Manmohan Singh deserves our heartiest congratulations ... - cuts ccier

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Resurging Asian EconomiesAsian economies may be the firstto emerge from the global crisisbecause the region’s banks hold fewertoxic assets than lenders elsewhere,said Zhao Xiaoyu, vice-president ofthe Asian Development Bank (ADB).Zhao said European and Americanfinancial institutions are sellingvaluable Asian assets to get hold ofcash and improve their balance sheets.ADB predicts that economies inAsia excluding Japan will grow 3.4percent in 2009 and six percent in 2010.ADB report said, improving tradefinance is one of the keys to an earlyrecovery in the region. The financialcrisis has prompted banks around theworld to reduce lending to emergingmarkets and cut credit lines toimporters and exporters.(Livemint.com, 10.04.09)Stress Stressing TreasuryWork-related ailments like heartdiseases, strokes and diabeteswill likely cost India’s exchequeraround US$160bn during 2009-15,an industry lobby study jointlyprepared by Assocham andPricewaterhouseCoopers (PwC).Though India is a fast-developingcountry, it is yet to create facilities tomitigate tension and high bloodpressure from work-related stress,which often leads to cardiovasculardiseases, says the report.According to the report, toprevent chronic diseases, Indiansshould reduce tobacco intake, eathealthier diet and exercise regularly.(BS, 10.05.09)Babudom – A CurseIn a damning judgement on thebabus, the Political and Economic RiskR E P O R T D E S K – N E W S D I G E S T“TFalling Standards in the ‘August Houses’he unseemly behaviour ofpeople’s representatives inthe ‘August Houses’ and theirunethical misdemeanour are acause for high concern”, saysthe Citizens Report onGovernance and Development2008-09 by the National SocialWatch Coalition. Theperformance of the 14 th LokSabha as it comes to an end isa telling tale on the “falling standards”, according to the report.The report says that there is not a single session during these two yearsthat has not lost valuable man-hours on account of unruly incidents such asslogan-shouting, walkouts and boycotts. The year 2008 even witnessed thevirtual abrogation of a whole session of Parliament. The report points to a“new high” in the corruption and criminalisation of legislators witnessed inthe cash-for-vote scam. (TH, 07.04.09)Consultancy (PERC), which releasedthe survey report said, “India’ssuffocating bureaucracy was rankedthe least efficient” and virtuallyslammed babudom as India’s biggestcurse where working with thecountry’s civil servants was a “slowand painful” process.“They are a power centre in theirown right at both the national andstate levels, and are extremely resistantto reforms that affect them or the waythey go about their duties”, PERCconcluded. (ET, 04.06.09)Unstable Policy RegimeAccording to the 2009 Ernst andYoung (E&Y) Business Risk Report,the continued instability in policyregime makes the business scenariouncertain for national andinternational oil companies.“A fragmented energy policycreates ambiguity, forcing oil and gascompanies to repeatedly makedecisions in uncertain environmentPoor Performersand deters long-term planning”, thereport said.It said the oil and gas sector hasbeen impacted globally by theeconomic downturn, which hascreated new risks for the industrythreatening the near-term survival andprospects of a number of oil and gascompanies. (TH, 25.06.09)Redefined Employment StrategyAccording to a report ‘TheChallenge of Employment in India –An Informal Economy Perspective’,the slowdown should not be blamedfor the lack of jobs, instead rapidgrowth of the past decades should beblamed.The Indian economy’s rapidexpansion has actually widenedinequality, shrunk job opportunitiesand reduced wages, according to thereport. The report highlightsstructural weaknesses in India’s labourmarket, such as illiteracy and lack ofskill development etc.(Livemint.com, 09.05.09)Performance of celebrities from business, sports, and film, as parliamentarians has been disappointing: infact, their track record has been “abysmally poor” as far as contribution to parliamentary democracy isconcerned, according to a report by National Social Watch Coalition.Of the 80,000–odd questions asked in both the Houses, their contribution is not even one percent. Govindadid not attend the Lok Sabha, while Dharmendra and Shyam Benegal did not ask a single question. Hema Malinifared better with 10 percent attendance and asked 179 questions while Bimal Jalan asked just one question; hisattendance was 20 percent and was active in debates 10 times.Vijay Mallya asked 126 questions; his attendance was a poor seven percent. Dara Singh’s contribution — 131questions, zero participation in debates and 14 percent attendance. Navjot Singh Sidhu was uncharacteristicallyquiet during debates while his attendance was six percent. Jaya Prada and Jaya Bachchan fared the best among thelot. Jaya Prada asked 178 questions and Jaya Bachchan 159, the latter being more active in the debates. (TH, 12.04.09)14 / www.cuts-international.org April-June 2009 PolicyWatchTimes of India
