develop a more realistic set of expectations. Do they have to be golden years? What is wrong with silver? But do not underestimate the economic wisdom of migration.
Adventurous seniors already know this. Up to 1 million Americans live in Mexico (up 500% in five years, according to some figures), and tens of thousands more live in Costa Rica and Panama, countries that market themselves as retirement havens. An income that can barely cover a double-wide in Florida can swing a condo south of the border. For the price of a condo in Phoenix, you can often have a villa in Mexico. Seniors who go south have to be brave and smart. The laws are confusing and sometimes rigged against foreigners. Crime can be a problem, the tax systems are tricky and sometimes unfriendly, and those who do not speak Spanish are further disadvantaged.
Worse, because the U.S. does not extend Medicare coverage to seniors living overseas, they have to find their own healthcare solutions. Though healthcare and prescription drugs can be far cheaper south of the border, serious illness is a financial issue anywhere. As younger and active retirees become older and more frail, they often have to return to the U.S. to obtain better services. Still, helping seniors move to where costs are low could give Medicare a boost while giving seniors more choices. To that end, the federal government should smooth the path for seniors looking to retire abroad.Link here.
Panama is paradise for retirees.
Panama is one of the best places in the world for retirees today, combining a low cost of living, near-perfect weather and one of the world’s best discount programs for retirees, with up to 50% off everything from public transport to movies, mortgage rates, doctor’s visits, electricity, restaurants and airfares. When you compare Panama with its neighbors, you will see that it has more amenities than traditional retirement spots such as Mexico and Costa Rica, with lower costs and crime rates. In Panama, you will encounter less red tape and less interference from local authorities.
To encourage long-term foreign investment, Panama requires no special authorizations, permits or prior registration for foreign investors. The Investment Stability Law, passed in 1998, protects foreign investors from any change in tax, customs, municipal and labor rules for a period of 10 years after an investment is registered. Major companies doing business in Panama include Federal Express, DHL, Sears, Price Costco, BellSouth, Kansas City Southern Railways, Continental and American Airlines, Warranty Company of the Americas and Hutchison Whampoa. Plus, you will find just about every American franchise you can imagine on the streets of Panama City. And there are other incentives for foreigners to spend time there, invest there … or retire there.
Panama is also perhaps the most accessible retirement haven for Americans. There is a frequent nonstop service to Panama City’s Tocumen International Airport. It is a 2½-hour flight from Miami on American Airlines and COPA, Panama’s national airline, which also flies from Los Angeles and Orlando, Florida. Continental flies from Houston, and Delta flies from Atlanta. Aeroperlas and Mapiex Aero are two domestic carriers that offer daily flights throughout Panama. Beware, however, that as accessible as Panama is to the U.S., it is still a foreign country. There are certain cultural differences that you can either accept and embrace … or try to ignore and become miserable and frustrated.
Panama has one of the lowest costs of living in all Central and South America. A U.S.-style home can be built for about $40 per square foot, unskilled labor costs $6.40 per day, a full-time live-in maid costs $120 to $160 a month, a beer at a bar costs 35 cents, electricity is about 10 cents per kilowatt-hour, water bills are $18 per year, telephone service costs roughly $30 a month, Internet access is $14 a month, cellular-telephone service costs about $30 a month plus a per-minute charge of around 22 cents, and cable TV will cost you about $30 a month. The three best places to buy real estate in Panama are the mountains of Boquete, the beaches of the Pearl Islands, and the First World metropolis of Panama City.Link here.
HOT TIPS AND PEARLS OF WISDOM FOR THE WOULD-BE GLOBAL REAL ESTATE INVESTOR
Tip #1: Position yourself to profit from the Baby Boomer’s invasion of Panama. In 1980 when Costa Rica introduced its famed pensionado program, U.S. retirees swarmed the place … and property prices soared. If you had bought a beachfront lot back then, today that same slice of coast could be worth 10 times what you paid for it or more. Panama is positioning itself as the world’s next great retirement haven. The best place to position yourself to profit from the coming invasion of U.S. retirees is the country’s First-World metropolis of Panama City.
Tip #2: Tourists and investors are returning to Croatia. Croatia is the next Spain (which for decades has been the number-one beach destination among European tourists), though they do not want to be the next Costa del Sol. The government has put restrictions and regulations in place to protect against overdeveloping (critically, before it starts). But Croatia has more going for it than Spain (at least the coast of Spain). It has the potential to attract a wider variety of visitors and repeat visitors. The potential in this re-emerging market is great in both the short- and long-term for gains in property value, because it is under-priced today.
Pearls: 1.) Like-kind exchange it to defer capital gains tax at home. 2.) Contact a title insurance company before you buy your home or land. 3.) Use your 401(k) or IRA to fund your investment overseas. 4.) Avoid long-term rentals in countries where tenants’ rights are sacred – Paris, e.g. Short-term rentals to tourists are typically a better investment, in Paris and other cities including Buenos Aires, Bucharest (Romania), and Panama CityLink here.
THREE HOMES FOR THE PRICE OF ONE
Ideally, I would like to buy three unique homes in Central or South America for the price of one home in the U.S. We just sold our house in Cuenca, Ecuador, which leaves us with just one home – a delightful country place in Vilcabama, Ecuador. But that means we have two other homes yet to buy. After weeks of deliberation, we have settled on a pretty exciting game-plan.
First, we want to keep our primary home in rural Ecuador. We love the place for it charming rural setting, but we also appreciate its proximity to Cuenca, Ecuador’s most beautiful city. Second, we would also enjoy having a place in the historic center of a large city, with access to all the things that make a large city enjoyable. (At the moment, Montevideo, Uruguay looks good for a city venue.) Third, aside from the country home and city apartment, a beach home would be nice, too, would it not? For this one, we are thinking of the Pacific Coast of Nicaragua. In my opinion the locations offer the best of what I want each of them for, at prices that I can afford as an early-retiree with little income.
Ecuador has perfect weather, with low-cost properties and inexpensive labor for building a nice home. We do not need heat or air conditioning, and we pay no income taxes. Property taxes on our house in Vilcabamba are less than $10 per year. Montevideo has a European ambiance and old-world charm. Its old historic center is my idea of a perfect city environment, with sycamore-lined streets, open air markets, fine restaurants, and sidewalk cafés. Property prices are reasonable, and the day-to-day cost of living is on par with Ecuador, if not a bit less. They have even got a jazz festival. Nicaragua’s beaches enjoy real “beach” weather all year. There is no cool season, no gloomy season, and even in the rainy season the sun shines most of the day. It is a place that you can go to anytime of the year to enjoy the surf and sand. Living costs, again, are on par with Ecuador.Link here (scroll down to piece by Lee Harrison).
Sunsets, surf and Nicuragua’s best burgers.
Leaving the coastal road, I parked the truck by the ocean and looked out at what many say is Nicaragua’s best surf spot: Iguana Beach. It is home to the country’s two best surf breaks, including the famous Colorado break. I have been to this property before, and still believe its wide, sandy beaches are among the most attractive on Nicaragua’s Pacific Coast. This is an overseas destination for retirement or vacation living that, for many, represents the best of both worlds: a golf course at your door and one of the country’s best beaches just a few minutes away. Moreover, you can make a few extra bucks by renting your condo out when you are not in residence.
