How corrupt are you? -Russia in reality

source: russiamonitor.blogspot.com

I read that the Swedish minister of Foreign Affair, Carl Bildt, whom I am also a big fan of, this week meet with Alexey Navalny, a Russian political and social activist. Mr Navalny blog has quickly become one of the most followed one with 150 000 visitors every day. He has managed to bring quite some publicity to the law enforcement agencies in the country. The subject for his blog is corruption that also regarding to President Medvedev is one of the country’s biggest problem. Navalny and his collaborators are with legal instruments aiming to minimize the corruption as much as possible. His contribution is important in order to improve and stabilize the climate of business that is crucial for the modernization of the country, as it requires foreign investments. Still regardless to whether a company is owned by shareholders or a state, they should be playing on the same field.

Corruption Index 2010

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source: worldofgorman.files.wordpress.com

This week Russia took a major step forward in its three-year effort to join the Organization of Economic Cooperation and Development, OECD, as they signed onto the Western-dominated forum's anti-bribery convention at a ceremony in Paris. That a reform of the legal system against corruption now is on the political agenda also for the Russian leaders is obviously positive. However while these anti-corruption efforts overall appear to be increasing, so are bribery and fraud. Still a huge amount of money is being stolen, “corrupt officials steal’s practically every fifth ruble from the country's defense budget through kickbacks and bogus contracts”, according to chief military prosecutor Sergei Fridinsky. The fact that bribery and corporate fraud have increased in Russia is a fact and even if most large companies have established some kind of anti-bribery measures foreign companies are often forced to take part of the corruption or to withdrawal. The managing Director of IKEA Russia, Per Wendschlag spoke recently to media: 'We must not tolerate corruption, we have very clear policies and regulations." (read more about Ikea and its restrictions for doing business in Russia here.)

The trend of globalization is forcing countries to adapt and to live up to its requirements, whereby Russia is not an exception. The globalization gives opportunities- but at the same time it is also easy to fall behind which it seams like Russia has if you compare the country to other countries from the BRIC’s. The price-earnings ratios in the BRIC countries are, on average, 50% higher than those in Russia. The country's ratio of market capitalization to GDP is two to three times lower than in the most developed G20 countries, and lower also than in Latin America and in Eastern European countries like Poland. Yet Russia experienced $21 billion of capital outflows in the first quarter of this year. Other obstacles for business include bureaucracy, infrastructure and the occasional shutdowns of the stock market. Indeed the upside potential for Russia is for these reasons large but I believe that the corruption and fraud will continue to be a problem until society begins to take it seriously.

Many people do still question Russia’s ability to deal with the problem and so do I. I wander why more people do not show anger when corrupt politicians do receive bribes or when public money is being stolen and ended up in someone’s pocket. The Russian people need to realize that corruption is a real threat to their society as it prevents people from getting better opportunities and contribute to social and economic instability. Corruption makes the country weak in every sense and sooner or later Russia will due to pressure be transformed.

source: cartoonstock.com

The stinky CIVETS - will they overtake the BRICS?

source:slowvelder.wordpress.com

Few days ago, the financial website of the Year “thisismoney.co.uk” published an updating article about the CIVETS in their Investing column. Former chief executive of HSBC, introduced the term CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey, South Africa). He was referring to a group of countries that are believed to be the next global growth engine. The Civets, he suggested, might be in their way to replicate the dynamic growth of the BRICS. From a personal point of view I agree with this statement. If we consider major economies in Europe or in North America, we cannot expect much growth in the coming decade. In the same way, most of the growth has already come from BRIC countries and might already be a bit too late to catch opportunities there. I think opportunities are definitively in emerging markets and these six countries have demonstrated interesting growth prospects for the coming years. I do believe however; as it happened with the BRICS, that it will take a while for the CIVETS to get on traction. Going a bit further, it might be an interesting point for countries under this acronym to start building alliances and closer relations to rectify the term and leverage their already strong economy.

