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Liberland or another Tax-haven on demand?

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In the beginning of April, world got a brand new country: The Free Republic of Liberland. It occupies 7 square kilometers of no man`s land between Croatia and Serbia. The self- appointed president is Vít Jedlička, a regional party leader of the Czech Republic`s northern district and part of the Free Citizens Party of libertarian views.

Liberland already has its own flag, a national anthem and a provisional government although it is still unclear whether it is a real country or not. One issue is associated with its president that has a history of pulling pranks and pointed out in a recent interview that Liberland started out as a protest and political stunt. He also admitted that his actions were inspired by Jeremiah Heaton, an American who claimed a remote patch of land between Egypt and Sudan and claimed by neither, so his 14- year-old daughter could be a princess.

Apart from these (common- sense) reservations there is also the questionable accordance to the formal and empirical sovereignty demands. Formal apply to the legal equality of nation-states in terms of their rights and obligations in the international system. An empirical aspect of sovereignty demands states to have population, territory, effective rule over territory and population and the recognition of other nation- states. Thus, sovereignty is both a legal and empirical phenomenon; it must display certain observable characteristics however, this is not enough. For a state to be perceived as sovereign it must be recognized as such by others; arguably, sovereignty is therefore mostly granted in a socio- legal context.

Liberland, for now, has sort of a territory, sort of population and a sort of rule over its citizens, formed on voluntarist basis. By purely legal means, Liberland is not a state. Its population is largely the President and the self- proclaimed citizens, who all still seem to be living in the Czech Republic. Additionally, Liberland does not exercise effective rule over its territory, since the entry into the “country” is granted by Croatian border patrol. Effectively, in terms of international law, the best we could say on the sovereignty of Liberland is that it is a failed state, occupied by a foreign nation. Pragmatically speaking, Liberland is just a website that Jedlička made.

The issue with sovereignty is also closely linked to the philosophy of Liberland (if we can imply such a thing), which is based on libertarian political thought. Libertarianism is formed on the idea that upholds liberty as its key objective; accordingly it seeks to maximize autonomy and freedom of choice, political freedom and voluntary association; it is also against discrimination and strongly supports non- aggression. Libertarians are highly disinclined to state authority however, the desired scope of state activities differs in various schools of libertarianism. The prevalent school of thought represents the idea that governments should do as minimal as possible, limiting its responsibilities to a standing army, local security and courts system. In the case of Liberland, we see a more radical approach, for Liberland will not have an army and the country is designed to find out the minimum amount of taxes and regulations needed to live. All the coverage of basic needs and services- banks, cell phone service, hospitals etc.- are to be provided on an entirely voluntarist basis. Therefore it is hard to determine whether the Liberland government does nothing because it is so libertarian (and this is a concept I am sure the late Douglas Addams would greatly appreciate) or because it simply does not exist.

The outlined characteristics of this new proto- country at the same time point out to the mostly criticized libertarian principles and in my opinion most important social and economic consequences of libertarian thought. The calls for minimum taxes and minimum government involvement definitely align with the current wild neoliberalism and businesses, enamored with tax havens. Clearly, this is exactly what Jedlička had in mind, for he was quoted saying “I would categorize it [Liberland] as tax haven. The reason why Liberland was created was that the rest of the world ended up being a tax hell”. Additionally, he vocalized his hopes that Liberland would become a successful financial center due to its loose tax laws. In a world of incomprehensively disproportional wealth distribution, it is obscene to form yet another financial haven, accompanied with political clichés about individual freedom, liberty and recognition of private property.

In terms of economic criticisms, another very important one is also connected to the moral philosophy of libertarians. Within libertarian framework, choice is a binary concept: either it is consensual or coerced, good or evil, beneficiary of malevolent. Therefore, following this line of argument, a worker being underpaid and working in inhumane conditions is not faulty, because the responsibility rests solely upon the worker to submit himself to such conditions. This is a very dangerous concept because it disregards the impact environment, living conditions and social options have on individual choices. It also introduces the belief that the poor are to blame for their state of livelihood and the rich deserve to be rich. The accompanying line of thought here is the belief in the trickle down economy, which we noticed is not working, since the 1 % of richest people combined wealth is greater than that of the remaining 99 %. Choices are not binary, they are a scope of intertwined elements, presenting possible and more importantly, acceptable choices individual has in the terms of pros and cons for each of the presentable options.