Moving down the coast from Iguana Beach, my next stop promised to be an enjoyable one. San Juan del Sur, once a sleepy fishing village and now the only hub for tourism on Nicaragua’s southern Pacific coast. It is a place where everyone likes to hang out. Host to big surfing competitions, the town of San Juan del Sur boasts quiet, unspoiled beaches, and faces the brilliant Pacific sunsets. It is only half an hour from Costa Rica, and enjoys nicely paved roads back to the international airport in Managua. Here, you will find beachfront bars and restaurants, hotels, shops, and Internet cafes. Residents and visitors are well-equipped with cellular and Internet service, boat docks, markets, and gas stations. Cruise ship lines now make San Juan del Sur one of their Central American stops. And while San Juan offers all of these amenities, it manages to keep its authentic charm.
While hanging out in town, I found what I believe to be Nicaragua’s best burger at Big Wave Dave’s. Word around town has it that Dave’s got the best food in San Juan del Sur. What is missing here, though, is a destination resort – or, for that matter, much in the way of comfortable lodging in an environment that does not feel like you are roughing it. That is what brought me to Villas de Palermo, just five minutes outside of town, overlooking the bay. Villas de Palermo is an ideal opportunity for anyone wanting to invest in the booming Nicaragua coast. It is also suitable for people who do not want to live here full time, do not want to undertake a building project by themselves in a foreign country.Link here (scroll down to piece by Lee Harrison).
“FREE WORLD” TO “COMMUNIST” CHINA: BECOME MORE SOCIALIST
When it was clear that China would take control over all of Hong Kong in 1997 and not just the “New Territories” which Britain in 1898 leased for a 99-year period, there were many who worried that China would not respect its pledge that Hong Kong would remain de facto independent under the formula “one country-two systems” until at least 2047. Hong Kong have for long been the freest economy in the world while China previously was communist and still are so – albeit in name only. Hong Kong, they feared, would become more like China.
But as it turns out, China have instead become more and more like Hong Kong and have in fact worked to preserve Hong Kong’s relatively free economy. When the last British governor of Hong Kong, Chris Patten, in 1994 wanted to introduce a government pension system similar to Social Security in America, the Chinese government protested heavily and denounced Patten for trying to ruin Hong Kong’s capitalist character just a few years before the handover by implementing a “costly Euro-socialist” scheme in Hong Kong. It should be noted that Chris Patten belongs to the British Conservative Party yet he was denounced by “communists” for being too socialist! This says a lot of both how socialist Western conservatives have become and how market-oriented the Chinese Communist Party have become.
And in recent years we have seen more and more examples of this as representatives of “the free world” attack “the communists” for not being socialist enough. The Chinese government – like all governments – has a habit of violating people’s rights at will. But China certainly is in the important aspect of welfare statism much less socialist than the west and this is an important explanation for why the Chinese economy is so successful and will remain so – unless they start listening to the euro-socialist advice that “the free world” gives them.Link here.
Family portraits painted in China make tradition affordable.
A 4-year-old, rendered softly in oil paints, wears a white dress and smiles just slightly out of a heavy gilded frame. The portrait is one of 20 lining a small banquet room at the Grand Hyatt in Buckhead where North Carolina entrepreneur Hannah Davis is holding an open house. Davis’s fast-growing portrait business targets well-to-do families who want to continue the Southern tradition of family portraits but are not comfortable with the typical price tag of $10,000 to $20,000.
Davis’s hook: She commissions paintings in China, where the wages of artists, like other professionals’, are much lower than in the U.S. A 26-by-32-inch painting from Davis, such as the one of the white-clad girl, costs $3,500. A small painting can be had for less than $1,000. Davis commissions 60 child portraits a month through her Winston Salem-based firm. She is adding executive and pet portraits to her lineup. Her story illustrates that the opening of China’s vast labor market is changing the economy in ways nobody imagined. Not only are major industries like textiles being transformed by the cheap labor in China, but also a tiny niche business like child portraiture.Link here.
China’s troubled banks lure investors.
For almost a decade, China’s state-owned banking system has been in bailout territory. Since 1998, the government has spent almost $283 billion to shift a mountain of bad loans off the books of state-owned banks. In a report last week, the OECD said $203 billion more was needed to clean up the rest. Taken together, this rescue amounts to more than 30% of China’s GDP for 2004.
And while the Finance Ministry bails, a procession of senior managers at Chinese banks have been led away to serve long prison sentences for embezzlement, fraud and theft. Given this performance, foreign investors might be expected to give China’s banking sector a wide berth. Instead, global financial heavyweights have been scrambling for a piece of the action as China opens up its financial sector.Link here.
Private firms drive China’s growth.
Private business has overtaken the state sector to become the main engine of China’s economic boom and the source of most exports and new jobs created, according to a report from the OECD. In its first major economic study of China, the OECD drew a portrait of a successful transition from central planning to the free market, with rising private ownership delivering sustained growth and productivity. Once dominant state-owned industries continued to languish, it said.
A crucial question being asked by observers of the evolving political and economic situation in China is whether the rise of the private sector will eventually undermine the Communist Party’s iron grip on political power. The report did not broach this issue, and as yet there is no sign that the government is prepared to relinquish its dominant role in the economy through ownership of major companies in strategic industries like energy, steel, transport and finance.
Instead, the report said, China is developing a hybrid economy where, alongside private business, huge state-controlled industries still receive favorable treatment from the government. These state-run companies will continue to be partly privatized to provide new capital, increase competitiveness and bring in new management skills, but the government will retain control.Link here.
China establishing economic ties with Latin America.
China is expanding its economic and political ties with Latin America, a region traditionally seen as within the sphere of influence of the U.S. Some analysts say the Chinese move is accelerating as Washington has become more preoccupied with other parts of the world, particularly in conducting the war on terrorism and Iraq. What is driving the Chinese strategy?
Chinese President Hu Jintao paid a visit to Mexico recently, where he met with his Mexican counterpart, Vicente Fox, and members of Mexico’s Senate. The two leaders presided over the signing of various agreements, including one that may eventually allow Chinese companies to mine iron and other minerals in Mexico. It was Mr. Hu’s second visit to Latin America in less than a year. His stops last year included Argentina and Brazil where he met with the presidents of those countries and signed commercial agreements to increase Chinese imports of agricultural products and other commodities. China’s initiative toward Latin America appears to be part of a wider global strategy.
Michael Shifter, a Latin American expert at the Washington-based policy group, Inter-American Dialogue, said, “I think they are finding opportunities here and those opportunities are opportunities that the United States isn’t taking advantage of. There is a sense that the United States has looked elsewhere and hasn’t really put the energy and effort into taking advantage of the economic opportunities in this hemisphere. I think China has discovered that there may be some interesting ways they can take advantage of them so I think that’s happening, but I think this is part of their global strategy as a major power.”
China is looking at Latin America primarily as a source of raw materials like oil, timber and minerals. It also is importing agricultural products such as beef. These Latin American imports are supplying China’s rapidly expanding manufacturing sector and helping to feed its huge population.Link here.
What is so bad about Pearl Buck’s The Good Earth?
The book, movie, and Broadway show made Chinese people real for millions of Americans. Harold Isaacs is surely correct that for a generation of Americans, Pearl Buck “created” China in the same way Charles Dickens “created” Victorian England. Buck received the 1938 Nobel prize for a body of work which included The Good Earth (1931) and the twin biographies of her missionary parents. Critics charged that she could not compare with William Faulkner in the modernist values of stylistic complexity, irony, and moral ambiguity. Jonathan Spence’s survey of influential Western writing on China does not mention the book’s strengths, but comments (fairly enough) on the book’s “oddly archaic language”, which “sought to root China’s contemporary experiences in a timeless zone that has been at the center of so many Western views of China.”