source:resourceinvestor.com

Focusing more in the individual countries inside this group, I consider South Africa could be one of the strongest prospects here in economical terms. However having a particular interest in Colombia, I could rectify that it could be a really interesting prospect for the ten years to come. To study Colombia it is relevant to compare it to its neighbours in Latin America. During the second part of the 20^th century, the country has never experienced an economic meltdown or a populist revolution, or being under pressure of hyperinflation; phenomenons that have actually characterize the rest of the region in the last decade. Colombia follows a similar business cycle as any other commodity producing country. It has been a really stable country in the middle of an instable region. It is true however that Colombia has never shown signs of a fast growing economy. It has advanced in a continuous at a slow but steady pace. Good times means the economy growths slightly over 4% and bad time slightly under.

Summarizing a bit the history of Colombia, we could said that Colombian as always been a forgotten country. Colombia was never really interested in the world, and the world had never paid attention to Colombia. This was a common fact until the 1990s, where drug trafficking broke this equilibrium and gave way to the high levels of urban violence. By the end of 1990s, Colombia was suffering its worst economic crisis in more than a century. Neighbours and other countries named Colombia the “Sudan of the Andes”, it was already considered a “failed stated”. President Alvaro Uribe stepped in the right moment and with his “democratic security” agenda, managed to prepare the country to take advantage of the economic expansion the world enjoyed between 2003 and 2008. Over this period of time, Investment grew to 28% of gross domestic product from 12% in the previous years. Foreign Investment reached for the first time USD 10bn a year, and keeps on growing. Stock markets skyrocketed and fiscal deficit came to its lowest in years, only 4%.

Looking the future of the country, most economic forecast indicate that Colombia will continue to growth at is usual mediocre growth of 4% per year. In the same way, many problems still present in this country. Inequality has never been higher among its people. The country remains the world’s largest exporter of cocaine. And Still a pretty isolated country.

Many investors might think that this “frontier markets investing” is more volatile and riskier than either established BRICS or western markets. However from a personal perspective it could be argued that that CIVETS are by no means less stable that Western economies in Europe or America that are highly in debt.

Spanish voters had enough

source: cryptome.org photo by:

Arturo Rodriguez

Madrid, Saturday, May 21, 2011, the photo shows thousands of Spaniards that express their anger at political parties and the country's handling of the economic crisis. The Puerta del Sol square has been invaded since last Sunday and the crowd are pledged to stay until after municipal and regional elections.

Newspapers have in the past week raised my concern for the Spanish people. After reading articles in The Guardian and Svenska Dagbladet and watching the BBC news, I could not ignore the Spanish peoples concern which forest me to post this post in hope of raising further awareness in the Spanish recent local elections, voters have had enough of the present prime minister and Euro crisis. Spain experience an increases in the gap between its people and country.

Furthermore as local elections ended in a landslide victory for the center-right Popular Party, this is a warning that the Socialist government is about to loose the next election. Parliamentary elections must be held within ten months. The election results were a sign that many Spaniards have suffered and that there is a concern for the future, said Prime Minister Jose Luis Zapatero.

The election campaign was framed, not least of the protests in Madrid's central square, Puerta del Sol. The demonstration can be seen as an inspiration of the Arab spring, and its public meetings. However the parallels between Puerta del Sol and Tahrir Square in Cairo is offensive, as in the Arab spring people risk their lives for their believes while the spanish protesters where just calling for their disappointment of the established political parties.

With unemployment at 20 percent and twice as high youth unemployment, there is an unstable basis for dissatisfaction in Spain. In Portugal, there have been large demonstrations, but in the bottom league Greece is worse both in terms of reform inertia and protests from the public. Unlike the financial crisis i countries in northern Europe such as Estonia and Latvia there is no sense of adherence to the nation in the current financial crisis in the Mediterranean countries.

It is obvious tough to clean up after years of misdemeanors. Nevertheless, there are no simple solutions, it's impossible to wish away the problems, nor to put the blame on the euro. While it's also a populist way that would attract many and which creates a widening gap with the EU and the European ideal.