I am sure that a true libertarian would counter me on the last paragraph, correcting me that the injustices and inequalities spring out only due to the existence of regulated international system of states and other institutions. If we dismantle the letter, the sun will be shining, the grass will be greener and everybody will be happy (or at least have exactly what they deserve). I believe that the issue with the lack of rules and authority is firstly, the lack of coordination and secondly, the inevitable clashes between stretches of personal liberty, whereas the letter is actually the consequence of the former. To expect that a world of 7 billion people can operate on a stateless basis, according to individual personal morality and choices is really a political equivalent of getting a tongue ring or a hideous tattoo at the age of 16. It just does not work in the long run, not at the current state of mind of people and at the level of social and technological human evolution.

That is also why the libertarian thought, put in practice, only comes across as another neoliberal triumph of private property and tax evasion; individual rights are in the current world framework translated from Libertarian-ese to English only with business and its profit. Accordingly, the greatest catchphrase Liberland is associated to is not that it is a haven for freedom- seekers but that it is a new haven for the wealthy. In the world, where every country is a h(e)aven for the wealthy, excuse me for not being too excited about the newest sprout of Friedmanism.

Economy

How to build your entrepreneurial mindset today

MD Staff

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An entrepreneurial mindset is a way of life. Even if you aren’t starting your own business, an entrepreneurial mindset teaches you that no problem is insurmountable: you can overcome challenges through perseverance and resilience.

Here are five things you can remember to build an entrepreneurial mindset today. If you’re aged between 18-30, why not start by applying to be a Young Champion of the Earth in 2019? Stay tuned—the competition is opening soon!

Transform problems into opportunities

There are so many clues in everyday life. Is there anything that you experience daily that frustrates you? Perhaps it is the prominence of unsustainable materials in your local shop and restaurants, such as plastic straws or unnecessary food packaging? Often, alternatives to problems do exist, but no one has thought of connecting them in specific circumstances. A good example is supplying restaurants and bars with paper straws. Entrepreneurial mindsets apply a lens which identifies problems not as negative issues but as opportunities to be solved, towards creating value in our economy.

Dare to dream and believe in yourself

If you can dream it and believe it, you are halfway there. How big you can dream is a component of your potential for success. Everyone has ideas—but daring to dream big, and then believing in yourself to apply an entrepreneurial mindset and bring them to reality, takes effort. This year, why not push yourself to think creatively? You could come up with a problem once a week, and each week, come up with one matching solution, for example. The key is to think outside the box, to think of a problem as a potential solution.

Know yourself and discover what you are passionate about

Solving problems, especially those associated with the environment, can be daunting. You will constantly be faced with challenges in your journey to change the world. Some environmental challenges feel so large—like those brought about by climate change. But helping to break down large issues into smaller ones which everyone can take steps to solve, is part of the entrepreneurial journey. Remember that you are capable. Find problems that you are passionate about solving and connect with others passionate about solving them too. This will help you through the tough times to stay motivated.

Go for it and don’t take no for an answer

We all have the foundations of an entrepreneurial mindset. We can all identify problems and think up ideas about how to solve them. Being an entrepreneur pushes you to go out there and take actions to achieve them. Often, this process forces you to think through a specific problem in more detail. It helps you to truly understand pathways towards a solution which others might not have thought about. An idea does not have application in the real world if it is not hammered out in real situations. Part of being an entrepreneur requires following this process, identifying real experiences which can be made better or more efficient, and talking with other people who experience similar challenges to find solutions. Using the resources you have at your disposal will force you to be creative. Keep improving your solution. As you go on, you will eventually gain traction and interest. From there, the possibilities are endless.

Learn, embrace uncertainty and accept failure

Eric Ries from the lean startup says that entrepreneurship is “management under conditions of extreme uncertainty”. Forging your own path to solve a problem that no one has solved before is scary—things change constantly. There will be many obstacles and there will be failure. But an entrepreneurial mindset teaches you that failures are opportunities to learn in disguise. An entrepreneurial mindset embraces uncertainty and learning, to leverage the opportunities that emerge from the space between them.

UN Environment

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Economy

Iran’s oil market facing the new sanctions era: What to expect

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After an expected hiatus in Iran’s oil exports to some of the country’s main customers following the reimposition of the US sanctions, once again the country’s old buyers are coming back to take advantage of the 180-day window which has been presented by the waivers granted in November.

Although it took some of these buyers more than a month to make necessary arrangements or to contemplate on the matter, it seems that finally the convenience of buying oil from Iran has outweighed the skepticism overshadowing Iranian oil industry.

With the customers coming back everything was seemed to be, once again, in favor of Iran’s oil industry, however the US government’s disappointing comments last weekend could change all the equations for Iran’s oil market in the months to come.

