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Pandora Papers: Revelation of a Parallel “Shadow” Economy

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After groundbreaking revelations of Panama papers and other documents pointing to tax-evasion efforts of the global elite, another new revelations namely pandora papers has surfaced raising furore about the secret wealth of the global financial elite, leaders and public officials of numerous countries. This revelations indicate an evident trend among the elite across countries to shield their illicit wealth from the probing eyes of authorities and also discloses a big shady financial affairs to which the general mass had been conveniently kept unaware of.

The Pandora Papers has been revealed by the International Consortium of Investigative Journalists(ICIJ) which involved 600 journalists from 150 media outlets in 117 countries. The dump of more than 11.9 million records, tantamount about 2.94 terabytes of data, came five years following the “Panama Papers” that revealed how money was concealed by the wealthy in ways that law enforcement agencies could not detect. The agency leaked files from 14 offshore service providers which has connection with more than 330 public officials, including 35 world leaders underscoring the disproportionate representation of governance elite in the list.

The offshore financing has become a increasingly ploy of the transnational elite as this provide them with tool to conceal their identity and also give them the window to utilize their ill-gotten illicit money to invest. The process of such financing is complex. Especially, financing in a foreign country is operated through a legal process where a tax-compliant individual of any country have to abide by the due procedures in order to invest his money in another country .However, corruption run rampant among the public officials and the leaders of many countries which put them at a disadvantaged position in utilizing their money. Therefore, they often take resort to devious methods in order to make their financial investments in a foreign country discreet from the responsible authorities .

Against this backdrop, a new clandestine economy has taken shape to cater to the demand of the offshore financing. This economy hinges on the countries where the tax regulation are often lax and where the authorities doesn’t impose stringent financial conditionalities with regards to financing and other economic activities. A group of unscrupulous transnational individual exploit these loopholes in those countries and abet with the errant individuals to conceal their wealth and identity and thereby act as an accomplice in illicit financial gains and tax-evasion.

Although these illicit affairs prevailed since 1970,it was not until the revelation of Panama papers when these outlawed activities had been divulged to the public and had evoked considerable uproar among the citizens. The backlash following the revelation panama paper was such that it had led to toppling of political leaders of different countries most prominently Nawaz Sharif in Pakistan. These revelations therefore, facilitate the accountability of errant elite of the countries and also make general people cognizant of the illicit activities of their officials and leaders. Besides, these revelations also dissuade the potential rowdy activities by the elite as they are fearful of such revelation and prospective reputational risks.

While the whole world is grappling with a crippling pandemic due to a appalling lack of resources to combat the virus ,such revelations is worrisome as it points a grave injustice to general people who are dispossessed of the basic necessities and services. Revenue is one of the fundamental sources of government earning. Often, revenue is commensurate with the earning of the individual which facilitates in the fairness and equitability of the revenue system. Besides, the revenue process also ensure the accountability of earning and investigate the legality of earning of individual. Therefore, money earned from shady sources through corruption and outright embezzlement can’t be utilized domestically. This prompts the unprincipled elite to evade tax and other liabilities and funnel to foreign tax havens .However, these activities inflict severe damages to domestic economy due to two reasons. Firstly, when a person can channel money transnationally to such havens are motivated in future to engage incremental corrupt activities to make more financial fortune. This, propels incentivizes increasing corruption which is detrimental to the economy and society of a country. Secondly, this activities also translate to tax-evasion dispossessing the citizens of the benefits of the revenue and thereby deteriorating government spending in areas of health, education and other indispensable services which makes people susceptible to the any shock such as epidemics as has been blatantly revealed by the Covid-19 pandemic. Moreover, such transnational financial activities isn’t innocuous rather it involves far-reaching socio-economic consequences.

What’s more appalling is the fact that the people embroiled in these activities are the very people entrusted with advocating public interest and shielding people from the adversities. Therefore, their involvement in such nefarious activities, as has been revealed by the Pandora’s Papers that features the public officials and political leaders, is indicative of a deep predicament of governance in these countries. Besides, these revelations also unmask the feigned benevolence of the country’s elites.