Really disturbing is the equivalent of no confidence lawsuit against the European idea is not only occurring in PIIGS countries that need assistance but also in the euro countries, made up with help. One example is the successful party the “True Finns” in Finland, (where the willingness to pay is zero), and who became the third largest party in the recently held election. The success for the True Finns' was partly rooted in the requirement that Finland would not contribute to EU economic assistance to Portugal. Similar views from other populist parties can become clean plague over Europe.

In Germany, forced Merkel into a balancing act on the one hand, bring a responsible policy on the euro and, on the other hand, face a growing reluctance among the population that constantly come to the rescue of Europe's weak economies. It will prove to be negative in the next parliamentary elections and it cost the CDU government in recent state elections in Baden Württemberg. For the euro area it is up to politicians to resist public opinion even if it costs on. To date, well-managed EU Euro misery pretty well, but the crisis may not be open so that the support mechanism in practice becoming a permanent support to crisis countries.

Lisbon Treaty is a step towards a more integrated Europe that large public opinion all over Europe does not wish to expand. Now the crisis for the euro even tensions the barrier between people and countries. Also I thought the whole point of democracy is that it does what the people want and not what the powerful elites want. But this is just an other prof that it do not work.

WAR OF NERVES OVER GREECE

When the G8 countries meet in Deauville, France the biggest threats to the global economy is the U.S. budget deficit and the euro crisis. Euro crisis development and the acute situation in Greece, will have been one of the main topics on the meeting.

The current French finance minister, Christine Lagarde, will be the next head of the International Monetary Fund, IMF, and when she has confirmed her role no one will most probably challenge her for the position. It is probably the last time a Frenchman, or European, gets the job as the “world's bank chief of crisis”. Although Europe is the largest contributor to the Fund, it is the world economy is distressed as growth is occurring in former developing countries as they are moving out of poverty while West lack fiscal discipline, financial capacity and credibility.

Moody's has downgraded Greece's debt to "highly speculative" prompting an angry response from the finance ministry. Greek bonds fell after the rating agency cut its rating from Ba1 to B1.

The blue line shows the interest rate spread on long-term Greek government bonds over the equivalent bonds issued by the German government. The other two lines show the ratings assigned to Greek sovereign debt by S&P and Moody's since January 2008, normalized so that they're on the same scale.

source: angrybearblog.com

The Graph shows 10 yrs price on money that greece have to pay

source: howestreet.com

Greece's Finance Minister, Giorgos Papakonstantinou, explained in a Greek television interview that if the next part of the loan package to Greece will not be paid as scheduled in June, the country would simply go bankrupt. “
Loans cannot be repaid and salaries cannot be paid.“ The statement reflects that Greece is being stressed as the Greek government is fighting against a sceptical public opinion and rebellious unions. The Greek government is trying to strategically game for better credit condition from the EU, the European Central Bank and the IMF, that to the opposite is trying to pressure Greece to implement the most effective reforms possible before the inevitable step has to be taken in order to restructure the loans given to Greece.

Sooner or later the Greek public debt has to be reduced, written off or restructured in a creative way - without threatening the financial stability or political prestige of the country. The German "Der Spiegel" warns the Eurogroup Chairman Jean-Claude Juncker for a national bankruptcy, and to open up a "soft" restructuring of the Greek loans - with lower interest rates and extended maturities.

The political turbulence in Greece is increasing. The country has been ordered to sell state property to quickly release liquidity, 50 billion, as it is intended. By comparison, there are Greek government bonds worth 270 billion Euros on the market, where a third expires before the end of 2013. But the sales of government property are not appreciated by the unions or by the public. Many Greeks see it as a way of transfering value from Greece to the leading creditor nations.

Public protests have not passed by Brussels unnoticeable, EU requires that the Greek government reach a broad settlement with the opposition regarding essential actions, similar to what has occurred with Ireland and Portugal, however the problem is that the demand for Greece to live up to political unity may be unrealistic.

Nearly 80% of Greeks say they are not capable of more cost-cutting measures or tax increases - even though they are waiting around the corner. Maybe it is time for “the troika”, the team of EU, the European Central Bank and the IMF to put away the whip and start waving a bit of carrot. I think the next head of the IMF, Christine Lagarde, will have to begin to show a different attitude toward the Greeks. It is not easy to get acceptance of life standard cuts from the Greek people. To get acceptance for todays cuttings the future rewards must be clear.

