NEWS
RUSSIA — CYPRUS — BANK — RUSSIA
During 2008, Russian citizens have deposited ˆ22 billion in Cyprus Banks, eighteen of them &madsh; in October when the global financial crisis has reached Russia as well. During the current year these deposits have already reached ˆ3 billion by this May.
Experts assert that the Cypriot banks are so popular among Russians thanks to the favourable tax laws and absence of superfluous questions from the regulators. Investors also feel optimistic due to the fact that the government of Cyprus has decided to raise bank guarantees under contributions to 100 000 euro whereas in Russia the "ceiling" is of 700 000 rubles. It is curious that in the beginning of 2009, Russians became leaders in real estate acquisition on the island &madsh; their share was of 40 % of all transactions of purchase and sale of the real estate. According to experts of Midland Consult, Limassol &madsh; the second-largest Cyprus city &madsh; is possible to be named the «Russian capital in EU», and the number of Russians living there varies from 30 000 to 40 000 persons. Total number of inhabitants of the city, meanwhile, consists of more than 150 thousand persons.
Many Russians use Cyprus as «the All-Russia health resort» and as a place for perspective investments in real estate. At the same time, according to experts, the Russian money does not stay too long in Cyprus, and in the majority it arrives back to Russia, to the business most interested branches. For this reason Cyprus is considered to be the largest investor in economy of Russia. It is testified not only by figures, but also by those careful approaches with which the Additional Report signed in April to the Agreement on avoidance of the double taxation between two countries was edited. The main thing in this work was &madsh; not to harm too much the process of receipt of investments through Cyprus in the Russian economy.
BENEFICIARIES ARE ASKED NOT TO WORRY.
Recently business circles of Russia and Cyprus actively discuss signing in April of the additional Report to the Agreement on avoidance of the double taxation between our countries. As always in such cases, a number of the Russian mass media editions has hastened "to give the shakes", and as it often happens recently, this important event has been generally unprofessionally analyzed. Some others did it though. Many tax experts, consulting professionals in Cyprus and in Russia coincide in their opinion that there are no reasons to fear, and owners of the Cypriot companies can not worry, as changes have concerned only the several moments.
First of all, it is necessary to refer to the arrangement between Russian and Cypriot presidents which has been reached in November, 2008 in Moscow. According to this arrangement, Cyprus should keep its leading position of the country through which major investments come to Russia.. They were the basic criteria of teamwork over the Report. And consequently, as the Minister of Finance of Cyprus Charilaos Stavrakis tells, coordination process proceeded at mutual aspiration of the parties to keep former conditions.
Concerning the details, the minister has noted that the main concession made by Cyprus are the changes in tax burden on sale the real estate entities. It means, basically, the market of the commercial real estate. Now such objects of the commercial real estate belonging to the Cypriot companies, are not assessed in Russia with the profit tax (which is usually of 20 %). New amendments to the article 13 of the Agreement, allow Russia to raise the profit tax from sale of shares of the Cypriot companies if more than half of their assets lies in Russian real estate.. According to the Cypriot Minister of Finance, it may happen not earlier than 4 years from now and if these amendments are confirmed by the two countries at legislative level all the same there are no reasons for anxiety. Tax experts already see a ready-made decision, rather effectively allowing to avoid negative consequences. After all the shares of any Cypriot company can be owned by any offshore company from Belize, or BVI where the account of shareholders and directors is not conducted. Besides, trust companies are known as an effective tool for such cases. So, it is worth repeating again – there is no need to be concerned. However, business circles of our countries have already understood it, and keep increasing cooperation. As the Minister of Finance of Cyprus Charilaos Stavrakis says, the signed Report will eliminate psychological instability, will allow to deduce Cyprus from Russian « black list», & dispel various conjectures and gossips. And the major point is that investors will dismiss their uncertainty and doubts in Cyprus, as the largest organizer of investments into Russia. Thus the major advantage of Cyprus having one of the lowest taxes in Europe remains and changes of tax rates are not planned.
