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Gender Gaps in the Economic Sphere: Is Indonesia Making Progress?

By Namira Samir

Women’s rights have long been the centre of arguments since ancient times. Though societies have formidably dealt with the issue the best way they could, these efforts are shortchanged due to the underwhelming support for empowerment. In this article, the author imparts practical measures on how The Government of Indonesia can alleviate its citizens’ cry for gender equality.

 

Women are no longer half of humanity according to the latest data of human sex ratio by the Central Intelligence Agency. For every 107 men in the world, there are only 100 women. The factoid holds behind this figure is that gender imbalance is a result of evolution and biology, nothing else.

It is not a completely false notion that evolution and biology engenders the imbalance between the number of men and women. But one may ask, does it explain the unequal participation in the economy, politics or even education? Gender inequality as we know, is the implication of external forces that oftentimes disregard women as the global citizens who deserve the rights as much as those given to the opposite gender.  

The unequal participation of men and women is believed to exist in multifarious parts of human life. The Global Gender Gap Report, which provides yearly update on gender parity in the health, political, and economic sectors, reveals on its 2017 data that gender parity is on the range of 0.6 out of 1. Breaking it down into sectors on average of 144 countries, 98% of the gap in health outcomes has been resolved.1 Meanwhile only half of the gap in economic participation has been closed.

Economic participation is judged across several indices which include labour force participation, wage equality, and estimated earned income. Poor women participation in all indices demands strategic measures which could directly mitigate the issue.

According to the data released by the Central Bureau of Statistics of Indonesia in February 2018, the labor force participation rate of Indonesia is 69.20%, which means that for every 100 workforce in the economy, there are 69 who participates.2 This is a staggering number if we look from a different angle which shows us that almost one-third of Indonesia’s population ages 15-64 are unemployed.

 

Gender Inequality is the implication of external forces that oftentimes disregard women as the global citizens who deserve the rights as much as those given to the opposite gender.

The figure is even more shattering if we analyse the data from the gender-based perspective. In the first quarter of 2018, the Indonesian Central Bureau of Statistics revealed that the employment to population ratio (EPR) of men is 78.62%, whilst those of women is 52.73%. This means that nearly half of women are unable to participate in the Indonesian economy.

Above all, governments are the stakeholders that handle matters related to the welfare of all its citizens including women who are marginalised. The fact that different dimensions of well-being and deprivation are deeply intertwined suggests that policy created by the Government must include all of the dimensions on the consideration. Nowadays it seems that the pro-poor policy growth does not pay attention to gender gap issue that is very likely to worsen the situation.

Perhaps the word “prevention” is unsuitable for this condition as the Government of Indonesia does not ban women from employment. Yet the Government also does not initiate such policies or programs that can ameliorate women’s participation in the economy. Gender inequality is not even mentioned in the National Medium-Term Development Plan (RPJMN).3 The inability of women to gain financial independence through employment is found to be detrimental on their capability and well-being.

The absence of such economic opportunities is directly linked to deprivation. Not having the necessary income, women will find themselves endure various kinds of hardships with basic needs, health and education going unmet. The multiplier effect of gender inequality in the economy is severe as it can impede the country to achieve a robust economic growth. Contrarily, increasing women participation in the economy contributes to higher economic growth.4

To better illustrate the positive impact of women’s empowerment on the economy, one best practice is provided as an example. In Cambodia, the Ministry of Women’s Affairs (MoWA) and the Cambodia national Council for Women (CNCW) are supporting their country progress on gender equality and women empowerment through designing policies for gender-responsive approach in the economy. Another form of support received by women in Cambodia is through the Cambodia Women’s Empowerment Project initiated by a local NGO. The project provides deprived women with entrepreneurial skills as well as the introduction of new employment opportunities such as in the tourism industry. This will enable them to have the capability to participate in the workforce.

In Indonesia, 98.8% of business entity are Micro, Small and Medium enterprises (MSMEs), which is evidenced to contribute 30.25% to the gross domestic product (GDP) of Indonesia.5 With the majority of small businesses being in the informal economy, they are not legally and socially protected by the state hence the workers.

The majority of Indonesian women (57.9%) in the labour force are working in the informal sectors, a 2014 data by International Labour Organization suggested.6 As previously elaborated in the informal economy, people often feel less valued of their energy and capability and they are often socially excluded from the formal economic activity. Realising this, the Government must take a responsive approach to make these people, most specifically women, feel valued.