“The United States is not looking to grant more waivers for Iranian oil imports after the reimposition of US sanctions.” Brian Hook, the US special representative for Iran, told an industry conference in the United Arab Emirates capital Abu Dhabi.

Considering this new stand, the immediate question which comes to mind is what would become Iran’s oil market after the 180-day period is over? To answer this question two main aspects should be taken into account, one is the consideration of Iran’s ability to bypass the sanctions and the second is the possibility of Iranian oil customers being pushed away in the wake of difficulties resulted from the sanctions.

Iran’s capabilities

Even though at first the markets were almost certain about the severe impact of Trump’s plans on Iranian oil industry, but the surprising decision on granting eight countries waivers to continue buying Iranian oil significantly mitigated the harsh outlook.

Now, nearly three months after the reimpostion of the US sanctions on Iran, the market has witnessed that the Iranian oil exports are not plunged as much as expected.

Although due to the confidentiality of Iran’s crude oil sales data, especially in the sanctions era, there is not an exact report for the level of the country’s oil exports in recent months, however based on the estimations presented by institutes which track Iranian oil vessels, the country’s oil exports stood at near 1.1 to 1.3 million barrels per day in November and December.

Furthermore, considering the exempted countries which are going to resume their oil purchasers from January, and the new approaches which Iran is taking to sell its oil like offering oil at energy exchanges or finding new customers, the country can definitely maintain an even higher level of exports in the months to come.

According to a FGE report, Iran will ship 1.08 million barrels per day in January and exports 1.115 million barrels per day in February.

We should not also forget Iran’s experience in bypassing sanctions to sale its oil. As I mentioned before, Iran has acquired certain ways to bypass sanctions and sell its oil even during the sanctions.

Iranian oil buyers

Nearly two months after the US granted eight countries waivers to continue purchasing oil from Iran, recently some of the Asian buyers have signaled willingness for resuming oil imports from the country.

China, India and South Korea have placed orders for loadings in January or February and Japanese refineries have also expressed hope to resume shipping in Iranian oil as from late January provided that some final clearance and paperwork were made.

As reported by S&P Global, the presidents of Japan’s JXTG Holdings and Cosmo Oil stated that they aim to load Iranian barrels at the end of January upon making some final clearances.

“Cosmo Oil aims to load around 1.8 million barrels of Iranian crude at the end of this month” the report read.

Last week, head of South Korea’s SK Innovation, which owns South Korea’s biggest oil refiner SK Energy also told Reuters that South Korean oil buyers are expected to restart Iranian oil imports in late January or early February.

India’s Ministry of External Affairs has also stated recently that the Asian country will continue importing Iranian oil. According to data provided by FACTS Global Energy Group (FGE), four Indian refineries namely, Indian Oil, Bharat Petroleum, HMEL and HPCL have placed orders for 321,000 barrels of Iranian oil in February.

Regarding Greece, Italy, and Taiwan which were exempted from the US sanctions, no news has been officially out since November.

Even though Europe opposed Trump’s actions, and have reassured Iran’s government that they want the nuclear deal to continue, refiners in the green continent have had little choice but to comply with sanctions. The US can cut off access to their financial system for any company judged to be doing business with Iran.

The customer preferences

With all that said, there are still other considerations which should be taken into account to have a rather clear view of what to expect for the future of Iranian oil.

The fact that it took near two months for some of the Asian buyers of Iranian oil to make necessary arrangements to come back to Iran’s market, is an indication of the hardships that the customers of Iranian oil will be facing in trade with Iran.

The heavy bureaucratic process which the exempted countries have to go through in order to buy Iranian oil, could push some of the more cautious customers like Japan and even South Korea away from Iran.

Most Asian customers of Iranian oil are very sensitive and conservative in their relations with the United States, and this is likely to be a barrier in the way of their energy relations with Iran.

Japan is a clear example of this situation; despite being granted sanction waiver the Japanese refineries have conditioned the resumption of their purchases upon “making some final clearances”.

Regarding Iranian oil buyers’ future decisions, yet another fact that should be taken into account is the reality that with Saudi Arabia, Russia and US producing almost at their peak, and with prices hovering near $60 there is currently a lot of cheap oil in the market.

In such a market, it is natural that some of the Iranian oil customers prefer to purchase their oil from other oil suppliers instead of exposing themselves to the consequences of breaching the US sanctions.

So in the end, it all comes to the incentives which Iranian government is willing to provide to make its oil attractive enough to worth the risk.

It seems that the country has taken some steps in this regard, since earlier this month, the Iranian Deputy Oil Minister for International Affairs and Trading Amir-Hossein Zamaninia said despite the US. sanctions more oil buyers have approached the country for negotiations.