Global Financial Integrity (GFI) recently published areport entitled ‘Illicit Financial Flows fromDeveloping Countries: 2002-2006’ as part of a projectfinanced by the Ford Foundation. This report, which waswell received by academia, governments and nongovernmentalorganisations, came to be widely discussedin the Indian media. The report found that black money tothe tune of US$22.7-US$27.3bn a year has been leavingIndia over the five-year period, 2002-2006. It should benoted that even the upper range of GFI’s estimates likelyunderstates the outflow of black money from India. Afterall, economic models cannot capture all the channelsthrough which money can betransferred illegally out of acountry.A few examples will suffice. Itis well known that illicithawala transactions are animportant way by whichresidents can swap the rupeefor foreign exchange. A USstate department reportestimates that hawalatransactions in India rangebetween US$13bn and US$17bn annually, and present asecurity threat to the country.R E P O R T D E S K – I N F E A T U R EHow much Cash Leaves India?Economists capture theoutflow of black money in two ways — by estimatingoutflows that are unrecorded in the country’s externalaccounts and the ways through which residents can accrueforeign exchange abroad by under-invoicing exports andover-invoicing imports. Both these models can show illicitoutflows as well as illicit inflows.Traditionally, economists have tended to take thedirection of flows as they are and simply netted outinflows from outflows in a straightforward manner.However, we found the traditional method wanting in anumber of ways.First, it generated large swings from net outflows of blackmoney to net inflows for a large number of countries,whereas one would not expect such outflows to simplyturn around without supportive economic policies or adecline in pervasive corruption. That’s not how blackmoney behaves in real life. Second, the traditional methodalso generated some strange regional patterns such asAfrica being a net receiver of about US$12bn annually inblack money. We, therefore, rejected the traditional methodin favour of an approach that looks at outflows and inflowsfor a country in a much more realistic way.Even the upper range of GFI’sestimates likely understates theoutflow of black money from India– Dev Kar *Instead of taking an “automatic” net position with regardto inflows and outflows in each year, the GFI method looksat how illicit flows behave over the entire five-year periodand includes only those outflows that are sufficiently large.According to the GFI approach, illicit flows must meet certaincriteria — they must flow out of a country in a persistentmanner (at least three outflows within a five-year period) andoutflows must be large enough to rule out data problems.Both conditions must hold simultaneously for each country.Even though, as a result of these conditions, GFI’s estimatesof illicit flows from developing countries are quiteconservative, they have nowcome to outstrip officialdevelopment assistance by afactor of 10:1. If for every dollarin official developmentassistance, an amount of US$10leaves a developing countrythrough the back door, it is timeLive Mintthat both donor and recipientcountries adopt policy measuresto address the serious long-termimplications for povertyalleviation.Even the upper range of recentestimates likely understates theoutflow of black money from thecountry. We are now studyingthe absorption of these illicit outflows into offshore financialcentres (OFCs), tax havens (most of which are also OFCs),and traditional onshore banks. Available data suggests thatdeposits in OFCs have been growing very fast; externaldeposits in the Cayman Islands alone, the largest OFC, hasgrown from US$722.6bn at the end of 2002 to nearly US$2tnby the end of the first quarter of 2008 — before coming downto US$1.7tn by the end of third quarter 2008 as a result of theglobal financial crisis.While all these deposits are not necessarily illicit, asubstantial proportion are, given that large transfersof private capital in contravention of foreign exchangecontrols make those transfers illicit. The stock of illicitmoney worldwide is huge, given that the Cayman Islandsis just one OFC out of a conglomeration of financialinstitutions engaged in that business. This means thatnational governments and regulatory agencies ofdeveloping countries would not only need to adopt policymeasures to stem the outflow of black money, but the G20as well as international regulatory agencies would also needto make the absorption of black money much more difficult.* Lead Economist at Global Financial Integrity, Washington, DC and a Former Senior Economist of the International MonetaryFund. Abridged from an article that appeared in the Live Mint on April 30, 2009.April-June 2009 PolicyWatchwww.cuts-international.org / 15
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