Source: Dagens industri and Svenska Dagbladet

Forget Business- Colombia need Humanitarian Agreement

On Monday the 23th of May, former President of Colombia Alvaro Uribe was lecturing about The three pillars of Colombia’s progress at the London School of Economics. Dr. Uribe introduced the conference under the topic of "social responsibility", which quickly turned into a question and answer session with the audience as attention was drawn to what model Colombia is playing in its region. But in this point they forgot to mention Human Rights that goes hand in hand with Social Responsibility, that cannot be considered as a role model for other Latin American countries.

source: amnesty133.org

The 18th of May, the UK Foreign Office, FCO published its annual report based on the situation of Human Rights in the world, and again Colombia was one of the 20 countries mentioned in this list that each year is being updated. The report begins to state that the general situation of Human Rights in Colombia still is extremely concerning. This might be mainly due to structural problems, which in return limits the full enjoyment of human rights. Main issues in Colombia are exclusion, marginalization, poverty, inequality, land tenure, impunity and lack of access to justice. Government has without doubt done some progress, lately the congress has passed a law to remunerate families affected by the internal war that the country is going through. But still remain much to do before results could be appreciated; the activities of illegal armed groups and drug traffickers continue to have seriously adverse impacts. Lately the demobilized paramilitaries are a hot topic again; the Foreign Office said that an increase of new armed groups supposedly demobilized paramilitaries returned to criminal ways. This should be a point of concern, it could be a sign that the country is falling behind again. Adding to the report another focus should be impunity; even if some progress has been done here impunity remains a serious problem. Let’s hope this new law will be the start of a solution for the victims. Unions that are so important for the UK area highlighted issue for Colombia. The country remains an extremely dangerous place for trade unionist. An example is the latest case of Ecopetrol; violence and intimidation of trade unions across the country remains one of the most serious problems facing the country. The latest figure concerns 28 trade unionists murdered. This shows that even if Colombia is a great country to invest in due to its growth potential there are still many issues to solve that have not been given the needed importance by politicians, media or investors. Huge social actions should take place in the Human Rights field, before Colombia could be considered as a role model for others.

Can India deliver? - Will the monsoon cool down inflation?

Not only the monsoon rain hits India at the moment, also inflation is peeking and driven by higher energy and food prices.

source:hken.ibtimes.com/

India’s recent economic growth and strategic partnership with the United States have completed the transformation of that previously impoverished colony of the United Kingdom into South Asia’s superpower. In its 63 years of independence, India has surpassed its former imperial masters in economic development and global power. That historic growth was achieved in great measure with the aid of a rich variety of cultural tools adopted from its old Western rulers. (A mixed Legacy, Harvard International Review) India has indeed changed so profound that the economy is able to maintain a growth rate of 9 percent or more in the medium term, according to Saumitra Chaudhuri, a member of India's plan commission and economic adviser to Prime Minister Manmohan Singh.

It is mainly the domestic demand that drives growth and it is now not only in the cities as consumption increases. Incomes are rising rapidly in rural areas. Companies that sell consumer goods turn increasingly to low-income groups in rural India. Domestic demand will remain the dominant factor for India's growth in 10-15 years, according to Mr. Chaudhuri.

The poverty rate has fallen from 50% in the early 1990s to 36% last year, according to government Definiton. The food inflation is badly affecting the poor at the moment. For all Indians to be able to share in the growth economy, India must grow at least 9 percent a year for a long time. But there are some big obstacles that remain for such development, which also is pointed out by Mr. Chaudhuri at a conference, each spring arranged in Molle, a seaside resort in southern Sweden, the Swedish Network for European Economic Research. To realise the growth the Indian government has three priorities which are explained by Saumitra Chaudhuri.

1 The first priority is to drive investment in infrastructure ahead. India has a huge lack of infrastructure utilities such as power and transport. The shortage will be even greater when India continues to grow.