Recently there has been a move to reconsider. Peter Conn’s readable and well-researched Pearl S. Buck: A Cultural Biography convincingly argues that Buck was marginalized for the wrong reasons. True, Buck wrote too much for her own good. She wrote her first novels to escape an unhappy marriage, to support a family, particularly her retarded daughter and adopted children, and if she became imperious and crotchety at the end of her life – well, how many male authors have done the same without being severely criticized for it? Conn urges that her reputation be restored if not to the highest rank, then at least to one comparable to John Steinbeck or Sinclair Lewis, and that her feminism and antiracism be part of the story of her generation.Link here.
HONG KONG’S Q2 GNP GROWTH RATE 7%
Hong Kong’s second quarter GNP grew 7% over the same period last year to $333.2 billion, while GDP grew 5.7% to an estimated $328.4 billion, the Census & Statistics Department says. Compared with GDP, the value of Hong Kong’s GNP was up $4.8 billion, representing a net external factor income inflow of the same amount, and equivalent to 1.5% of GDP in the quarter. After netting out the effect of price changes, Hong Kong’s GNP rose 8.1% in real terms, higher than the corresponding increase of 6.8% recorded for GDP. Both investment income inflow and outflow posted substantial increases in the second quarter, on the back of improved corporate profitability worldwide as well as increased interest income due to higher interest rates.
The huge amount of investment income flow into and out of Hong Kong, both equivalent to about two-fifths of the GDP, has reflected the city’s role as a financial center and a regional hub in aiding external investment activities. With investment income inflow grew faster than outflow, leading to a much larger net external factor income inflow, GNP rose at a faster pace than GDP in the second quarter.
Analyzed by country and territory, the British Virgin Islands was the largest source of Hong Kong’s external factor income inflow in the second quarter, accounting for 29.2%, reflecting continued investment income inflow from this tax haven economy where Hong Kong companies had set up a considerable number of holding companies. This was followed by the Mainland, with a share of 25.7%. Other major sources were the U.S. and the UK, at 9.5% and 4.9%.Link here.
Mickey and Minnie in Hong Kong.
The Disney people established a beachhead in China last week, with the opening of Disneyland Hong Kong. But like all Americans abroad, the Disney staff has to tread sensitively. When Euro Disney (now Disneyland Paris) opened in 1992, it made all kinds of mistakes. One unforgiveable gaffe: the no-alcohol policy, which meant no wine in the restaurants, something the French consider uncivilized.
Already, there is trouble on the cultural imperialism front in Hong Kong, according to the London Telegraph. Hong Kong newspapers have been filled with negative reports – the culling of stray dogs at the park, concerns about the effect of nightly fireworks on Hong Kong’s smoggy air, allegations of sweat-shop labor used to make park merchandise and high-handedness in dealing with health inspectors. To soften the image, staffers have been trained to smile and wish visitors “a magical day”.
Then there is the challenge of educating 1.3 billion people on China’s communist mainland, who would not know Goofy from Groucho Marx, or Karl Marx, for that matter. Disney has invested heavily in TV shows, cartoons and films and paid big money to China’s communist party in return for being allowed to send singing Disney storytellers into schools. Not on the song list: “It’s a Small Classless Society with Some Entrepreneurship After All!”Link here.
EU ADMITS CONSTITUTION IS ON ICE
European Commission President Jose Manuel Barroso has acknowledged that the EU will not have a constitution for “at least two or three years”. He said that the text was unlikely to be ratified in the near future, after French and Dutch voters rejected it. However, Mr Barroso said this should not mean paralysis in Europe. He said it was important to convince citizens of the relevance of the EU by creating jobs, improving security and protecting the environment.
The failure of referendums in France and the Netherlands earlier this year led an EU summit in June to call for a period of reflection, rather than risk further rejections in other countries. “There hasn’t been much reflection so far,” Mr. Barroso said. “We haven’t seen many initiatives.” Mr. Barroso insisted that the EU should not be nostalgic for the constitution, but should make the most of the existing treaty framework.Link here.
ANGLO IRISH BANK EXPANDS IN MIDDLE EAST
Anglo Irish Bank has been granted a license to operate in the United Arab Emirates following the successful entry of other Island businesses. The Isle of Manwts finance sector has increased its interest in the region, in response to the rapid development of the middle east economies. Government representatives led a delegation to the UAE earlier in the year and signed Memorandumwts of Understanding (MOUs) with the financial authorities in Dubai, the UAE and Bahrain. Lloyds TSB Offshore, Barclays Private Clients International, Zurich International, Friends Provident International and Standard Bank already have operations in the region and Anglo Irish is the latest to join them.
The area has benefited from rapid growth in many industries as the governments make an effort to diversify away from oil-related activities. It is also home to many wealthy ex-patriates, who require savings and pension type products.Link here.
WHAT HAS HAPPENED TO IRAQ’S MISSING $1 BILLION?
$1 billion has been plundered from Iraq’s defence ministry in one of the largest thefts in history, The Independent can reveal, leaving the country’s army to fight a savage insurgency with museum-piece weapons. The money, intended to train and equip an Iraqi army capable of bringing security to a country shattered by the U.S.-led invasion and prolonged rebellion, was instead siphoned abroad in cash and has disappeared.Link here (subscribers only).
NATIONAL TAX BLACKLISTS “OFTEN CONTAIN ERRORS”
National tax blacklists are often drawn up in an arbitrary, subjective and discriminatory fashion and many contain errors or even countries that do not exist, an international study (PDF file) for the Society of Trust and Estate Practitioners (STEP), a UK wealth management association, found. The study found that southern European and Latin American countries relied most on such lists and that where a sound methodology for assessing tax havens existed, it was often out of date. Many countries appeared simply to copy neighboring countries’ blacklists with sometimes bizarre consequences: when copying Mexico’s list, Venezuela blacklisted itself.
Mexico, meanwhile, has since 1996 blacklisted a country called Patau, which does not exist. The study assumes it meant Palau, a tiny Pacific island, which until 1994 was a US-administered United Nations Trust territory. Portugal, Argentina, Mexico and Venezuela also blacklist the UK territories of St. Helena and Ascension Island, although until April 2004 neither had a bank and St. Helena has a corporate tax rate of 30%.Link here.
GUERNSEY BANKING BUCKS PESSIMISTIC EU SAVINGS TAX-BASED FORECASTS
Guernsey Finance chief executive Peter Niven said the latest statistics showed that deposit levels held in Guernsey banks to the year ending June 2005 had risen by £4.2 billion on the total in June 2004, an increase of 6.1%. “This is a healthy increase across the board and there’s every indication that it is set to continue,” he said. “Some media reports that balances would reduce as a result of the EU Savings Tax Directive have proved incorrect at this stage. Most banks have reported that losses have been minimal.” Mr. Niven added that many customers had opted for exchange of information on their interest rather than paying the 15% retention tax. Total deposits with local banks at the end of June increased by £449 million vs. the March figures to reach £72.7 billion. Mr. Niven was upbeat about the banking sector, which currently comprises some 50 operations.Link here.
APPEAL LAUNCHED OVER AUSTRALIA TAX CASE RULING
The identities of several prominent Australian business and entertainment figures caught up in the Australian Crime Commission’s investigation into money laundering and tax evasion may be revealed this week. A late afternoon sitting in the Federal Court in Melbourne on Friday saw the Herald Sun win a legal bid to have a suppression order lifted against a well-known Melbourne identity, who has a bevy of clients even more famous than himself.