Minister Of Finance of the Republic of Cyprus Mr. Charilaos Stavrakis
CYPRUS ATTRACTS INVESTORS
The Minister of Finance of Republic of Cyprus Charilaos Stavrakis has declared that foreign investors have become interested in macroeconomic indicators of the Cyprian economy and has expressed confidence that the aim to attract 1 billion euro from the European and American investors will be reached. The Cypriot minister spoke in May in London at a presentation exhibition of the Cypriot economy and bank system for the foreign investors, organized to popularize the Cypriot state bonds issued for a period of four years. Charilaos Stavrakis has underlined that positive elements of the present Cypriot economy will allow to involve investors, despite that the situation in the market is not most suitable for that due to the world financial crisis. He has noted that the involved capital will allow the government to carry out the four-year plan for development & preservation of high level of economic growth, social and pension support. When asked &madsh; why foreign investors can be interested in such investments, &madsh; the Cypriot minister answered that they are impressed by macroeconomic indicators of Cyprus &madsh; the unique country in Europe with positive level of growth of economy of 1,6 % in the first quarter of 2009 that is considerably higher than anyone could expect.. Besides, inflation decreases. Moreover Cyprus has a healthy bank system which does not demand state support. The Cypriot Minister of Finance mentioned as well that gross domestic product of Cyprus exceeds 90 % average indicators of EU that is the best result among the 12 new members of the European Union/ there is also a low rate of unemployment & inflation decreases which is expected to be of 1-1,5 % in 2009.
Concerning plans of transformation of Cyprus in the financial centre of the region Mr..Stavrakis told that the country has a simple taxation system with the lowest income tax rate in Europe. Besides, Cyprus has strong and independent bank system and Agreements on avoidance of the double taxation with more than with 40 countries.
Russia has won first place on recession of GDP among G8 countries
In Russia the deepest recession of GDP and the highest rate of inflation among the countries of "G8" is noted following the results of the first quarter of 2009
According to Rosstat (Statistics Office), recession of gross domestic product in the first quarter of 2009, in comparison with the first quarter of 2008 in Russian Federation is of 9,5 % whereas in Germany the GDP has decreased almost on 7 %, in Italy &madsh; on 6 %, Canada &madsh; on 2,3 %, Great Britain &madsh; on 4,1 %, the USA &madsh; on 2,6 %, France &madsh; on 3,2 %. Russia takes the fourth place among G8 countries on recession rates of industrial production in 2008 . Past year the inflation in Russia was of 14 %. In India inflation was 8 %, in Brazil &madsh; 5,6 %, in China the deflation kept at level &madsh; 1,2 %. In Great Britain the rate of inflation was 2,9 %, in Italy &madsh; 1,2 %, Canada &madsh; 1,2 %, in Germany &madsh; 0,5 %, in France &madsh; 0,3 %. In Japan and the USA during the same period the deflation counted with &madsh; 0,3 % and 0,4 % respectfully.
UNPRECEDENTED RECESSION OF GDP IN LATVIA
At the same time there are European countries with even higher level of falling of industrial production. For example, GDP of Latvia in 2009 will fall to 12 %, the Minister of Finance of the country Atis Slakteris has informed journalists on Wednesday. Latvia endures the strongest economic recession in EU. Country’s GDP in the fourth quarter of 2008 in comparison with the same period of last year has fallen to 10,5 %, many companies of the republic have not coped with the crisis and declared bankruptcy. In December, 2008 the Diet (parliament) of Latvia has supported the plan of stabilization of the economy developed by the government which provides increase of tax rates and reduction of expenses of all state institutions on 15 %. "According to the forecast which was developed by experts of the Ministry of Finance of Latvia, in 2009 the GDP will fall to 12 %", &madsh; the Minister of Finance told. Also by the end of the year under forecasts of the Ministry of Finance the rate of unemployment in the republic will grow to 12 % above the present 8 %.
In December Latvia has completed the negotiations which begun in November with the European commission (ÅC) and the International Monetary Fund (IMF) about the financial aid aimed to stabilize the economy. The IMF and ÅC have expressed readiness to render to the republic the financial aid. Before 2011 Latvia will obtain a credit at a rate of 7,5 billion euro. The republic plans to spend this money for a covering of deficiency of the state budget of 4,9 %, and also on stabilization of bank sector and support of businessmen.
Under forecasts, in early autumn the government of Latvia will have to retire
The government of Latvia, &madsh; whose economy suffers the strongest recession in EU, &madsh; will be compelled to retire in early autumn, &madsh; the deputy of the Diet (parliament of Latvia) from opposition party "For human rights in the united Latvia" (ÇàÏ×ÅË) Jury Sokolovsky has declared in May. " Because of the difficult economic situation in the country the government of Latvia is compelled to conduct very rigid economic policy. Budgets to the ministries are cut down on 40 %, salaries of state employees promptly decrease, thousands of people are losing work daily. I think that to an early autumn the economic situation in the country will become aggravated even more strongly, the government cannot supervise the situation and will be compelled to retire", &madsh; the deputy has told. Latvia endures the strongest economic recession in EU. Country’s GDP in the first quarter of this year has fallen to 18 %.
The government of Latvia in December, 2008 has developed, and the parliament has confirmed the program of stabilization of national economy which provided increase of the rate of the value added tax (VAT) from 18 % to 21 %, and also reduction of expenses of all state institutions of republic on 15 %. This decision has displeased the public, & caused protests through the country.