“Despite US pressures on Iranian oil market, the number of potential buyers of Iranian oil has significantly increased due to a competitive market, greed and pursuit of more profit.” Zamaninia said.

Mentioning “pursuit of more profit” indicates that Iran is probably going to provide its customers with remarkable discounts or provide them with long-term payment plans which considering the current situation in the market seems to be the best decision at the moment.

First published in our partner MNA

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Economy

Iran: Currency reconversion not a turning point in economic reformation

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One of Iran’s main economic policies, under the framework of the sixth five-year development plan, is modification of banking system and reformation of monetary policies, moving forward toward which the Rouhani administration put forward the plan to shift the national currency from Rial to Toman earlier in December 2016 by eliminating specific number of zeroes.

However, the administration decided to postpone implementation of currency reconversion policy in 2016 due to some reasons including the expressed concerns about the time unfitting economic conditions which would ignite inflation and economic instability.

The policy basically seeks to facilitate monetary transactions among the Iranians and match the currency being transcribed in official documents and banking bills (rial) with the one utilized in real daily lives of Iranians (toman). Rial has practically been replaced by Toman in daily transactions as the result of the cumulative inflation over the recent years.

On Saturday, the Central Bank of Iran (CBI) submitted the bill on lopping off four zeroes of the national currency to the cabinet, the act which drew public attention to the issue again, forming a chorus of criticism and speculations.

Through its proposed bill, the CBI seems primarily able to re-empower the depreciated national currency, tangibly decrease the ever-increasing liquidity volume, and make a nominal reduction in prices of goods and services in the country.

The most remarkable achievements of implementing the bill, however, would be a psychological one among the society.  Shifting from rial, the free market exchange rate of which is presently about 110,000 against the U.S. dollar, by cutting four zeroes to toman may cover the psychological aspects of the inflationary impacts of rial devaluation, which has unprecedentedly increased prices in Iran. It is said to be able to recover national currency’s value against U.S. dollar to some extent and cool down the inflated prices, as well.

Omitting zeroes from the national currency would surely facilitate calculations and money transfers in daily transactions and would seemingly retaliate for the sharp recent rial devaluation but it should not be expected to improve Iranians purchasing power at all.

It would not have any specific impact on economic indices, inflation, investments, job creation or demand and supply, either.

As a matter of fact, economic stability and single-digit inflation rate are the most significant prerequisites of implementing currency reconversion while Iran is experiencing none of the named factors.

Currency reconversion per se would have an inflationary effect. To curb its inflationary impact, it must be done simultaneous with taking contractionary measures and modifications in monetary policies.

In addition, printing new banknotes and injecting them to the market would impose an amount of costs on the shoulder of the central bank.

Addressing the issue in an interview with the Tehran Times, the Iranian economist and President of Iran World Trade Center Mohammad Reza Sabzalipour said that “the government aims to hit several targets with one shot.”

“It seeks to control money and liquidity volume in the society i.e. cutting four zeroes would change the present 17 quadrillion rials (about $404 billion) of liquidity down to 1.7 trillion rials (about $40.4 million) overnight,” he explained, “but the zeroes will incrementally come back and liquidity will be increased over time, in case CBI continues printing fiat money.”

“The act would appease the public opinion just for a short time when they see the price numbers of the goods and services are decreased but after a while when their income also comes with lower zeroes, they will find out that what has happened has not improved their commonwealth,” he added.

“There is no reason for us to consider a national currency with less zeroes a more valuable one,” Sabzalipour said, “having a strong economy is not necessary related to having a national currency with low number of zeroes but to positive trade balance and high quality of the nation’s livelihood.”

“The decided monetary reconversion is mere a political and a psychological move,” he underscored.

What the government is getting prepared to do should not be expected as a revolutionary step in Iran’s economic and banking reformations, that would bring the nation a better livelihood and a more prosperous economy.

It is a postponed measure that has not been implemented in previous years due to lack of proper economic conditions and it is being done under the circumstances that the country is experiencing the toughest economic conditions in its history thanks to the U.S.-led draconian sanctions and when a rampant inflation rate is expected for the upcoming Iranian year.

The costly currency reconversion would, for sure, facilitate money transfer and calculations in daily transactions and also reduce the volume of exchanged paper money and etc., but its effect would be neutralized and the omitted zeroes would snap back one after the other in the long-run, in case of monetary mismanagement or any other unpredicted international, political or economic event which would threaten the economy.

First published in our partner Tehran Times

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