However, the victory was short-lived as the man’s barrister, Peter Faris, QC, announced his client was appealing. Federal Court judge John Mansfield, hearing the matter by video link from Adelaide, granted an interim suppression order which will remain in place until 4:00 p.m. on Thursday. Mr. Faris said his client was a solicitor with a substantial practice who had not been charged with any offence relating to the commission’s investigation, but had been served a summons to appear as a witness. His client had challenged that summons. Mr. Faris said since a temporary lifting of an order suppressing the solicitor’s name, his client had received substantial adverse publicity in the nation’s newspapers.
Mr. Faris said the solicitor believed the adverse publicity had led to his firm losing clients because readers would assume he was “doing illegal tax schemes for them”. Mr. Faris said it was a matter of public interest that witnesses appearing before Australian Crime Commission hearings were protected. Earlier on Friday, the Melbourne figure, known as “B” and and an Adelaide business identity known as “S” lost their application to stop the crime commission from examining their financial affairs. The pair’s barrister, Mr. Faris, had argued, unsuccessfully, that the summons issued by the Crime Commission was invalid and that the ACC Act itself was invalid.Link here.
EUROPE CIRCLES THE FLAT TAX
The flat tax. In the eyes of many fiscal conservatives, it is the Holy Grail of public policy: One low income tax rate paid by all but the poorest wage-earners, who are exempt. No loopholes for the rich to exploit. No graduated rates that take a higher percentage of income from people who work hard to earn more. No need for a huge bureaucracy to police fiendishly complex tax laws. U.S. conservatives have been pushing the idea for decades. But it has gotten its first real road test in the former Soviet bloc, where at least eight countries, from minuscule Estonia to giant Russia, have enacted flat taxes since the mid-1990s.
Most of these countries’ economies are growing at a far-healthier clip than those of their neighbors to the west. So it is no surprise that calls for a flat tax are now being heard in Western Europe, the most heavily taxed zone on the planet. Günther Fehlinger, president of Europeans for Tax Reform, a Vienna-based flat-tax advocacy group, says interest has picked up noticeably since last year, when a flat tax took effect in Slovakia. That country’s booming automotive industry is luring billions in highly desirable investment away from Western Europe. “That changed everything,” Fehlinger says.
The issue is so politically explosive that no Western European government is likely to impose a flat-tax regime anytime soon. But tax simplification is clearly in the air. What is driving this interest all of a sudden? It is a competitiveness issue, says Paul Mylonas, chief economist at the National Bank of Greece. “Our neighboring countries are reducing taxes, which provides them with a more attractive business climate.” Even without pressure from the East, many Western European governments face growing complaints about the complexity of their tax regimes.Link here.
Leading economies told to reform their corporate tax systems.
The leading industrial economies need to reform their corporate tax systems by lightening taxes on capital to attract new investment if they are to overcome Asian countries’ advantage in labor costs, a study by a Canadian research group concludes. The CD Howe Institute says while taxes in such countries as the U.S., the UK and Germany may appear low relative to the size of their economies, the structure of their tax regimes is a serious disincentive to capital investment.Link here (subscribers only).
LONDON SEMINAR EXAMINES OECD/OFFSHORE STATE OF PLAY
The Society of Trust and Estate Practitioners (STEP) is hosting a high-level symposium in London to examine prospects for future co-operation between international financial centers (IFCs) and OECD member states. The symposium, “Beyond The Level Playing Field?”, which is also supported by the International Trust Companies Association, brings together key thinkers from the private and public sectors in all the major IFCs, including Jersey, Guernsey, the British Virgin Islands, Bahamas, Barbados, the Cayman Islands and the Isle of Man.
Richard Hay co-chairman of STEP’s International Committee, said, “This is the first time that leading public and private sector players from so many major jurisdictions have come together to debate these fundamental issues. While confrontation with the OECD is dangerous, capitulation may be worse. The symposium will examine a third option of working jointly with OECD member states in advance of a level playing field, so as to remove discriminatory measures and lower the tax and regulatory barriers to free trade in international financial services.”
Since 1998, the OECD has been running an international initiative on tax information exchange. This has generally been viewed as arbitrary and unfair by focusing on IFCs in small states while permitting OECD financial centers like Switzerland, Luxembourg and Delaware (USA), as well as key non-OECD jurisdictions like Hong Kong and Singapore, to operate without adhering to the evolving regulatory standards. Numerous IFCs committed in 2002 to provide transparency and exchange of information on the basis of a “level playing field” embracing OECD member states and key non-OECD jurisdictions. Until a level playing field is achieved, the OECD’s project is stalled.
Progress on establishing a level playing field is to be reviewed at a milestone meeting of the OECD’s Global Forum in Melbourne, Australia this November. The STEP symposium will consider whether, in the continuing absence of a level playing field, IFCs should reject further cooperation, capitulate or find a constructive third way forward. STEP is a professional body providing education, training, representation and networking for over 11,000 members working in financial services in some 60 large and small jurisdictions across the world. Members specialise in trusts and estates, executorship, will writing, administration and related taxes.Link here.
BAHAMIAN FINANCIAL SERVICES EXPERTISE BEING QUESTIONED
Both professional and creative expertise in the financial services sector could use some fine-tuning, according to some experts close to the industry. Most of them advocate that in order to remain on the cutting-edge of developments and trends in the industry, more needs to be done in this area. “It’s true in some cases that we do not have the expertise, especially when it comes to designing and customizing products for The Bahamas. Much of the products that we provide in The Bahamas are basically products that other jurisdictions, like Cayman and Bermuda, bring out and then we adapt them. We make little changes here and there to fit with our legislation,” said economist Mr. Carlos Smith.
Mr. Smith, an economist at the Landfall Center, said the types of ideas that are generated are fine tuned to individual organizations and not ones that are employed across the financial industry. He also said the industry needs to take a more aggressive and proactive role, which could result in its being the leader in financial services in the region.
During an address recently at Ernst and Young’s third Annual Investment Funds Symposium, Allyson Maynard-Gibson, Minister of Financial Services and Investments, expressed her concern over the lack of professional expertise in the industry. “I note that as I travel to promote the sector, I hear strong concerns about the professional expertise or lack thereof in The Bahamas,” said Ms. Gibson.
As to why there is not enough innovation in the industry, Mr. Smith offered a practical explanation. He said sometimes the expertise or the potential leaders in the industry are overlooked in the hierarchical chain, established in most financial organizations. “The other component is that we have individuals in financial services who have the ability or the know how, but it’s just that they are not put in a position where they can [use that expertise] because of [hierarchies that exist],” said Mr. Smith.Link here.
Bahamas Trusts and due diligence rule.
This look at the due diligence requirements for estblishing a Trust or opening a banking relationship for a trust considers the Financial Transactions Reporting regulations 2003 (Amended) (FTRR) The provisions of the FTRR are not exhaustive, as most Financial Institutions in addition to the FTRR’s mandatory due diligence information for individuals have established their requirements and practices for establishing the trust or opening the related account. Requirements vary within Financial Institutions but some basics are uniform.Link here.
U.S. ambassador apologizes to Bahamas for embarrassment caused by drug list.
U.S. Ambassador to The Bahamas John Rood apologized to Deputy Prime Minister Cynthia Pratt for any negativity that a new U.S. narcotics report has caused The Bahamas. Ambassador Rood presented the deputy prime minister, who is also the minister of national security, with the International Narcotics Control Strategy Report 2005, which named The Bahamas as a major drug trafficking country. Minister Pratt said the report is a balanced one, which gives credit to the efforts that the Government of The Bahamas and its law enforcement agencies are making in the fight against illegal drugs.
