MAY NEWS FROM MIDLAND CONSULT
May, 2010
Midland Consult keeps growing
This May has been a success for Midland Consult. Apart from already existing offices in Panama, Nicosia, Hong Kong, Riga, Moscow, Saint _ Petersburg & Kiev, Midland Trust Limited has been granted a first class trustee license in early May, authorizing the company to act as a registration agent of the BVI Financial Services Commission. An office with two employees has been already opened in Road Town, starting its trustee & registration business.
However it is worth mentioning that the license was proceeded by various years of negotiations, business trips & other activity aiming to fulfill local authorities’ requirements in order to open an office in Road Town, located on the largest of the 40 Britain controlled islands.
Nowadays BVI is one of the major investment centers for Russian economy. More than $2 billion of investments come to RF through BVI. The British Virgin Islands were discovered by Christopher Columbus. In XVI-XVII Englishmen & the Dutch settled there. Recently the islands with a rich historical inheritance attract not only tourists & treasure hunters, but businessmen as well, as BVI off-shore companies are exempt from tax liabilities & do not have to file reports. Besides, there are no secretary, local share holder or director requirements & there names are not public. These & some other advantages allow the businessmen – owners of the BVI companies to save time & concentrate on business matters. Soon Midland Trust will be ready to offer its clients new services, such as foundations & trusts.
EU Finance Ministers save Euro
27 Finance ministers of EU countries determined in early May that 750 billion Euros are needed to avoid the debt crisis spread. Countries, edging default, like Greece, will be provided with financial aid from European Stabilization mechanism of 500 billion euro, 60 billion Euros of which will be granted by the Euro Commission in credits.
In order to save the European currency the IMF will also invest 250 billion Euros. It is a mechanism for fast raising of credits, not a cash foundation issue. Credits of 60 billion Euros are granted for 5% annual. There is already similar credit line of 50 billion Euros for the countries – non EU members. Members of the Euro Zone also provide their problematic neighbors guarantees of 440 billion Euros for three years, under which the debts of the weakest Euro zone countries will be bought. However in order to receive this help a country should comply with a number of tough requirements similar to the IMF requirements.
Olli Rhen Euro Commissioner for Economy & monetary policy is certain that: “Budget efforts of the governments – members of European Union, Euro Commission financial participation, & measures taken by the European Central bank & Euro Zone countries testify that we are doing everything necessary to defend Euro.” Besides, soon the ECB will start buying large amounts of euro zone countries’ obligations. The following months will show whether these measures will be sufficient to save the European currency. First tranche – financial aid for Greece have been already given in the middle of May, Olli Rhen reported. He said 14,5 billion Euros were transferred to Greece by the partners: 10 countries _ Germany, France, Italy, Spain, the Netherlands, Austria, Portugal, Luxembourg, Cyprus & Malta, another 5, 5 billion Euros were provided by the International Monetary Fund. During an extraordinary meeting in Brussels held at the beginning of May the finance ministers of 16 Euro zone countries approved the amount of financial aid for Greece – 110 billion Euros. 80 billion will be paid by European Union, 22 billion of which will pay Germany – the major economy in the Euro Zone.
Luxembourg – the most generous aide for Greece
Luxembourg will provide the biggest financial aid for Greece (per head). Each citizen of Luxembourg – 417, 54 Euro, that is 42% more than for the Irish that held the second place. However Luxembourg will pay only 0, 3% of the total amount of the financial aid for Greece. The biggest part will be paid by Germany – about 30%, although if counting per head it holds just sixth place (272, 38 EURO). Greece has been provided with an urgent tranche as on 19th of May it had to pay out its obligations’ debt of 8, 5 billion Euros. The total debt of Greece to the Euro Zone countries after completing the program constituted about 7,1 thousand Euros per head. Now the total state debt of Greece is of more than 125% of the GDP or 33,75 thousand Euro per head.
Bank of Russia banned further currency exchange points’ registration
Starting from the 10th of May Russian banks are not allowed to open currency exchange points. Before that they were registered by notification. According to the decision of the Central bank already existing currency exchange points should be reorganized in bank branches before the 1st October 2010 or be closed.
