BETTER…BUT NOT QUITE

February, 2011

The Cypriot Finance Minister: The situation is getting better

The Minister of Finance of the Republic of Cyprus Kharilaos Stavrakis declared in February, that the economy of the island demonstrated the significant advance, and every apprehension of the opposition impedes to the further development of the economic indicators in the non-financial sector.

During the meeting of the ex-ministers of economy of Cyprus, Kh.Stavrakis added, that the improved in the preceding year economic situation, allowed to the country to meet all the tax duties before the European Union. The Cypriot Minister assured his colleagues , that this tax policy of consolidation will be continued in 2011 and 2012 and will allow to restrain the budget deficit on the level, exceeding 3%annual percent.

At the beginning of the February, the financial authorities of the European Union, satisfied with the results of the financial activity of Cypriots, stoke Cyprus from the roll of countries, that were under the financial monitoring of the EU.

Unemployment and expensiveness can lead to war

The head of International Monetary Fund Dominic Stross-Kan declared that the modern world economy suffers the high unemployment rate and the price rising, that could lead to the protectionism in the power-generating sector and cause wars between people. The price rising of foodstuff and energy sources during the last months stroke the poorest countries and became one of the indicators of mass protest in some Arabian countries of the North Africa, in Egypt and Tunis the price rasing lead to the overthrow of the presidents. In the head’s of the IMFD opinion, nowadays two dangerous unbalances exist that could lead to the new crisis. First of all, the homogeneous recuperation after the world crisis takes places not everywhere: the young developing countries are growing faster, than the developed and “warmed-over” economies. Secondly, the social intensification in the countries with the high unemployment rate and the growing distance between the populations incomes. During the next decennary the governments of different countries will meet with the unemployment trouble of the 400-million of young people, in the head’s of IMFD opinion. And the creation of new workplaces will become the top target not only for the developed economies, but for a lot of poor countries.

The heads of the world countries are worried with the price rising of the foodstuff

The heads of the world countries expressed their preoccupation of the world price rising of the foodstuff during the meeting that took place in Davos. As the Indonesia’s president noted, the earth population to the 2045 will growth to the 9 billion people, taking in consideration the present 7 billion. This will cause the additional burden to the food production, energy, water and resources. Heading the G20 and G8 the French president N.Sarkozi appealed to the system implementation of the international regulation.

Russia: the record recovery, unstable taxes.

According to the results of the 2010, the Russian government is satisfied with the results achieved in oil and gas sphere: the output of oil achieved the maximum indicator of 505 billion tons. The gas output has increased, was developed the oil and gas field development, the new deposit on the shelf of Caspian was set off, oil delivery to the Asian Pacific Region countries were aligned, the plant of production of compressed natural gas was put into the gross power, the development of Russian shelf was promoted. In the preceding year Russia managed to come out on top of the “black gold” recovery.

However, despite of some success, in Russia the new tax system for oil sphere is not developed, and the prices for oil are growing out of control.

The capital of the world shoping was called

The British investigators called the best city for shopping. It’s rather paradoxically, but this title conquered London. The capital of Great Britain took the first place of the volume trade of non-foods goods. Last year, this volume was 64,2 billion pounds. It is more than in of 22 cities of the list.

The second place took Tokyo, with the trade volume of 61,4 billion pounds. At the end of the leaders is New York with the trade volume – 47 billion pounds. And then Paris follows, with 46,6 billion pounds.

Nowadays, more than 26 thousand of stores of non-food goods exist in London. They represent 138 of 250 world leading webs of retail business. In the cities, that form the list, only at average of 90 leading trading brands exist. The London stores are visited by more than 14 million tourists annually.

Hong Kong is improving the registration system

From the date of 21st of February of 2011 Hong Kong instituted the new improved system of company’s registration. Henceforward this system of “one window” will empower not only to register the international companies, but amend some documents.