Explaining the reason for the country’s presence on the narcotics list, Ambassador Rood said, “The fact that The Bahamas appeared on this list caused concern for a lot of people in the country, but it’s merely due to the country’s geographical position.” He said several countries that were named on the list have done exceptionally in their fight against drugs. Among those countries were Colombia, The Bahamas, and the Dominican Republic, he said. 17 other countries were also named to what is known as the “Majors List” for either being a major drug trafficking or drug producing country.Link here.
THE WRONG FINANCIAL GUIDANCE CAN COST YOU DEARLY
otten a good tip on a financial adviser lately? Consumers who decide they need help in choosing investments may find that choosing an adviser is the first step – and that winding up with the wrong adviser is a costly misstep. A few years ago, Michael Kostoff, a retired teacher in St. Augustine, Florida, turned for advice on how to invest her retirement nest egg to Vincent Cervone, a financial adviser recommended by Kostoff’s brother-in-law, a doctor. But instead of safer and more-suitable bonds and large-company stocks, Cervone put the bulk of her $114,000 into highly speculative micro-cap stocks, according to allegations recounted in an arbitrator’s award in June against a firm that helped handle the transactions. Net loss: her entire investment. Her brokerage, meanwhile, pocketed $19,000 in trading commissions on the account, according to Kostoff’s lawyer.
With more baby boomers worrying about their finances and finding an exploding number of confusing financial products on the market – variable annuities, wrap accounts, private real estate investment trusts, unit trusts – the financial-advice business is booming. NASD, the private-sector regulator of the securities industry, says its more than 660,000 registered representatives, also known as stockbrokers, were licensed last year, up more than 58% from 1990. Also up: scams. NASD filed 1,396 disciplinary actions last year, up 53% from 1992, the earliest figures available. Mary L. Schapiro, NASD’s vice chairwoman, says the need for investors to check out who is giving them financial advice is more acute than ever. “There are firms out there you definitely do not want to do business with,” she says.
As it happens, Kostoff was fortunate. Though Cervone has left the industry and his main former employer, Glenn Michael Financial Inc. of Melville, N.Y., had closed its doors, an NASD arbitration panel ruled against the firm that did back-office work for the brokerage, in a rare decision against a so-called clearing firm.Link here.
CAREFUL, OR THEY WILL HEAR YOUR PASSWORD
Computer scientists at the University of California at Berkeley have found a new way to crack computer passwords: By listening. Professor Doug Tygar and graduate student Li Zhuang use off-the-shelf microphones to record keystroke sounds and run the noise through a modified program originally designed to recognize human speech. On its first pass, the program correctly identifies only half the typed letters. The results are then fed through software that spots spelling and grammar errors. Data from these programs are used to train the keystroke recognizer, so that it gets more accurate with each pass. By the third run, “we get 96% of all the characters,” said Tygar. Tygar said that when assigned to crack a 10-digit password, the software replies with 75 possibilities. “This means we can break into one of every 75 people’s accounts, on the first try,” he said.
Even more alarming, sound snoopers do not need direct access to the computer. They could aim a sensitive parabolic antenna from a building across the street. They might tap the target’s telephone and collect keystroke sounds from its microphone. Many computers even have built-in microphones that “Trojan horse” software could trick into switching on and relaying the sounds to a remote location.
Tygar said that computer users should adopt alternatives, such as “two-factor authentication,” produced by companies like RSA Security Inc. of Bedford, Massachusetts. This method involves two passwords – the typical kind, and a second numerical one generated by an electronic device. The second password changes once a minute. “That sort of system would be robust against our attack,” said Tygar, “because you’d never type in the same password twice.”Link here.
POWER UP YOUR RETIREMENT PORTFOLIO: MOVE IT OFFSHORE
Gresham House Investment Trust is the world’s top-performing mutual fund – up an amazing 1,812% since 1996. But chances are, your U.S. broker will never tell you about Gresham House, not to mention more than 50,000 other offshore mutual funds, plus hundreds of thousands of foreign securities, that are not traded on U.S. exchanges. Why not? Basically, it boils down to laziness. Most U.S. brokers do not want to deal with the extra work needed to invest offshore for their clients. There are also legal issues to consider. U.S. brokers are not permitted to promote securities that are not either registered with the SEC, or that qualify for an SEC exemption. But, it is perfectly legal – and potentially very profitable – for you to buy these “forbidden” investments. And one of the very best ways to do so is through your retirement plan.
With a handful of exceptions, U.S. law does not address what investments you can place into a retirement plan. Instead, it lists various “prohibited transactions”. Whatever is not prohibited is, in fact, permissible. And there are no specific rules prohibiting any offshore investment. In other words, you can achieve all the advantages of offshore investments – higher returns, currency diversification, privacy, asset protection and investment continuity in the event of a temporary shutdown of U.S. markets – and not pay a penny in U.S. tax until you actually receive the profits! Indeed, if you make the investments through a Roth IRA, you will NEVER pay tax on the profits (other than estate tax, and even that tax can be avoided with proper planning) – and it is all perfectly legal.
Actually, a retirement plan is now the only way a U.S. person can own offshore funds tax efficiently and make buying or selling decisions about those funds. This is a consequence of an obscure provision of the U.S. tax code that imposes draconian interest charges on tax-deferred dividends or capital gains from most offshore funds. In most cases, because of the complexity and high compliance burden of the IRS regulations, there is no easy way to avoid not deferring the tax due. The outrageous result is that it is possible to owe more tax and interest to the IRS than you made in profits from the offshore fund! But, if you buy the funds through your retirement plan, you do not have to worry about this tax time bomb. Skeptical? All of the funds I mentioned are based in London, where the concept of mutual fund investing was invented more than a century ago.Link here.
KATRINA VICTIMS UNLIKELY TO GET BREAK ON NEW BANKRUPTCY LAW
Efforts by consumer activists and a handful of lawmakers to get Hurricane Katrina victims some breaks from a stringent new bankruptcy law are looking like a long shot. Through letters, e-mails and proposed legislation, the advocates are trying to convince the Republican-controlled Congress that Katrina’s economic aftermath will be so severe that the law’s October 17 effective date should be delayed a year for Gulf Coast residents, or other temporary reprieves should be granted.
But even some of the advocates acknowledge their chances of success are slim despite the number of homes, businesses and lives destroyed by the storm. Not only does Congress have many other fights on its hands right now, any debate about bankruptcy rules is burdened by nearly a decade of partisan politics that preceded the bill’s enactment.
Critics – including many Democrats, bankruptcy lawyers and consumer groups – say the law does not give clear exemptions to victims of a natural disaster. But the new law’s chief sponsors say no delay or changes are necessary because of a “special circumstances” provision that make it easier for filers financially devastated by unforeseen events such as hurricanes to have their debts erased. Republicans contend opponents of the new law are using Katrina as an excuse to make last-minute changes.Link here.
U.K. BILLIONAIRE GREEN VICTIM OF ID FRAUD
The charlatans and swindlers have targeted the little man for years. Identity theft via credit card fraud became an IT industry boom in itself. Yet hoaxers have now realized there are bigger phish to fry, in the form of corporate identity theft. According to a British newspaper report, billionaire entrepreneur Philip Green has apparently run afoul of such trouble. A property company Green reportedly runs with his mother was targeted by thieves, who charged cars, computers and cell phones to Green’s tab. It is not known how much Green’s company lost in the scam, but the Metropolitan Police in London have said the average cost of this form of fraud is $3.6 million.