A state is a social contract which is devised and driven by a reinforcing social contract between state and the individual. State is represented by its institutions and its apparatuses while citizen binds himself with the state through providing allegiance to the state in exchange of a proportionate guarantee from the state about safety and guarantee from the state. Revenue serves as a fundamental mechanism by which state ensure accountability, undertake redistributive activities, ensure different essential services. Therefore, revenue ensure fundamental rights of the citizens of the state .However, when the powerful and wealthy quarters of the state engage in corrupt dealings and deliberately evade the revenue system, it inflicts a severe harm to the general people as they are deprived of the basic services. Therefore, such instances of tax evasion and shady activities revealed by the Pandora box points to a steady erosion of the social contract between the state and the individual. Besides, this affair is also indicative of emergence of greedy transnational elite who are free of accountability from their government and coordinate transnationally to accumulate greater wealth and their shady activities transcend the borders of state.

While any connection of any Bangladeshi citizen in the leaked documents is yet to be ascertained, it is however indubitable that there are numerous Bangladeshi elite predominantly civil servants who are actively linked with similar kind of nefarious money-laundering activities. In Bangladesh, corruption is unbridled as there is sheer lack of accountability and oversight of the activities of public officials. While government has launched numerous attempts at whitening the black money, there is however still considerable undocumented wealth own by country’s rowdy elite. Therefore, they exploit the opportunities of illicit transfer of the money to the countries where regulation are lax. This money ,however, represents embezzlement of public funds and corruption. This facts aren’t conjectural anymore as the existence of Begum Para has adequately shed light on the contours of transnational capital flight from Bangladesh.

Moreover, the revelations of Pandora Papers unravels the shady business activities of transnational elites who operate across nations and funnel their money to the tax havens where the regulations are often lax. While the developments has elicited enormous public furore for the dramatic effect, it however points to grim situation of governance marked by corruption, greediness and lack of accountability by public authorities who are ironically entrusted with the responsibility to safeguard public interest. Therefore, these shady activities inflict a severe damage on the state’s revenue and erode state’s resources in rendering services to its citizens. Against this backdrop, these revelations contributes to good governance by disclosing the illegal activities and also by subjecting elite activities to public criticism. Moreover, these revelations also underscore a pressing need of a transnational infrastructure to coordinate global governance efforts in order stem the tide of off-shore financing.

Kazi Asszad Hossan is currently pursuing International Relations degree from University of Dhaka.He is a scholar intern of Modern Diplomacy 2022 Scholar Internship Program.He is a part of the defense group of the MD team.His areas of interest includes Security Studies,Critical Geopolitics,International Relations Theory and Nuclear Security. He has been writing on contemporary issues profusely for national and international newspapers.

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Guangdong special economic zones at China

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Guangdong Province in southern China is distinguished by the economic development. The sign been approached by “Made In Guangdong” is becoming so famous globally, besides the Guangdong industries and its unique culture.

  Guangdong represents one of the most important provinces of China for a number of political, economic, social and natural reasons. Indications of the success of the openness experiment pursued by China since the late seventies of the last century are evident in it.

Guangdong special economic zones have made great achievements. As the province with the largest economic output in China, south China’s Guangdong Province has achieved tremendous economic development in the past 40 years, thanks to the establishment of special economic zones.

 According to my information, the Guangdong region has established the “Zhuhai Doumen” intelligent manufacturing economic development zone recently, after the Guangdong Provincial Government officially approved the establishment of the “Zhuhai Doumen intelligent manufacturing economic development zone”, which will implement the existing provincial-level economic development zone policy.  It is the third regional economic development zone in “Zhuhai” after “Foshan Industrial Park and Liangang Industrial Zone”.