Mass riots against the difficult economic situation have passed in January in Riga which participants demanded resignation of the government and Diet dissolution. The government headed by Ivars Godmanis has retired in February . The parliament has approved in March the new government under the direction of Valdis Dombrovskis who has declared that the republic is on the verge of bankruptcy. The rate of unemployment in the country in April has exceeded 11 % that is the highest indicator from the moment of Latvia independence in 1991. Latvia has addressed for the help to the international financial structures which will grant the country a loan in 7,5 billion euro before 2011.
Today, Latvia ranks 22nd place in the world in the list of countries favourable for starting service business, and in 2007 it occupied the 17th place. Results of annual researches of one of the global consulting companies confirm this fact.. According to the same data, positions of Estonia have worsened as well - the country has fallen from 15th to 18th place. Lithuania, on the contrary, has risen from 28th to 21st place. According to a rating, the best countries for sphere of services remain to be India, China and Malaysia where low expenses are combined with high level of knowledge of languages and technologies, and also a favorable state policy. In the rest in the list on appeal of business there were fundamental changes - the countries of Central and Eastern Europe have conceded their positions to the states from Asia, Middle East and the North Africa. Dollar exchange rate falling has strengthened positions of the USA (14 place instead of 21 in 2007).
MARFIN POPULAR BANK TRANSFERS HEADQUARTERS TO GREECE
The Vice-president of one of the largest Cypriot banks &madsh; Marfin Popular Bank – Andreas Vgenopulos has declared in May that the decision to transfer the headquarters of the bank to Athens has been reached. According to the banker, this decision is dictated by several reasons, including the aspiration to show strategic flexibility in possible expansion of activity of the bank in the financial market of Greece and some countries of Southern Europe. Besides he has declared that some provisions of the Greek legislation will allow the bank to increase its capital base and to expand operating possibilities with share programs. Now about 67 % of shares of the bank belong to several thousands of private investors which should be still convinced that the transfer of the headquarters to Greece coincides with their interests. According to A.Vgenopulos, present global financial crisis, besides obvious negative effect, has also brought certain possibilities & that the bank needs to be quick in taking decisions in order to use them. At the same time, the banker has noted that transfer of the headquarters of the bank to Athens does not mean that Marfin Popular Bank leaves Cyprus. It will never happen, the banker has concluded.
FBME ANNUAL MEETING
In the middle of May, the oldest "offshore" bank &madsh; FBME celebrated its anniversary in the Cypriot capital. Addressing the visitors and business partners the head and one of the owners of the bank Farid Saab has underlined that careful and thoughtful approach in making financial decisions allowed FBME to conduct successfully the bank activity during more than a third of the century and to reach appreciable results. Now FBME, besides the Cypriot offices in Nicosia and Limassol, has its representative bodies in Beirut, Moscow and several more countries.
World countries on the verge of default
Iceland became the first country to declare being on the verge of default. The country has got to a heavy economic situation after the largest national financial institutions – banks Kaupthing, Landsbank and Glitnir &madsh; have appeared on the verge of bankruptcy.
In October, 2008 the American mass-media referring to a source in "national intelligence" have informed that Pakistan is on the verge of a default.
In the end of October, 2008 mass-media have informed that Hungary has appeared on the verge of bankruptcy as well. Its external debt has exceeded 100 billion dollars, and in the next 12 months it will have to pay out 32 billion euro which it doesn’t possess.
On February, 16th, 2009 Bloomberg Agency referring to the representative of the government of Argentina has informed that Buenos Aires has decided not to pay out ahead of schedule its debt of 6,7 billion dollars to the Parisian club of creditors.
On February, 27th, 2009 the candidate to the prime minister of Latvia Valdis Dombrovskis has declared that the country faces the risk of total bankruptcy.
According to some mass-media, inability to pay the amounted debts threatens to a number of other countries as well. Ecuador, Philippines, Malaysia, Thailand, Colombia, Turkey and Ukraine are under the risk.
OIL PRICES RISE, CRISIS BEGINS TO DECLINE?
The May indicators of the world oil prices inspire some optimism to the financial market analysts. Oil prices which by the middle of May has exceeded the 62 dollar boundary, continues to rise in price due to the reduction of “black gold” stocks the USA. Obviously it influenced the revival of the world financial market and corresponding growth of stock quotes of some companies. According to the American stock exchange experts, in the USA positive tendencies are observed and financial crisis, after achieving its "bottom" has moderated & starts to decline. At the same time the European analysts are not yet ready to express themselves definitely in favor of positive dynamics.