Criminals illegally took 90 billion rubles out of Russia
Four criminals detained in Russia who had organized an illegal channel for the monetary funds to be taken out of Russia. All of them are Azerbaijan citizens. During more than two years they assisted by some employees of some Russian banks had been transferring big sums to the foreign companies’ accounts – false companies in Latvia, UAE, Cyprus & Azerbaijan. There the sums were cashed & returned to Russia by smuggle. Annual return was of 90 billion rubles. The Tverskoy Court of Moscow sanctioned the arrest of the detained criminals. Trial was initiated condemning them in “Illegal banking activity” & “Smuggling”.
Average bribe in Russia doubled during the last four years
According to statistics, average bribe in Russia doubled during the last four years. Most of the Russian businessmen (92%) had to bribe when registering a company or obtaining a license for business during the last three years – testify several polls held in the middle of May. In 2005 19 per cent claimed that they had to give bribes. Nowadays like five years ago 67 per cent had been giving bribes when violating rules of the road or when detained by the road police. About 45% had to bribe for the criminal case trials, to get a driving license or technical certificate for the car. Statistics says that in last 4 years an average bribe in Russia grew approximately 2 times: from 5048 to 8887 rubles. Every second Russian citizen who deals with officials has to give bribes. Another 10% believe that only criminals can give bribes. 69% of those who participated in the poll said they didn’t have to give bribes during last 3 years.
Euro zone economy gets out of recession
In the first quarter of 2010 an economic growth was noted in most Euro zone countries. German government forecasts 1, 4% GDP growth during this year. The Gross domestic product of the Euro Zone countries grew in the first quarter of 2010 0,2 % compared to the last three months of the last year. In the year of crisis 2009 the Euro zone economy decreased 4,1%.
Major growth can be seen in Slovakia where the economy grew 4,6% from January till March 2010 compared to the same period last year. It is followed by Portugal with 1,7% & France with 1,2%. Meanwhile Greece & Cyprus are facing decrees of 2,3% due to the large GDP debts. In Germany the gross domestic product grew 1,5% in the first quarter of 2010 compared to the previous year. The statistics experts explain this step from stagnation to growth by the increase of export from the country. Besides, many enterprises invested large sums in transportation & equipment & supplemented production reserves. The Federal government forecasts that during the current year German economy will increase 1,4%. In 2009 the economic decline constituted 5%, for the first time from the moment the FRG was formed.
Cyprus favorable for real estate investments
In spite the world financial crisis hundreds of the Russians buy real estate objects in Cyprus annually. According to the Cyprus mass media, in 2008 Russian citizens invested about 430 million Euros in the island real estate. They are the second major investors after the English, whose share of investors- non residents is of 30%. It is worth mentioning that besides acquiring real estate on the Mediterranean Island the buyers obtain all the advantages of living in a European country with developed economy. They are attracted by mild Mediterranean climate, clean beaches, good ecology, landscape variety that allows to choose between the mountains & seaside. More over, it takes only 3-3,5 hours from Moscow to the airports of Larnaca & Pathos by plane, & from Beirut, Cairo, Tel -Aviv or Athens – it’s only about an hour.
Euro Commission wants to hear the society’s point of view on double taxation issues
Everybody has a possibility to express his or her attitude towards double taxation issues before 30 of June. The Euro Commission decided to hold a poll among physical persons, business representatives & professional consultants on the issues of double taxation in EU> According to Mr. Algirdas Semeta, Euro Commissioner on Customs & taxes, this poll is held in the interests of real evaluation of the efficiency of the existing double taxation avoidance system & in order to elaborate means for its improvement. Everybody can express his or her opinion & introduce ideas to the existing standards of the treaties at http://ec.europa.eu/taxation_customs/common/consultations/tax/index_en.htm. The results of the poll will be include in the Euro Commission report containing suggestions on the international agreements’ improvement.
Cyprus & Latvia introduce tickets
The authorities of a Cyprus Limassol city plan to introduce special tickets in order to provide with free meals families with low income, Mt Andreas Christou, mayor of Limassol claimed in May. Such families can apply for the tickets during the year. According to the preliminary data the tickets can be changed for food in a chain of “Carrefour” supermarkets. It is worth mentioning that a similar system is already successfully functioning in Greece & some other European countries. The Limassol Social Committee headed by Evi Tsokalis supports the idea but final decision depends on joint research held by social welfare services & Limassol authorities.
