MARCH BROUGHT TSUNAMI, KADDAFI AND BILLIONAIRES

March, 2011

Conference in Malta

The conference Intax Expo, dedicated to the taxation sphere, law and consulting services in sphere of the company’s registration, was held in Malta the 23-24 of March. The International Holding Midland was presented by Midland Trust — the licensed trust company of the British Virgin Islands, specializing in the company’s registration on BVI, trusts and foundations. Midland Trust disposed the stand with the informational material in the lounge of the expositions, and Hariett Skelton — the representative of Midland Trust that specially came from BVI, made a talk about the modern BVI legislation, oriented to the money laundering and the achievement of the transparency in the sphere of exchange of tax information.

More than 300 participants from the different countries of the world, such as Great Britain, Denmark, Austria, Netherlands, Switzerland, Liechtenstein, Latvia, Belize, Cyprus, Malta, Russia and Ukraine, were presented on the exposition. They were the representatives of consulting companies, advocatory, auditing firms, and also banks, that are specializing on the services of the international tax planning sphere, protection of assets, registration of low-tax and tax-free companies. In the opinion of the head of the Midland holding Maxim Stepanov that participated in conference on Malta this event became the one of the most significant in the sphere of company’s registration and tax planning.

The foreign banks are running away from Russia

The western banks have recently considered Russia as the big undeveloped market. But now some foreign creditors changed their opinion. As minimum six European and American banks announced last year their plans to cut or to close their transactions in Russia. Morgan Stenley sold his local hypotherapy department, while the Spanish Banco Santander gave up in December on the attendance of the natural person. As it turned out in the beginning of March, the British Barclays announced the closing of its retail department in Russia, that he acquired some years ago for the price of 750 million dollars. By the information of Credit Suisse, only the 24% of the households in Russia have the bank accounts. At that the Russian senior citizens, that were the witnesses of the dissolution of their savings during the 1998 year’s crisis, are referring to the banks suspiciously. But the young generation, vice versa, hunger for obtaining consumer loans for financing of their purchases — vehicles or household appliances. Russian hypothecary system is arising, and the new push of privatization from the Government has to provoke the rising of the investment-banking activity.

Nevertheless, some foreign banks, including Barclays and Santander, were suffering some problems in terms of competition with the biggest financial institutions. The occidental specialist believe, that Russian state banks hold under control more than half of all active assets in the banking system of the country and «enjoy the benefits of the unique and inimitable surpassing access to the cheap financing and high quality loaners». Sberbank and VTB- are the biggest state banks in Russia in terms of the volume of assets and nowadays they are gaining influence. Sberbank of Russia has more than twenty retail departments, and it is developing the sphere of invest banking. VTB, being the ex-soviet bank for the foreign trade, has more than 530 departments in the country, and its invest banking department is one of the biggest underwriters in the sphere of the selling stocks and shares. The VTB has recently achieved and accord of the buying the Moscow government’s share in the Bank of Moscow at the price of 3,5 million dollars, and this transaction became the most biggest acquisition, realized by the creditor in Russia.

While the Russian banks are developing, they are pressing out the foreign competitors. Swedbank is reducing its retail business in Russia, because it hasn’t obtain the necessary scale to become more profitable, as believes the representative of the credit organization of Stockholm, Tomas Baketman, The Rabobank Group from Netherlands asked the Central Bank of Russian Federation to cancel its license last month, with the purpose to have the possibility to pay attention to the more promising markets, such as India and China.

Although Barclays is refusing to have the retail business, it is eager to continue with developing its invest banking sector in Russia. The British bank — is one of the 22 financial institutes that were hired by the Government for support in the selling of state assets at the price of 34 billion dollars the next 3 years.

A little amount of European banks are still staying put. Societe Generale, that bought the Moscow Rosbank in 2008, has more than 16 thousand of employees in Russia — more than in another country beyond France. The Italian UniCredit group acquired the total control of the International Moscow bank in 2007 and has in Russia more than 100 departments. «As the analytics believe, Russia represent the history of development, and there is a big potential for banks, that could master the developing market of the consumer crediting. Thereby, the conclusion is suggesting itself, that the Russian state banks are intensifying their turns, making the foreign player from the «light-weigh category» to run away from the market.

Russia and Switzerland come to an agreement about taxes

Russia and Switzerland negotiated about the revision of some provisions of the Double tax treaty. Besides the paragraph about the rendering assistance according to the new international standards, in the new revision of the treaty appeared the provisions that would be more profitable for the Swiss economy, particularly, the reduction of taxes on dividends and the royalty payment.

But the content of the revised treaty is still non-disclosed. The next step will be its discussion in the cantons of Switzerland and in business associations with the goal to elaborate some remarks. After that the new revision of the treaty will be signed and presented on the approval of the Parliaments of both countries.