How did the hackers do it? The criminals apparently abused a loophole in the system for registering business address changes in the U.K. Last December the registered address of Green’s company, Langley Road Investments, was switched from the swanky offices of its accountants to an apartment in a poor neighborhood of northwest London. When the tricksters tried to change the firm’s address back last month to avoid detection, the fraud was revealed. A source close to Green – who lives in Monaco and holds most of his fortune in his wife’s name for tax reasons – confirmed to the British paper, “There was a problem about six months ago with the address being changed. Philip is not involved in the company other than being a director.”Link here.
U.S. POSTPONES IMPOSITION OF BIOMETRIC PASSPORTS
The U.S. has extended the deadline for the switch over to biometric passports by one year until October 26, 2006. In the meantime the current machine-readable 2003 model Swiss passport will still be issued. The extension gives Swiss authorities the opportunity to be ready on time as they plan to have the new high-tech passport available from September 2006. Danièle Bersier, a spokeswoman for the Swiss Federal Police Office, said that everything was planned for the first biometric Swiss passports to be available from September next year. “Anyone who asks for a passport after that time will have a choice between the two types: the 2003 model which is available now or the more expensive biometric one,” Bersier explained.
The new biometric passport, which was supposed to be ready by the end of this year, will contain a digital picture and fingerprints of the holder. The push to introduce biometric passports came from the U.S., which wanted to tighten border security.
As part of the U.S. Visa Waiver Program, citizens of Switzerland and 26 other countries traveling to the U.S. for tourism and general business for up to 90 days do not need a visa. To continue to take advantage of this waiver after October 26, 2006, Swiss travelers need to have either a new biometric passport or a machine-readable 2003 model passport issued before that date. Alternatively, Swiss citizens can apply for a visa for short visits and transit.Link here.
I HAVE A CHIP, BUT IT IS NOT ON MY SHOULDER
“Can a microscopic tag be implanted in a person’s body to track his every movement? There’s actual discussion about that. You will rule on that – mark my words – before your tenure is over.” – Sen. Joseph Biden, to Judge John Roberts at his confirmation hearings, September 12
I cannot wait for the day when we all have microchips implanted in our heads. It is exciting to be so close – pet owners are already implanting VeriChips in their animals to help track them down, motorists have OnStar on call to pinpoint their location in case of emergency, and by 2006 the State Department plans to put Radio Frequency Identification (RFID) tags into new U.S. passports to keep track of us.
We are already scrutinized by surveillance cameras at stoplights and in public places, and the reauthorized USA Patriot Act gives the feds even more opportunities to search my house. So I say, why bother with all the inevitable lawsuits and legislative hot air? Let us skip to the next logical step. I hereby volunteer to be an RFID guinea pig. Just insert the chip discreetly beneath my scalp, so I can get started on my easy-as-E-ZPass existence.
Think of all the advantages. While you are stuck in line at the supermarket, the better-than-barcode technology embedded in my brain will allow the cashier not just to know who I am and where I have been, but charge my groceries directly to my account. Just a tilt of the neck, and I am sailing on through. This is what self-checkout was meant to be. The possibilities make my head spin.Link here.
AMERICAN LIFE UNDER A NATIONAL ID CARD
If you have done nothing wrong, then you have nothing to fear from these surveillance policies in the Patriot Act. There it was – the one line that is continually uttered by those who are determined to turn America into the society of Big Brother. It is the one line that will instantly bring out my own urge to kill anyone who has said it. My patience has run paper thin for such short-sighted, quivering, knee-jerk reactionaries who are willing to sacrifice our precious liberties for some false sense of momentary security.
Now, during a radio interview on the subject, sitting in my office on the opposite end of the telephone, I heard it said by my host. I had been feeling the frustration growing throughout the interview as he dismissed my fears of an allseeing, controlling government that can invade my own home without a search warrant or even a court order issued by a real judge. To him it was perfectly fine to pat down little old ladies and children in airports, while those fitting the profile of a terrorist could walk by, protected by political correctness. Its OK that all of our personal lives, our bank accounts, records of books weve read and videos weve rented could be searched. And above all, to him, the greatest idea yet devised for protecting freedom in this nation was the creation of a national ID card. Now, he said, we can control who comes in to this nation, where they go and who they are dealing with. And if you have done nothing wrong you have nothing to fear!
I lost it.Have you any idea what living under a national ID card will be like? Have you given it the slightest thought beyond your own selfish, primal fear of some unstated threat, I shouted into the telephone and over the airways. Well, I spend a majority of my time looking into this issue and let me tell you what I have found to be true. And then, you tell me if this will be a nation you want to live in. It was surprising to me that my host let me talk at this point. Perhaps the murderous tone in my voice warned him to stay quiet. Nevertheless, he let me continue. …Link here.
CANADA: PRIVACY VERSUS PATRIOTS
Those who handle individuals’ personal information, including financial details, in the course of business are required to treat that information in accordance with Canada’s privacy laws. This includes getting an individual’s consent as to where and to whom this information is disclosed. If it is stored with, processed at or otherwise shared with a U.S. or U.S.-controlled Canadian company, there is a risk the U.S.-linked company could be compelled to disclose that information to US authorities without the individual’s knowledge or consent. While the risk of access by U.S. authorities has always been present, the introduction of U.S. anti-terrorism legislation has raised concerns about the increasing ease and secrecy of access and its interaction with Canada’s privacy laws.
The USA Patriot Act was introduced in the wake of the events of September 11, 2001 as a means of increasing the government’s ability to intercept and obstruct terrorist communications and activities. To this end, the act facilitates, among other things, the ability of U.S. authorities to conduct searches and to seize or compel the disclosure of records. The implications of the act on Canadian businesses and the security of Canadians’ personal information, while still somewhat unknown, are highly relevant to any business that handles Canadians’ personal information and shares or transfers that information to U.S.-linked entities.
Until the U.S. government releases more information about the uses it might make of its Patriot Act powers, it will be difficult to determine how worried Canadian businesses should be and what should be done to protect the personal information of Canadians in the hands of U.S.-linked companies. In the meantime, by ensuring that clients are aware of when and how their information may be at risk of access by U.S. authorities, and by exploring other means of contractually protecting the data, Canadian CAs and their firms can protect themselves to some degree from breaches of Canadian privacy legislation.Link here.
ASHCROFT DEFENDS PATRIOT ACT
Former Attorney General John Ashcroft is well aware his name is nearly synonymous with the 2001 Patriot Act that gave the FBI and Justice Department broad powers. As its chief enforcer and defender, Ashcroft has been a target of librarians and civil rights activists who say the Patriot Act brings Big Brother into the private lives of ordinary citizens by allowing investigators to detain terrorism suspects. “I’m probably a poster boy for the ACLU (American Civil Liberties Union),” Ashcroft told members of the Economic Club of SW Michigan. “They’ve built their membership against me.” But he told the audience of mostly like-minded Republicans why the act is necessary in a post-9/11 country.
The act’s measures give federal investigators more tools to prevent future terrorist attacks, such as “bringing down the wall” of silence that prevented the CIA, FBI and local enforcement agencies from sharing information that could have stopped the planners of the 9-11 attacks. Measures like “roving wiretaps”, he said, sound alarmist, but they extend to terrorists what law officers have used to fight drug dealers for years.
Another provision that angered librarians at the time about the federal government being allowed to inquire about reading materials of patrons was also highlighted by a bookstore owner in the audience. She told Ashcroft she has no safeguards against her records being seized. Ashcroft said during the first two years of the Patriot Act, no library records were seized to hunt for terrorists. “I don’t think there have been abuses of the Patriot Act,” he said, adding that “libraries should not be a safe haven for terrorists.” He pointed out that before the act was approved, the federal government had reviewed library materials used by the Unabomber suspect while piecing together evidence against him.Link here.