 Guangdong Province is an economic powerhouse in southern China, and the province will promote high-quality development this year by fostering new engines of growth and strengthening cooperation and communication in the regions of (Guangdong-Hong Kong-Macao Greater Bay) to deepen reform and opening up.

 Guangdong Province, a major part of China’s foreign trade and industrial hub, accounts for about one-tenth of China’s GDP and is the largest of all Chinese provinces.

 Guangdong Province pays close attention to the progress of China’s modernization and the overall picture of reform and opening-up and major national strategic planning. It firmly attaches importance to the reform and opening-up policy by strengthening cooperation between the province and the “Hong Kong and Macao” regions, aligning the development of Guangdong with the “Northern Metropolis” plan of Hong Kong and the economic diversification strategy of Macao, implementing the “Greater Bay Area Connection” project in a more in-depth way, and working with “Hong Kong and Macao” together to build a world-class bay area, injecting vigor and strong impetus into its modernization efforts”.

 It Is remarkable that most of the cities of Guangdong Province are crowded with visitors from all over the world, especially Arabs and Africans, who come to them for the purpose of trade and search for investment. The province is considered one of the regions characterized by the diversity of its industries, quality and attractive prices, as well as commercial activities in various fields.

 It Is also distinguished by the beauty and sophistication of its buildings, which embody the aesthetics of modern Chinese architecture, as well as the spread of green spaces and vibrant squares throughout the day. It is also distinguished in terms of weather, with its atmosphere that resembles the tropical atmosphere with heavy rain, and the various cities of Guangdong Province are also characterized by easy access to it from different parts of the world throughout the day, as well as ease of movement between its various cities, thanks to the presence of an infrastructure that makes most of the cities of the province at the forefront of attractive cities for investment globally.

  Due to the existence of the commercial ports, Guangdong has a long experience in terms of commercial exchanges regionally and globally.

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The Theatrics of the US Debt Ceiling: Fiscal Austerity or Political Brinkmanship?

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It amazes me sometimes how pointless some discussions are to begin with, yet the hype they garner is just outrageous compared to relatively pressing issues in the mainstream spotlight. I am no Democrat supporter or even a backer of Mr. Biden – as my columns would effectively relay. But I am also no fan of idiocy when I see it (also apparent in my writings). And the ongoing tensions lacing the US polity, unfortunately, qualify that criterion by a long shot. While the debate around the debt limit is neither novel nor unprecedented, the preachy statements posited in the US Congress to justify the GOP posturing are downright ridiculous. But even if we don ignorance and accept their premise as is, I fail to see any alternative path toward economic balance and prosperity – assuming that is actually the end goal of the Republican lawmakers.

Before even delving into the nitty-gritty of the debt ceiling saga, let’s get some ambiguities clear and out of the way. The debt limit is a statutory cap on the total amount of money the US federal government is authorized to borrow. Currently, that amount stands at $31.4 trillion – already reached about two weeks ago. However, breaching that limit is well-nigh avertable: All the US Congress needs to do is raise that limit higher, and the chaos would disappear overnight. No risking the smooth functioning of the money markets, no pressure on the Treasury and the Federal Reserve, and no uncertainty while the world grapples with demons on geopolitical and economic fronts. But what about fiscal responsibility? Since 2001, the United States has consistently rolled around with budget deficits year after year and filled the gap with excessive borrowing to meet its financial obligations. In that period, the US has accreted about $20 trillion in national debt; debt held by the public as a percentage of Gross Domestic Product (GDP) has roughly tripled from 32% to 94%. Even for an economy as omnipotent as the United States, that’s prohibitive. But we need a thorough comparison to realize the underlying trends – both on the macroeconomic and political scale.