2 The second priority is to increase productivity in the agricultural sector. Most important for productivity is perhaps to improve the management of water and soil nutrients says Saumitra Chaudhuri, which says that plans are to provide each farmer with a card that shows what each individual farmer's land needs for nutrition. But equally important is to reform the methods of transporting, distributing and storing food. It is a very outdated logistics of how the food from the fields are moved to the kitchen tables, resulting in an extremely wasteful, poor compensation for agriculture and unnecessarily high food prices.

3 The third and most long-term priority is to improve health and quality of education. It is important to increase the country's productivity, "said Saumitra Chaudhuri.

There are therefore major problems left for India to solve. But India's strength is probably the long high growth. Growth must surely also increase the Indian state's capacity and resources to help the poor in rural India.

India also has several precarious challenges of which a currently as mentioned is high inflation, which at times approached 10 percent, inflation is partly imported, for example, India imports most of its gasoline and oil, but can probably also be due to deficiencies in agriculture. Another problem highlighted is corruption after several big scandals in government and in industry.

Free trade agreement between India and EU can be ready in 2011
Negotiations on a bilateral trade and investment agreements has been going on between India and EU in the years since 2007, an agreement can be finalized before year-end.
The EU is India's largest trading partner. A free trade agreement should be able to increase trade and lead to the countries can better complement each other's economies, and of course, India would get access to the European countries' high-tech.

Although India's growth has increased the pace, India is still no giant in the global economy. India's share of world GDP was 2.6 percent in 2010 and India's share in world trade was only 1.3 percent in 2009, according to Indian government figures. During the financial year 2011/2012 expect it to India's GDP will grow by 9 percent to about 2,000 billion U.S. dollars, which represents one-eighth of the EU's GDP. India's GDP, U.S. $ 1.650 per inhabitant and year, is equivalent to one twentieth of the GDP level among the EU countries.

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source: http://www.tradingeconomics.com/india/gdp-growth

We can see from the graph that GDP has been around 8-9% during 2007-2010. We can also note that India recovered from the recession quickly and in fact India remained the second fastest growing economy after China.

Thus, the RBI is taking tightening measures so that inflation is under control which effectively means that growth will fall in the near term. For this reason also the 9% growth in the current fiscal looks hard to achieve. Moreover as we look into the future, in 20 years India will have a labor force of 250 million people while most of the advanced economies will have a negative labour growth. This has become the main resource of India. I think educating 250 million people into a meaningful labour force and being able to create the value is absolutely the strategic issues for India tomorrow. As also the world relies on the labour force of India.

The picture illustrates a cable television that is being introduced to a school

class in India for the purpose that it increases the number of school enrollment of younger children.

source: nonicoclolasos.wordpress.com

Gaddafi says he will defeat of Western forces

Vehicles belonging to forces loyal to the Libyan leader explode after an air strike by coalition

forces, along a road between Benghazi and Ajdabiyah on Saturday

Source: Dailymail

On Saturday evening the 19th March 2011, hours after a cease fire was declared by the Gaddafi regime, a French aircraft carried out the first strike on an unknown Libyan vehicle, fulfilling its promise of US, British and French military intervention in Libya. The rockets destroyed the Lybiasair defense installations and a no-fly zone was immediately established over Lybia.

Once again, the representatives of a despotic regime has been taking hectic and unsustainable actions against the people who are against him, and once again the authorities have been willing to move from words to action. But this time, the international community cannot and does not stand by and watch.
The good thing about the late action against Gaddafi is after all the action now taking place has been sanctioned by the UN Security Council and with a cautiously but still a full support by the Arab League.

The opposition is very beleaguered, but hopefully it involves intervention by the Allies to that Gaddafi will fail to take control of Benghazi, thus, the opposition and resistance remain and can be consolidated. There Allies front a very demanding period of time, during which it applies to weaken the dictatorship while preventing loss of life. Gaddafi appears to be aiming at escalating the situation by handing outweapons.

The UN-sanctioned attack on Libya is not a good solution but there is perhaps no other solution.