As the employees of representation of “Midland Consult” in Hong Kong note, the new system allows to fasten a process of the new companies’ registration and to work with the State Company Register timely. As they think, the business begun to develop because of the increased interest of the Russian, Ukrainian and other entrepreneurs to China. Using the possibilities of Hong Kong, it is possible not only to acquire the international companies to work with China, but to open accounts in the biggest banks, including in the Chinese currency.

Great Britain is going to attract wealthy people

The British government is working out plans of attracting to the country of wealthy entrepreneurs for permanent domicile. The Ministry of Internal affairs decided to institute the “investment visa”. The wealthy people will spend less time and less bureaucratic procedures for obtaining this visa. Up to now, Great Britain managed to attract several hundred millionaires, including the businessmen from the ex Soviet Union. However, England is still behind Canada that could attract more than 3000 millionaires from the different parts of the world. According to the proposition of British people, the investor that makes investments into Britain in volume of 10 million pound sterling will receive the permanent domicile during 2 years. Investing 5 million – during 3 years, 1 million- 5 years. Nowadays, everybody who wants to receive the permanent domicile by the investment visa, has to live in the United Kingdom no less than 5 years.

Bureaucrats forecasted inflation in Russia

The inflation rate in Russia can achieve 7-8 per cent in 2010, according to the official forecast of 6-7 per cent. This is the opinion of the Ministry of economic development. It is possible, that the forecasts will be updated in April. According to the specialists from the Ministry, the inflation rates in January of 2011 was 2,3 per cent, that was a little bit higher of the predicted rates. In the annual indicator, the inflation rates exceeded the 9 per cent, and by the middle of the year, when the maximum rate is expected, the inflation rate will achieve the double-digit indicator, but in the second semester the rates will fall down. Foreign analytics predict inflation rates in Russia of 8,2 per cent.

In 2919 the inflation rates constituted 8,8 per cent, as it was in 2009. Initially in the Ministry of economic development, counted that the price rising at the end of the year would be 6-7 per cent. However, because of draught the agriculture products price got up.

Russian people buy currency

Foreign currency returned to be popular among Russians. At the end of the last year, Russians bought the record volume of dollars and euros. The euro demand increased by one third, comparing with the last February. The maximum indicators of the currency purchase were fixed in December. According to the information of the Central Bank, in February Russians bought 2,8 billion dollars and 1,7 billion euros.

Comparing with the November rates, the dollar demand increased 19%, euro-29%. According to the analytics opinion, Russians fall into the buying-up of currency because of the fall of rates of banking deposits. Also, it was because of the seasonal factor: Russians were in anticipation of the long winter vacation. It is also possible, that the buying of foreign currency could be massive, but the high oil prices that achieved the 104 dollars per barrel still are supporting the Russian currency.

Retirees are expected to live in the foreign paradise.

The hope of Russian authorities to make the retirees migrate outside the territorial road to the board with the Moscow region, can surpass the wildest expectations.

The happy possessors of square meters in Russian capital, could migrate farer, than the city administrators expect.