The US last enjoyed a fiscal surplus during the presidency of a Republican. Mr. George W. Bush. But you rarely witness a vociferous detour around that nook of history by any GOP members. It is perhaps because he squandered that surplus on tax cuts for the wealthy. Or on the invasion of Iraq. While one led to more inequity in an already lopsided social demography, the latter ushered those resources to decimate a foreign land on bogus pretenses. Another manifestation of the ‘Trickle-Down economic principle (apparently notorious for the Conservative fractions on both sides of the Atlantic) was during the Trump tenure. Mr. Donald Trump ran through another profligate tax-cutting regime to do good for the US economy. But ironically, the debt ceiling got raised three times during his own term, sans the drama we witness whenever the Republican Party holds either of the chambers of the US Congress but not the presidency. At this point, some people won’t need any more evidence to gauge the true intentions of the right-wing bloc baying for fiscal austerity. But let us sieve through the Democratic rule for a non-partisan outlook.

During the past two decades, only two episodes stand out apropos of record debt as a function of the US economy: the Great Recession 2007-09 and the Covid-19 pandemic. While I admit Mr. Biden’s nearly $2 trillion worth of American Rescue Plan helped (in large part) fuel the current inflation, it also helped avoid a devastating recession and jumpstart a speedy recovery. It kept businesses running, people employed, and spending buoyed. Notwithstanding that the unemployment rate in America is still at a multi-decade low, the economy could very well trip into another recession as the Fed moves aggressively to blunt the pain of price increases. But insofar as projections go, it appears that the American economy would brush past a prolonged recession and manage a relatively softer landing. According to recent estimates, annualized inflation has slowed consistently for the past six months, dipping to 6.5% from a summer peak of 9%. While the Republicans tried effortlessly to channel their narrative around the economy, their embarrassing rout during the Midterm elections was a testament to the facetious nature of their claims. 

Then there was the infamous standoff in 2011. We all know how the markets got rattled; borrowing costs spiked; and why the S&P downgraded the credit rating of US debt, even though we didn’t actually breach the limit. But we rarely ask: Why did the Obama administration end up with a debt of such mammoth magnitude? The answer is obvious. The Great Recession dried up tax receipts as the economy plunged into turmoil; the social safety net programs swelled, especially as spending on unemployment benefits soared. In 2008, the federal budget deficit stood at $458.6 billion, which staggered to $1.4 trillion in the subsequent year. Despite that, it took roughly eight years for unemployment to return to normality. Had the government raised taxes or cut spending drastically, the US would have witnessed something like Great Britain.

In the aftermath of the financial crisis, while America sustained spending to bolster the economy via borrowing, the Tory-led British government embarked on an austerity drive: Annual expenditure, as a percentage of GDP, was cut from 46% to 36%; spending on health infrastructure dragged down by half over the last decade. In hindsight, the difference is remarkable. While American wages have just stagnated over the course of the past 15 years, real wages in Britain have declined over the same period. While the US still contends with a rousing China for global economic superiority, Britain got recently supplanted by India (its former colony) as the fifth-largest economy in the world. The story couldn’t be any more lucid. 

Ultimately, the GOP political mumble of “adding guardrails” and “fiscal reforms” to bend the debt curve might be politically splendid, but to an economic mind, it is frankly garbage! And I have no doubt that regardless of cogent reasoning, the hardline Republicans would hold the government paralyzed – as was evident when they scrapped concessions from Mr. McCarthy in barter for his post as the House speaker. Nonetheless, the bottom line is that regardless of your disposition – Democrat or Republican, pro-spending or pro-austerity – the debt ceiling is, as aptly verbalized by Senator Ron Wyden, “not about adding new spending,” but “it’s about paying debts that the government [already] owes – debts that were incurred under presidents of both parties.”

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The Prolongation of BRICS: Impact on International World Order and Global Economy

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BRIC, coined by an economist Jim O’Neil in 2001 as an acronym for the four countries like Brazil, Russia, India and China. South Africa joined in 2010 and this organization turned into BRICS. The prime goal of BRICS was to the formation of the diplomatic and economic assistance framework, and the challenges to western influence in the global economic order. The Western cordially welcomed BRICS with the earnestness. The BRICS, five major emerging economies, together represent about 26% of the world’s geographic area, inhabitant of 2.88 Billion people which is about 42% of the world’s population and accounted for a quarter of the global GDP. The enlargement of BRICS was talked on June, 2022 at the groups summit which took place in Beijing. The 2023 summit will take place in South Africa. 