Latvia can also introduce meal tickets system in autumn in case the country fail to decrease losses & obtain an international loan, Mr. Ilmars Rimshevich, President of the Bank of Latvia told. Such a scenario is likely to be carried out as without a credit & expenses decrease the state “won’t be able to pay out the necessary sums out of the budget”, he added. “The tickets system can be understood literally as well, when people exchange tickets for food, or tickets can be used as obligations or even surrogate money” Mr. Martins Gravitis, press secretary of the Bank of Latvia explained, noting that these are just probable scenarios & it doesn’t mean that there is a group already working out the introduction of the food ration ticket system in Latvia.
Cyprus may allow casinos
In the nearest future Republic of Cyprus will once again discuss the casino business’ issue. According to the Minister of Trade Mr. Antonis Paskhalidis the authorities had to return to the issue due to the fact that some foreigners want to invest their funds in casino-projects. For instance, golf-business licensing has already showed its positive points. Each license issued adds to the state budget about 5 million Euro. In September they start to construct a golf club in Terthephanou, and then in Kouklie & Kha Potami.
Far East Region & Hong Kong create a unique joint business system
Participants of a business –seminar “Hong Kong _ your ideal partner in Asia” held at the end of May in Vladivostok discussed mutual cooperation. The participants of the seminar, headed by the Minister of Finance of the special administrative district of Hong Kong Mr. John Tsang & the chairman of the “Hong Kong – Russia” Business Cooperation Association Mr. Ivan Plyakov agreed that Far East Region of Russia & Hong Kong have a wide range of opportunities for cooperation in various spheres. Nowadays a considerable number of Russian companies already carry out their business through Hong Kong. In 2009 Russian export of silver & platinum constituted 30,5%, oil & oil products – 25%, metal products – 16.8%. Hong Kong export to Russia of jewelry constituted 45,8%, computers – 22,1%, household appliances – 10,8%. In 2009 goods turnover between the regions constituted more than 1,5 billon dollars, touristic turnover – 32 thousand people.
Hong Kong is excellent to found your own business not only due to the fact that it is a world trade & financial centre, as well as a service centre, but also because of the simply taxation system. A businessman gets considerable taxation & operational advantages when founding a limited liability companies. It allows to decrease losses & increase import/export profits. Income tax for legal persons in Hong Kong is 17,5% & in case the profit has been gained as a result of off-shore operations a company can be totally exempt from income tax.
Hong Kong businessman acquired 5% of a Latvian bank – Rietmu
At the end of February Mr Balram Chainrai, a businessman from Hong Kong acquired 5% of shares of a Joint Stock company Rietmu Banka (Latvia) buying it from one of the major share holders of the bank, - bank press- release reports. Meanwhile the shares of other major share holders, such as the founders of the bank Mr. Leonid Esterkin & Mr. Arkadiy Sukharenko, as well as Boswell International Consulting Limited, that belongs to a n Irish financer & billionaire Mr. Dermont Desmond remained the same. Mr. Chainrai is a citizen of Great Britain who permanently lives in Hong Kong & is one of the major businessmen of the territory. His wealth is estimated to be of 1 billion dollars. He owes Cainarai Group, which nucleus is Hornington Enterprises Ltd founded in 1984 with annual turnover of more than 500 million dollars. The company has business in Asia - Pacific markets, European Union. East Europe & Russia. Companies owed by Mr. Chinairai supply Russia & CIS countries with household equipment of such brands as Akai, Hyundai, Telefunken & its own brand Scarlett. In 2001-2006 Mr. Chainrai was deputy president & since 2007 he has been president of the Indian Chamber of Commerce in Hong Kong.