Thanks to the exorbitant prices to the property in Moscow, rent of rental contract of the property allow to it possessor to meet their age in countries, that are more attractive for seniors. At that, the comfort residential level in the Mediterranean or pacific cost doesn’t concede to the level of Moscow region, and the correspondent infrastructure is more developed. Russian retirees appraised the advantages of such moves long before the world crisis. Even in the beginning of the century, active seniors, who managed to work and gain in Russian reality and managed to accumulate some money and experience, moved to the West. Since that time this fluency doubled. And in all appearance, it will be growing. According to the information of the property companies, Russian and CIS citizens occupied the 4th place between the property buyers in foreign countries. The post crisis situation contributes to the development of such tendency. The property prices in a lot of countries dropped more appreciably than in big countries of Russia, so it became cheaper to buy the property abroad, than two or three years ago. In the terms of the dropping of the home demand, the sellers welcome the foreign investors, because living in the foreign territory, the retirees spend their money without creation the competition on the job market. It is not surprisingly, that a lot of countries welcome the seniors and also create favorable conditions for them. For example, by the representatives of “Midland Consult” in Panama, there special program exist in this country, called “Turista Pensionado”, this program provides discounts for air tickets, mass transport, utility bills, some entertainment services. And the cost rent in one of the prestigious regions of Panama-City – El Cangrejo is 500$ per month, and the buying price will be less than 85 000$. As far as prices, Latin America is paradise for seniors. In Ecuador is possible to buy the new flat with two bedrooms, two bathrooms with an eye to the ocean less than 45 000$. And the house with the lot of 8 Ares, situated on the hill with an eye to the Pacific Ocean will cost 80 000$. The property in Mexico is more expensive, but there is possible to buy the whole house in colonial style by the Moscow’s flat price. But not a lot of people risk to climb so high. The favorite direction for Russian migration is European countries. A lot of people prefer Spain because of the habitual climate and moderate cost of living. Because of the crisis, Spain became more available and according to the rates of drawdown of property’s prices, this country is in the list of world leaders. Nowadays is possible to rent two-three bedroom unit on the Spanish coast with the price of 500$ per month, and to buy the flat from 40 000 euro’s. And it is possible to buy the village with an eye to the Sea at the price of 100 000 euro’s. France beyond Paris isn’t so expensive for the well-fixed citizens of Moscow. It is possible to buy the house, surrounded by the vine groves, gardens in province less than 150 000 $, or to buy the flat in centre of Lion at the price of 125 000 $. Russians buy property in the Eastern Europe- Bulgaria, Croatia, Montenegro. The money received from the sale of Moscow flat will be sufficient for buying the house and long living.

The sector of international business of cyprus is growing

Despite of the fact, that some sectors of Cypriot economy are suffering from the consequences of the world financial crisis, the sector of international business is developing. According to the information of the Chamber of Commerce and Industry of Cyprus, more than 400 000 of international companies were registered in the island by the February.

The growth of activity in the international business sphere, gives optimism to the Ministry of Finance of the Republic of Cyprus that is worried with the inflation rates growth, dropping of the sales level of property and the unemployment growth. The influx of capital to the Cypriot banks from the third countries as Russia and Ukraine, contributes to the pickup in the international business sphere.

Considerable volume of money was received from Greece. During the conversation with the Midland Consult representative, the head of Financial and budget Commission of Cypriot Parliament Nickolas Papadopulos declared, that the international companies have nowadays more possibilities for investments to Cyprus, than earlier. The main kind of investment was property. Nowadays there are new possibilities for investment through the mutual funds, and investment to the power-generating sector, development and opening of gas and oil deposits on the continental shelf of Cyprus, and also thanks to the new stocks – of global depositary receipts, that will be developed by the end of the summer 2011.

Tax heaven and G4

The four biggest audit companies PricewaterhouseCoopers, KPMG, Deloitte and Ernst&Young have 81 office in the offshore tax-free zones, as the newspaper Financial Mail notice. It is in average – by the 20 offices for each of this companies, rendering the more expensive consulting services in the world. In the opinion of the tax expert John Christensen, the activity of this companies, having influence of the tax legislation, makes an astronomic profit, that are incomparable with their usual accountant’s and audit work. As Maxim Stepanov, head of Midland Consult holding, consideration, the activity of Midland in eight representations in Panama. Hong Kong, Cyprus and another countries, is directed to the rendering of services at the effective and moderate prices. The Midland’s representations don’t strive another objectives, they are basing to the legislations of these countries.

Ukraine imposes new tax rates

According to the establishment of the new tax rates, Ukraine from the 1st of April of 2011 imposes the reduction of corporate tax from 25 to 23%. In general, by the 2014 is planned the further reduction of corporate tax until the 16%.

Foreign investments: from Russia with love

The economic crisis advanced the reduction of flux of foreign investments to Russia: if in 2008 the investment flux reduced to 14,2%, in 2009 reduced to 21,0% - 81,9 billion dollars. Provided that, the investment maturity (divestments from the country) of the received investments increased to 12,8% in 2009 – 76,7 billion dollars. As result, the discrepancy between these indicators reduced sevenfold – from the 35,7 billion in 2008 to the low-profile against the Russian economy 5,2 billion in 2009.