Patriot Act on trial.
While Congress debates the future of the Patriot Act, a direct challenge to one of its provisions that exposes a chilling illustration of its use is under way in Connecticut. It is heartening that the challengers have won the first round. Passed in a congressional stampede in the fearful days after 9/11, the Patriot Act greatly expanded the government’s arsenal to pursue anti-terrorism investigations. Some provisions were reasonable extensions of existing power. Others were overreaching intrusions on civil liberties.
Of the latter, none attracted more attention and opposition (“hysteria”, then-Attorney General John Ashcroft called it) than the measure that allowed investigators to obtain patrons’ records from libraries and a host of other organizations and institutions … in permanent secrecy, without a court’s permission, without suspecting the patron of wrongdoing, and without an opportunity for the government’s demand to be resisted. Not only did the prospect of such snooping run contrary to our ingrained reverence for freedom of inquiry and thought, it was an abuse that a great many Americans could easily relate to – lots of us law-abiding types use libraries.
It is that provision that is on trial in a federal court in Bridgeport, in a case brought by the American Civil Liberties Association on behalf of … well, we do not know. That is the point of this phase of the court action. So secretive is this provision that the organization that received an FBI demand for records, through a form of subpoena known as a “national security letter”, would break the law simply by revealing that fact. What is known is that it is a nonprofit entity in Connecticut that is a member of the American Library Association.
The ACLU is challenging the constitutionality of the law, including its permanent gag order. The federal district court judge hearing the case has yet to consider the broader challenges but has ruled that the government was violating the First Amendment by preventing the organization from speaking out about the Patriot Act, identifying itself in the process. If Congress fails to restore constitutional protections, the courts must.Link here.
Businesses cope with Patriot Act’s requirements.
Tony Karimian brings an interesting perspective to the debate on the need for the USA Patriot Act. A native Iranian and a U.S. citizen, he opened the Air Center 1 flight school at Bowman Field shortly after Sept. 11, 2001, and he has seen the legislation come into play on more than one occasion. As a result of the Patriot Act, Karimian, a licensed pilot who has been in the U.S. for 28 years, has been required to closely scrutinize foreign nationals who come to him for flight lessons. The act requires that before foreign students can enroll in a flight school, they must seek permission from the U.S. Transportation Security Administration, which runs a comprehensive background check. “Security is tighter, which slows the (enrollment) process down a bit,” said Karimian, who occasionally receives inquiries about lessons from foreign nationals, primarily from Spain and other parts of Europe. “The background checks have created extra paperwork and require extra time, which translates into a need for additional financial resources,” Karimian said.
As Congress ponders whether to extend the USA Patriot Act, many businesses are grappling to manage additional expenses and responsibilities brought about by the 2001 legislation. Trucking companies, universities, trade schools, libraries, automobile dealers and financial institutions are among the sectors that have been affected. The Patriot Act went into effect in April 2002, but 16 provisions will sunset in October unless Congress extends them. The Senate and House are considering separate versions of bills to extend the provisions. What has put a strain on many businesses is a provision requiring banks, stockbrokers, automobile dealers and other businesses that provide financing to run background checks on each person applying for financing. Businesses must run the checks on a federal Internet database that contains names of people suspected of being involved in or supporting terrorist activity. They also must collect and manage additional identification and personal information.Link here.
CIVIL LIBERTIES UNDER SIEGE IN GREAT BRITAIN
RUNNYMEDE, England – Breezes sweep across the historic meadow where, 790 years ago, King John put his seal to the Magna Carta. It was here that the absolute power of the monarch was first curtailed and the rights of the individual were first enshrined, here that trial by jury was first guaranteed. As modern-day Britain faces the threat of terrorism, the rights of the individual, born in this meadow in 1215, are being diminished.
Since the 2001 terrorist attacks in the U.S., and with greater urgency since this summer’s deadly bombings of the London transit system, British officials have put forward a series of proposals that increase the power of government, narrow protected speech and, in some cases, abridge the rights of individuals to jury trials. Few dispute that this is happening. Government officials have been candid on the subject. Home Secretary Charles Clarke, Britain’s man in charge of policing, public safety and anti-terrorism measures, said this month that Europeans will have to accept that civil liberties must now be traded for protection from terrorists. If the European Convention on Human Rights – a document descended from the Magna Carta – gets in the way, Clarke said, it will have to be changed. Similarly, the head of MI5, Britain’s domestic intelligence service, warned that civil liberties might have to be eroded to keep citizens safe.
Those remarks prompted a rebuke by a former MI5 agent who thinks the intelligence services abuse their power. David Shaylor, who was jailed for six months in 2002 for revealing intelligence information to a newspaper, told the BBC that liberties lost would be hard to regain, and their loss could turn terrorists into “martyrs”. The debate in Britain centers not so much on whether civil liberties are being diminished as on whether that trade-off makes the country more secure or less so. Among the groups that argue the latter is Liberty, an organization that supports civil liberties. “Liberty is very concerned that at the moment there is this false debate about balancing rights and security,” said Doug Jewell, a spokesman for the group. “We are as concerned as everyone else with protecting our society from the terrorist threat. But this cannot be done by simply ripping up our hard-won rights and freedoms.”
Liberty argues that diminishing individual rights will make Britain more susceptible to terrorism. First, the measures will be seen as anti-Muslim, making British Muslims less likely to come forward with the kind of information that helped police solve the attempted London bombings of July 21, Jewell said. Second, he said, if Prime Minister Tony Blair is right that the fight against terrorism is an ideological struggle, eroding Britain's freedoms makes the country’s position weaker, not stronger.Link here.
GUERNSEY CALLS FOR FRESH THINKING ON THE WAR ON TERROR
Guernsey Financial Services Commission director-general Peter Neville has called for fresh thinking in tackling the funding of terrorism. In a speech at an international event on economic crime, he said that present controls were becoming outdated and needed to be more effective. Mr. Neville has called for: 1.) improving the provision of intelligence to regulators and firms, including feedback on suspicious activity reports, 2.) continuing to improve communication between regulators, firms, law-enforcement authorities and intelligence services, and 3.) ensuring that firms are not overburdened with bureaucracy and that the requirements placed on them are reviewed on a regular basis. “Not only must the regime be as effective as we can make it, but we must also retain the support both of the firms and of the public by engaging both the hearts and minds of those who are affected by the requirements,” he said.
Mr. Neville added that the politicians were reassessing the way they approached the war on terror. “It is time to evaluate whether what we are doing is the most effective way to play our part in countering the terrorist threat,” he told the Cambridge Symposium on Economic Crime. He said that what could be gleaned from publicly available information and the nature of the attacks indicated that the funding of terrorism did not take a lot of money.
More than $112 million has been frozen worldwide since 9/11. Mr. Neville said that it was difficult for financial services firms to decide whether a transaction would be used to finance an attack. The firms have to decide whether it is suspicious. “They have to reach into the minds of those involved and understand what is going to be done with that money after the transaction. Asking the firm and the individuals working for a firm to make such a guess and to reach the right conclusion when making that guess is asking the impossible.”
The final responsibility for making a judgement falls to the authorities. “But this still leaves the firms in the invidious position of having to operate a very bureaucratic set of procedures, backed up by extremely punitive sanctions on both the individuals and the firms if they fail to observe those procedures, with very little useful or specific information to go on. The result is an avalanche of suspicious activity reports, reporting far too many transactions for the authorities in many countries to be able to process effectively. In the absence of a crash course in mind-reading skills, what is needed is for the financial services firms to be given more reliable and more accurately focused information.”Link here.