Former Vladivostok mayor detained by Interpol in Panama
Interpol officers detained on the reclamation of Russian legal authorities a runaway ex-mayor of Vladivostok Vladimir Nikolayev in Panama. Nikolavev was detained a few days ago & now they discuss his extradition to Russia. He is to serve a sentence of 4,5 years in charge of abuse of power. Nikolayev left Russia in 2008 after his first interrogation. It will be really complicated to return the runaway, - Mr. Aleksandr Sukharenko, director of the New Challenges & Threats for the Defense in Far East Region Centre of the State University told. Panama & Russia signed a treaty on legal assistance in criminal cases in 2009 & still has not entered into force. However the agreement doesn’t imply extradition of suspects & accused on demand of one of the parties. “Therefore we can only hope for the loyalty of Panamian authorities & that Nikolayev is not Panamian citizen yet. Recently only a few persons have been extradited from Latin America to Russia & only those accused of hard crimes against individuals”-Sukharenko points out.
Big Russian Ukrainian Privatization
During the May visit to Kiev of Russian President Dmitry Medvedev they held a business forum which main result was as follows: to renew the cooperation between business circles of both countries, as political conflict that lasted for several years considerably affected business climate of interstate relationships & complicated cooperation between the businessmen. New Ukrainian government is willing not only to solve accumulated problems but to expand Russian capital & business presence in Ukraine, - mass media of both countries think.
Yet during the preparations for the visit of Dmitry Medvedev to Kiev Ukrainian Vice – President Sergey Tsigipko & the chairman of “Delovaya Rossiya” organization Boris Titov negotiated on the perspective of the participation of Russian companies in privatization of Ukrainian strategic enterprises. Titov specified that certain agreement were reached only concerning the possibility of Russian acquisition of a number of small Ukrainian state-owned companies. “We are speaking about more moderate business than holdings exposed for privatization. We are mostly interested in the assets of food industry, agriculture, machinery, light industry”. They already filed applications for these assets to the Ukrainian government bodies, still it is too early to speak about any results. In his turn Sergey Tsigipko noted that soon Russian investors will be allowed to take part in tenders for sales of such objects as “Ukrtelekom”, “Luganskteplovoz”, Odessky priportovyy, heat generating plants, etc. He already spoke about the necessity of urgent sales of strategic plants, exposed for privatizations several times that was accompanied by various scandals. This year FGI may gain up to $ 2,5 billion from privatization, Tsigipko believes. “Russia is interested not only in having a right to participate in the tender, but mostly in honesty of the determination of the winner & further investments protection. Recently there have been a number of scandals so that Ukraine has become unattractive for Russian businessmen, too risky & unpredictable. We must correct the situation in the nearest future”, one of the leaders of governmental structures told. He gave an example of “Luganskteplovoz” sales tender. Last year Ukrainian courts took away an efficient enterprise from a Russian investor & exposed it for second sale. New tender is to be held on 15 of June & officials are almost sure the same buyer will win “Transmashholding”.
A leading economist Vasily Yurchishin assumes that Ukrainian continuing crisis affected the entrepreneur climate there. He pointed that the main aim of the new government is to restore investors’ trust. Although part of Ukrainian opposition criticize the privatization of strategic enterprises before the end of the crisis. While Yurchishin believes that it is not likely to postpone the sale. “We are already late. Few years ago they talked about billion dollars that Ukraine could get for each object. Privatization of Odessa port plant last year showed that we could get only a billion as best. Assets’ price reduces every year. Taking into consideration that the structure of economy and demand in the market drastically change after crisis". Experts point out such positive factors for the Ukrainian party of arrival of the Russian investors, as maintenance of the strategic enterprises with cheap raw materials and power resources, and also packages of orders for ready - made production. An additional factor testifying the necessity of urgent resumption of business relations between Ukraine and the Russian Federation are critical indicators of inflow of capital in the country. In January-March, 2010 net increment of total volume of the foreign capital in economy of Ukraine has constituted less than $100 million - only 12 % from the level of the similar period of last year. The level of direct foreign investments in this time has decreased on 40 % compared to the first quarter of 2009: in the current year investors have enclosed only $717 million". It is really a negative record, - Yurchishin admitted. - I think, the situation was seriously affected by political events - presidential elections, reformatting of the parliamentary majority, appointment of the new government. The risks connected with it, of course, will not affect second quarter indicators. But the power cannot be idle, it should prove to investors its reliability ". If Russian capital returns to Ukraine western investors too will believe in stability and safety of working conditions in the country, - experts mark.