Besides the reference of the flux and maturity of the foreign investment, the important indicator is the reference of the flux of the foreign and deflux of the Russian investments. As we know, that the transactions that are statistically considered as Russian investments abroad, are a kind of display of the capital exports of the citizen exports (buying the property abroad).

Before the crisis, in the 2007 the foreign investment to Russia exceeded the investments from Russia more than a third, and constituted 120,9 against the 74,6 billion dollars. The panic in 2008 broke the situation: the investment balance became negative (investments in Russia – 103,8 billion, from Russia -114,3). But the stabilization of 2009 didn’t change the state of things because the investments from Russia exceeded the investments to Russia (82,6 billion against 81,9 billion).

At that the directions of Russian investments don’t leave a doubt that we are dealing with the capital exports. It will be sufficient to mention that the biggest place of application of Russian capital became Switzerland – an ideal place for money storage, but not so easy for its gaining. The investments to Switzerland – 34,9 billion – more than 40% of the Russian investments abroad.

On the 2nd and 3rd place of the volume of investments from Russia – Netherlands (10,7 billion) and Austria, that is fallen behind. On the 4th place – Belarus – 6,5 billion (because of the buying of the cheap property and migration of business to the country where 300 thousand of entrepreneurs don’t lie in prison), on the 5th and 6th place- Cyprus with 6,0 billion and Great Britain with 1,8 billion, Ukraine – 1,6 billion, USA – 1,5 billion and the offshore Virgin islands – 1,1 billion. Frankly speaking, the foreign investments to Russia create an impression of the payback of Russian capital, in a great measure. The biggest investor to Russia became Luxembourg (11,7 billion), China – 9,8 billion, Cyprus -8,3 billion and Germany- 7,4 billion.

Medvedev: we have to create the foreign investment generation fund

The President of Russian Federation Dmitry Medvedev charged the Russian Government with the objective to launch a proposal to create the special fund for attracting the foreign investments. Professional authorities shall dispose of this fund. This idea was explained by Medvedev during the World economic forum in Davos. The co-investment of state and private capitals will be the principle of this structure. But it is not clear, to what spheres of economy will be the accumulated income invested. The fund “Skolkovo” has the similar functions and his activity is directed to the support of venture projects. During the next 3 years more than 36 billion rubles will be invested in its projects. In summer 2010 the Ministry of economic development issued the project of creation of the fund of the direct infrastructure investments with the capital of 20 billion rubles. According to the Medvedev’s proposal, for each state ruble of such investments the private traders have to pay three rubles. Nowadays Cyprus is the biggest investor to Russia.

China: second, but poor…

By the results of 2010 China became the second biggest world economy, leaving behind Japan, but the first economy China could become only in 10-20 years. At that, the living level in this “Celestial Empire” is in 10 times lower than in USA and Japan. In the 1980 when the Japanese economy was developing, the economist thought that Japan would overcome USA, but it didn’t happen. After the publication of data of the Japanese GDP of the 2010 year, China received the statute of the second biggest world economy, ceding place to USA. Five years ago, the volume of Chinese economy was 2,3 trillion $, the half of the Japanese one. But Japan is suffering the economic stagnation period during the last 20 years, and China is leading on economy’s growth rates. The majority of economist assure that, although the Chinese economy is growing and is on the 2nd place, the major part of population lives moderate. USA and Japan leave behind China in the GDP level per capita. By the evaluation of the World Bank, more than 100 million Chinese citizens – spend less than 2$ per day. But these low level of GDP per capita doesn’t impede to the Chinese consumers to be the one of the optimistic in the world. China will have to spend 10 or 20 years to become the economy number one. The American economy is still being the indisputable leader. The economies of China and Japan together are less than the American economy, where the GDP level in 2010 was 14,66 trillion $.

Midland Consult