DEMOCRATIC HALLUCINATIONS IN AFGHANISTAN AND IRAQ
Insular and secretive presidential administrations often deny reality to the point of absurdity when they blunder into foreign misadventures. The classic example is the Johnson administration during the Vietnam War. The Bush administration’s current quagmires in Iraq and even Afghanistan are taking on that air. For example, the administration is congratulating itself on the Afghan legislative and provincial election day passing without rampant strikes by a resurgent Taliban. Recent attacks have spiked to the worst levels since that group was removed from power in 2001. In fact, U.S. military sources have already started floating a proposal to pull out some U.S. forces from Afghanistan. Similar talk of a U.S. troop drawdown from Iraq after the December Iraqi elections also has come from the U.S. military.
All this chatter about U.S. troop withdrawal comes at a time of increased Taliban strikes—which have killed a record number of U.S. troops, seven Afghan electoral candidates, and four campaign workers – and a wave of insurgent carnage in Iraq that has caused the third largest monthly U.S. military death toll and the worst death count in Baghdad since the U.S. invasion. In Afghanistan, the reduced violence on election day probably indicates that the guerrillas were smart enough to lay low to avoid intensified security measures.
In both Afghanistan and Iraq, the disconnect between talk of troop withdrawal and increased violence can partially be attributed to the U.S. military putting pressure on the Bush administration for relief from its globally overstretched condition. But with next year’s congressional elections in the United States looming, the Republicans would like to show some sort of troop reduction to insulate themselves from Democratic attacks on the issue. Of course, the short-term goal of reducing U.S. forces exacerbates the administration’s difficulty in achieving its long-term objective in both conflicts: winning.
Similar U.S. credibility gaps are yawning in both Afghanistan and Iraq at a time when the public at home is already restless about such foreign entanglements and when the Bush administration seems to have no coherent long-term plan to extricate the United States with dignity from such quagmires. To those who lived through the 1960s and early 1970s, the situation is unfortunately all too familiar.Link here.
Do you and I willingly give up our freedom and property for the benefits of living in these United States? Do we tacitly consent to oppression by not moving to another country? Do we tacitly consent to the authority of our governments by not rebelling, by not throwing the tea into Boston harbor? John Locke and many today say “yes” … we tacitly accept the State by paying our taxes, by receiving its benefits (such as property protection!), and by not emigrating. They say we acquiesce in an implicit contract in which we give up freedom or accept compulsion in exchange for other things that we value.
This view is dead wrong. Why? We are born into a system, we are chained from the start. The deck is stacked against us. The State has powers that it accumulated many decades ago, before you and I were born, and has accumulated since. We can change our position only at great cost. If we calculate whether to consent or not, we seemingly consent because we expect that to fight will cost us dearly without our securing a gain. We are not making a social contract freely entered into. There are guns to all our heads, one of which is PAY YOUR TAXES. Protest that and you go to jail. Call this consent?
People love their country – their area, their people, their culture, their place. To move is a wrenching experience. Why should we have to move anyway? So we stay on despite the State’s impositions. Call this consent? The State controls education. The State passes out favors to garner support from intellectuals and the press. The State manufactures propaganda. The State ties as many people up in the knots of social programs and subsidies as it can. The State deifies itself. Basically, the slaves are indoctrinated to love their masters and fear any other situation. If your education is so poor that you do not know where prosperity and happiness come from – and they are not from the State – then you are a sitting duck for all sorts of misinformation and propaganda. Call this consent?
Tacit consent is myth. What we really have is tacit submission. The only reason that tacit consent has survived in our political thought is as a convenient, albeit incorrect, explanation of how unpopular and illegitimate States remain in power. Lew Rockwell has written, “… a sizeable majority have invested the state with a sufficient degree of institutional legitimacy to keep the political system running. Otherwise, the state and its programs would fall.” If we eliminate the ill-conceived doctrine of tacit consent from our thought, then we will want alternative explanations of how illegitimate States retain power. That is important. Understanding how rulers control their subjects helps guide us in actions designed to undermine their power. The idea of tacit consent is an ad hoc doctrine that says that people being coerced by a State assent to that State by living in that State, paying taxes, receiving benefits, and not moving elsewhere. Next time you are tempted to say that States rest upon tacit consent, say instead that they rest upon tacit submission. That conveys the notion that threat is involved, that we go along despite the costs imposed upon us by the State.Link here.
OUR GLOBAL HOUSE OF CARDS
Despite the advances of modern techology, we remain as vulnerable as primitive societies.
Perhaps it is natural to blame humans for natural disasters. The president is out of touch, the emergency services are uncoordinated, it is all a racist plot. The people who do this are either out of touch themselves – they have never coordinated more than a Sunday picnic or, more sadly, are victims of the disaster and are going through the first stages of grief. Katrina did not expose gaping holes in modern American society. It exposed weaknesses inherent in all today’s globalizing cities when faced with the forces of nature, chaos, call them what you will. Put simply, any human society is a house of cards. The more complex that society is – numbers of people, communication links, socio-economic levels, trade networks, income sources, resource needs, etc. – the higher the house, and the more cards that can collapse.
Looked at in this way, modern societies are not more robust and strong than less developed, simpler communities, but in fact are more vulnerable, requiring far more care and attention. Historically, large, complex civilisations have existed for a fraction of the time of simpler agricultural communities, and there is a reason: not, as we arrogantly assume, that they were less technologically advanced, clever and networked than us, but precisely because they were so advanced and complex, and hence a bitch to manage. New Orleans is a perfect example, and hence a timely warning for the future as the global population expands, its climate changes, and its cities become more mega.
Witness the fall. It took about 72 hours for a reasonably functional, high-tech, well-educated, urbane, globalised, wired and well-resourced population in the world’s richest nation to unravel and start behaving like a roving primate troop. This is not to criticize the people of New Orleans as individuals, it is to highlight how dependent we all are on social organisation and institutions. The death toll and damage caused by Katrina or any of the other recent major natural disasters has been far greater than any of the terrorist attacks for which we have so obsessively prepared, and a lot of that human suffering has occurred in the breakdown of social organization that follows.
Here are three of planet Earth’s recent lessons for its lodgers: 1.) Do not rely on your national government. 2.) Do not live in a stupid place. Large population centers below sea level or on major seismic fault lines really should start comparing the cost-benefit sums of gradual relocation versus catastrophic wipe-out. 3.) Love thy neighbor. We live in a giant, precarious and precious house of cards. How much of it blows down, and how soon, will depend on the strength of its bonds – not the concrete ones, but the compassionate, civil, and cerebral ones.Link here.
Where to hide from Mother Nature.
No corner of the United States is immune to lethal natural disasters. Still, some corners are safer than others. If an American wants to minimize his chances of dying at Mother Nature’s hands, where should he set up house? Slate crunched the numbers – and did some educated guesswork – to find where in the U.S. the odds of perishing in a natural disaster are closest to nil. How about rural Connecticut?Link here.
From Nineveh to New Orleans.
The surprising thing about New Orleans is not that the city should have been engulfed, but that it took so long for it to happen. Cities do not last. Those built in precarious places collapse. The rest are doomed to decay or suffer humanly induced destruction. It is only our historical myopia, which prevents most of us from seeing much of the past at once, that makes us think our cities are solid or enduring. We should know better, and there are plenty of authors rushing to put us right.Link here.
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