Russia: the amount of billionaires is growing

For Russian manufacturers and entrepreneurs the crisis falls behind. During 2 years since the beginning of crisis, the amount of billionaires tripled and rose beyond 100, according to the data of the American magazine Forbes. The annual Forbes rating never has been so numerous. This rating has to be thumbed and thumbed to see the list of all compatriots whose fortune achieved the cherished mark of one thousand million dollars. The «best moment» — the spring of 2008 (because the economic crisis broke out only in autumn) — the billionaires were 1125. By March of the 2009 the fortune of a lot of billionaires has shortened, and these people became ordinary multimillionaires. But this time, the amount of billionaires is big as never — 1210. Their joint fortune — 4,5 trillion dollars. This amount catches imagination, because this is twice as large the annual GDP of Russia. The first trio hasn’t suffered any changes. «The number one» with the fortune of 74 billion dollars became the citizen of Mexico Carlos Slim Khelu, possessor of the biggest telecommunication companies. The second place holds Bill Gates, that contributed to charity 28 billion dollars- and could become the richest in the world. On the third place — the more successful institutional investor — Uorren Buffet.

But Russia looks impressively in the billionaire’s list. In Russia live 101 billionaires, and Russia takes the third place in the world. USA and China are outrunning. The billionaires are as selected- 15 men are in the first thousand in Forbes, and 79 billionaires are the citizens of Moscow. But how could Moscow became the «richest» city in the world? The progress of Russian people is on hand! 62 men were the billionaire last year in Russia, while in 2009- only 32. Why this dash occurred? The reason is the total economic development in the world and the more expensive oil, as the experts say. There is a direct dependence, because among the rich people only some are related to the raw resources. The amount of billionaires doesn’t benefit Moscow- the restaurants become more expensive, as the clothes, property! In Paris is more profitable to do shopping rather in Moscow. The high level of concentration of wealthy people, makes the Moscow life for another people insufferably!

Taxmen counts that in Russia there are 385 of ruble billionaires.

385 Russian taxpayers declared their income of more than one billion rubles in 2009. In comparison with the 2009, the amount of billionaires decreased on 15%. While in 2010 was recorded the total reduction of the number of tax declarations on 16%. The reduction of the number of the ruble billionaires didn’t impede Russia to increase in 2010 the number of dollar billionaires more than in half, from 62 to 101. 79 billionaires live in Moscow, more than in any other city of the world. The leadership between the richest people belongs to Vladimir Lisin, the possessor of Novolipetsky metallurgical complex. His fortune increased from 8 billion to 24 billion dollars.

The damage of the earthquake in Japan costs 309 billion dollars

The damage of the earthquake in Japan, that took place the 11 of March, is evaluated at 25 trillion yen (309 billion dollars). It was declared by the Japan agency Kyodo News with reference to the calculation of local government. The estimation of the officials consider the expenses for the reconstruction of social infrastructure, residential property and plants. The fall of industrial growing, GDP, the trade volume weren’t included into the total losses. The earthquake of 11 of March of 2011 is usually compared with the earthquake in Koba in January 17, 1995, when the losses of Japan were 9,6 billion yen. The victims of the natural disaster were 6,4 thousand people, now perished and are missing 25 thousand people.

The natural disaster in Japan caused not only the significant destruction, but the break down of the cooling installation on some energy units of the Atomic Power Station «Fukusima-1». Harmful substances got to the atmosphere. The Japanese government prohibited to sell the agricultural productions from the regions that are situated near the Atomic Power Station. The damage to the farmers has to be compensated by the company Terso, operator of the Atomic Power Station.

The experts are notifying about the serious danger of recession in Japanese economy, but they believe that the recuperation would be fast, and the stroke of the global economy wouldn’t be significant.

The main exporters of the country, such as three biggest carmakers (Toyota Motor, Honda Motor, Nissan) and the electronic company Sony, were obliged to close the majority of its Japanese plants. Some property will remain closed till the end of month — because of the limitations in the delivery of electric energy. The experts recognize, that it’s difficult estimate the possible scale of the influence of the Japanese crisis into the global economy. For some expensive goods, manufactured in Japan (such as computer chip or some spare parts), it’s very difficult to find any replacement in another countries. As result, the factories of China, Europe and North America could stay without necessary components.

But the economists note that the shortage of the majority of Japanese goods, that compounds the global delivery web, wouldn’t last for a long time. The majority of goods can be turned out in other countries, as the experts believe. The additional borrowings, that will possibly need the Japanese government for the financing of the restoration, could pick up the earning power of the assets in all over the world. But the experts believe that this rising would be significant!

Whom would Gaddafi prefer?

Libya will give all its oil contracts to Russian, Chinese, and Indian companies, said Libyan leader Muammar Gaddafi. «We no longer believe the West companies, they took part in the conspiracy against us, he said. — Our oil contracts will be made with Russian, Chinese and Indian companies. The West is to be forgotten». According to him, out of all European countries only «Germany may count on oil contracts with Libya in future». «We will not give our oil, which the West wants to possess», added Gaddafi. According to him the League of Arab States, having made a stand against Libya, no longer exists«.