Russian Foreign Minister, Sergey Lavrov stated that Algeria, Argentina and Iran have already applied for joining in BRICS. In contrast, Saudi Arabia, Turkey , Egypt have declared their intense interest for becoming the member of BRICS and they are already engaged in the membership process. Now the question is what outcomes or impacts may be happened in the International world order and global economy in order to the expanding of BRICS?

Russia is the second largest producer of crude oil among OPEC+ members. Russia is a self-contained of its oil production. Because of Russia-Ukraine War, America and its European allies imposed sanctions on Russia and some European countries minimized their dependency on Russian oil. China imports its oil from Saudi Arabia, Russia, Iraq, Oman, Brazil and Kuwait. China increases at 21% its imports crude oil from Russia in 2022. The  member of OPEC+ decided to reduced their oil production by 2Million barrels per day two month before and it will continue in the end of 2023. The U.S.A and other western countries aggravated. 

Saudi Arabia is one of the world’s largest crude oil exporters, 11% of the world’s petroleum liquid production and has 15% of the world’s oil reserves. Recently it has declared that it will take initiatives to boost its oil production from 10 to 13 Million barrels per day. Egypt is a prominent petroleum producer and exporter. Egypt exports cotton and textiles, raw materials, chemical products and petroleum products. Egypt is a dialogue partner to the Shanghai Cooperation Organization. Iran is the world’s largest hydrocarbon Reserves in the world. Western world impose sanctions again and again. Iran is also the member of OPEC+ and Shanghai Cooperation Organization. Algeria, 10th largest natural gas reserver and 6th largest gas exporter. It is also a member of OPEC+. Turkey exports motor vehicles and their parts, gold and petroleum oil. It is the world’s 7th exporters of cotton. Argentina is a major exporter of wheat and corn. 

If Saudi Arabia, Egypt, Iran, Argentina, Turkey become the member of BRICS, it will enormous impact on the World order and global economy. 

1. The sphere of influence of the oil producer countries will be strengthen. The structure of oil market in the global economy will be changed. 

2. Lula da Silva, President of Brazil suggested to make a common currency for the BRICS countries. If it takes place, a more stable currency will be created. 

3. As China, Russia, Iran have a rivalry with the U.S.A, they will make more alliances to combat the U.S.A influence in the world. 

4. As the U.S dollar is the world’s dominant currency in the global financial and monetary system, and it is the Centre of U.S.A global leadership, the monopolistic influence of Dollar will be undermined. If BRICS countries will reach an agreement to continue their trade through a common currency, De-dollarization will be accelerated. 

5. As Turkey, Algeria, Iran, Egypt, Saudi Arabia and others have already shown their interest to join BRICS, it will accelerate to boost BRICS global influence. Russia, China will lead collectively in the world order. 

6. Most of the countries reserve crisis will be resolved. 

7. Saudi Arabia, Russia, Brazil will be able to export their oil collectively to China, India, Egypt and Turkey. China is Saudi Arabia’s biggest trading partner with more than $50 Billion. 

8. The investment of China and Russia in African continent will be extended. China is the largest trading partner of South Africa. South Africa is more advanced than any other countries of Africa because of its natural wealth and location. 

9. De-Dollarization will deteriorate the U.S.A capability to alter the behavior its opponents. If BRICS continuously expand, China will easily promote its agenda and grand strategy in the world. 

10. According to World Bank, BRICS grew at an average of 6.26 percent in 2021. On the contrary, G7 grew at 5.15%. If BRICS continues to attract other countries to join, it will emerge as a powerful force of the global leadership. The GDP is hoped to double to 50% of global GDP by 2030.

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