Speaking about the situation in the country, Libyan revolution leader remarked that the current events are «insignificant incidents, planned by terrorist groups of „Al Qaeda“. It all will soon come to an end» — he declared. The day before Libyan leader Muammar Gaddafi made an appeal to Russia, China and India to invest in Libyan oil sector. Oil industry of the country has suffered significantly from the consequences of the civil war. There is a lack of skilled personnel, who could operate oil stations; international sanctions have its adverse effect on it, and the denial from the part of a range of international banks to transact operations connected with Libyan companies has its negative effect as well. Before combat actions the amount of black gold extracted was 1.6 million barrels per year. In the country operated famous corporations such as American ConocoPhillips and ExxonMobi, British — Netherlandian Royal Dutch Shell, Italian Eni and Spanish Repsol. The last events at the end of March nevertheless show that it’s getting more difficult for Gaddafi to control the situation and his opponents overpower him more and more frequent.

China will become the world’s biggest economy by 2030.

China will powerpast the USA in GDP volume by 2030 in case it will be able to increase its GDP by 8 percent each year during 20 years, say the economists of the World Bank. At the moment the first position of the world GDP volume is held by the USA (about 14,6 trillion dollars) the second position at year end is occupied by China (5, 879 trillion dollars), leaving behind Japan (5,474 trillion dollars) judging by amounts of economy in 2010. In 2007 China became the world’s third economy, having taken this status from Germany. During the last decades Chinese economy was growing much faster than other big world economies, and since 1990 till 2010 GDP of the country increased by 10.4 percent each year. In 2011, according to the forecast of Chinese government, the economy will «add» 8 more percent. A year before, GDP of the country increased by 10.3 percent.

In nominal terms in 2010 China’s GDP increased in 100 times comparing to 1978, when the former leader of Communist Party of China Den Syaopin started market reforms. Before they began the country was at the end of the second ten of world’s biggest economies. Such a fast development of the economy puts China at a great risk of inflation, and the uprise of a «bubble» in the real estate market. That’s why Chinese authorities try to limit GDP growth «to cool» the overheated economy.

Nomos bank declared its introduction into London Stock exchange

Judging by the official statement made in March by Nomos Bank, which is now in the 30 biggest Russian banks list, it is going to make its primary share placement (IPO) in London Stock Exchange. Shares of common stock and depository receipts will be offered to investors in the second quarter of 2011. First the plans of Nomos Bank IPO introduction were announced by Reuters at the end of the previous year. According to one of the agency’s sources, Deutsche Bank, one of the organizers of the placement, estimated Nomos Bank in 4 billion dollars. It is said that Nomos bank will sell to investors no less than 20 percent of shares. In the course of bank’s IPO, shares, possessed by Slovakian businessman Roman Korbachke, will be sold, and he expects to get 700 million dollars for his shares.

Also during IPO shares of new emission amounting to 5,5 billion rubles will be offered. These shares will be bought out by the main shareholders of the bank — Alexander Nesis (18, 66 percent) and PPF Czech group (28, 24). In September 2010 IST group owned by Nesis started the consolidation of active assets of Nomos bank and Khanty-Mansiysk bank, owned by Nesis as well. Analysts say that it may be connected to the businessman’s plans to introduce his bank into the stock exchange.

Auditors increase responsibility

At the end of March in Nicosia a seminar was held, organized by the Institute of Certified Public Accountants of Cyprus (ICPAC). In Nicosia hotel Cleopatra, Cyprus accountants and auditors discussed such issues as responsibility of the staff of international companies in cases of fraud and money laundering, and also auditors’ responsibility before directors and secretaries of international Cyprus companies. What is more, the issues of fulfilling obligations of directors and secretaries by auditors in international companies were raised. At the moment auditors of Cyprus are highly appreciated and respected in a range of countries and are frequently dealt with in official work and tax reporting of international companies in Russia, Ukraine, Czech Republic, Kazakhstan and other countries.

Byelorussians are buying up the foreign currency

The residents of Byelorussia began to buy up foreign currency large-scale. They are afraid of devaluation, though the government has been insisting that they will not decrease the rate of Byelorussian rubles. Last time sharp devaluation in Byelorussia took place in 2009 that was the response of the authorities to the world crisis. There was nothing surprising in decreasing of the national currency rate: it happened not only in Byelorussia, but in many other countries on the post-soviet territory, including Russia. But in Russian stock exchanges the sharp attack on ruble was stopped by the beginning of the year, and in Byelorussia it was a little longer. After 2009 in Minsk they are very careful about rate determination: devaluation, besides the health improvement of state economy, comes along with big political risks, because the decrease of currency rate for ordinary people is first of all the growth of inflation, and deposits and investments devaluation.

In the beginning of March The International Monetary Fund published a report on the working results of Fund’s mission in Byelorussia since the 25th of January till the 2nd of February. It turned out that the international experts offered to the local authorities to devaluate the currency to decrease the trade balance deficit.

According to the local media, dollars, Russian rubles and euro are being bought up not only by people but also by companies and financial organizations.

In the middle of March the rumors of coming Byelorussian ruble devaluation led to large-scale buy up of foreign currency by the residents. In December last year in the forefront of similar rumors Byelorussians bought up foreign currency of 600 million dollars more than sold.