It is therefore important to praise an effort that aims to relieve such issue. The Ministry of Women Empowerment and Child Protection of Indonesia recently invented a program focussing on empowering women through micropreneurs. The initiative originated from comprehending the dominant role of MSMEs in the Indonesian economy and its revolutionary approach on addressing poverty and gender inequality.

This finding is an important reminder that we need to overhaul our strategies on closing the gender gap. The 42% gap in economic participation that is yet to be resolved demands unique approaches and strategies that directly target the root causes of gender disparity which are multidimensional. Guaranteeing equal participation of men and women in the economy would not only lead to acceleration of gender equality but also helps the country achieve its desired economic growth, said Dollar and Gatti (1999).7 As such, under-investment on women’s economic empowerment would recoil on the positive economic growth that the country experienced and hamper the country’s realisation of its development agenda.

 

Perhaps the word “prevention” is unsuitable for this condition as the Government of Indonesia does not ban women from employment. Yet the Government also does not initiate such policies or programs that can ameliorate women’s participation in the economy.

To prevent the issue from happening, the utilisation of both top-down and bottom-up approaches is necessary. While the role of policymakers is most likely to make the most important contribution, it seems that the SDG 5, Gender Equality and Women’s Empowerment, is deemed the least important among SDGs objectives on Indonesia’s macroeconomic strategies for development. Indeed this is a torment for every feminist who understands the implication of disproportionate rights of men and women in the society.

Quoting what Gloria Steinem said when she was asked why gender equality matters, without hesitation, she answered “because gender inequality is the basis of all things”. Gender inequality is intrinsically connected and linked with other SDGs objectives therefore they have to be a part of the conversation.

One of the agreements from the World Summit for Social Development held in Copenhagen, 1995 is concerning the inception of policies and strategies for addressing social development issues and the need to address its root cause, by giving special priority to the needs and rights of women who often serve as the majority of the vulnerable and disadvantaged groups and persons.8 By designing gender-based policies, it will be more feasible to close the gender gap in the near future.

In addition to recognising the importance of gender equality on the country development agenda and policies, closing the gender gap might also use the bottom-up solution which in this matter means investing directly to women who are marginalised.

 

In addition to recognising the importance of gender equality on the country development agenda and policies, closing the gender gap might also use the bottom-up solution which in this matter means investing directly to women who are marginalised.

Without any particular push, the world could achieve gender equality 100 years from now. But the question is, “Do we want to wait for at least a century to make it happen?” If we want to witness it happen during our lifetime, ceteris paribus, it is simply impossible for gender equality to be resolved without any intervention.

We do not need centuries of endeavour to close the gender gap. What we need are solid macroeconomic and microeconomic approaches which put gender equality in both the global and national development agenda. And who knows, the target that somehow seems enigmatic could be achieved within a decade.

About the Author

Namira Samir is a researcher and consultant based in Indonesia whose main interests rely in multidimensional poverty alleviation, regional inequality and Islamic social finance. She holds a master’s degree in Islamic Finance and Management from Durham University, UK.

 

References

1. World Economic Forum. (2017). The Global Gender Gap Report. World Economic Forum, accessible at: https://www.weforum.org/reports/the-global-gender-gap-report-2017

2. Badan Pusat Statistik. (2018). Booklet Survei Angkatan Kerja Nasional. Badan Pusat Statistik, pp. 1-25, accessible at: https://www.bps.go.id/publication/2018/09/28/c49b09bd9fcb72050c51958e/booklet-survei-angkatan-kerja-nasional-februari-2018.html

3. BAPPENAS. (2015). Rencana Pembangunan Jangka Menengah Nasional (RPJMN) 2015-2019. Badan Perencanaan dan Pembangunan Nasional.

4. UNWOMEN. (2018). Turning Promises Into Action: Gender Equality in the 2030 Agenda for Sustainable Development, UNWOMEN, pp. 1-344.

5. KEMENPPPA. (2018). Ketahanan Ekonomi Perempuan, Kementrian Pemberdayaan Perempuan dan Perlindungan Anak, accessible at: https://www.kemenpppa.go.id/index.php/page/read/31/1665/ketahanan-ekonomi-perempuan

6. International Labour Organization. (2014). Indonesia: Tren Sosial dan Ketenagakerjaan. ILO, pp. 1-4, accessible at: https://www.ilo.org/wcmsp5/groups/public/—asia/—ro-bangkok/—ilo-jakarta/documents/publication/wcms_329870.pdf

7. Dollar, D. and Gatti, R. (1999). Gender inequality, income and growth: Are good times good for women? Mimeograph, World Bank, Washington, DC

8. United Nations. Report of the World Summit for Social Development. UN, pp. 1-134.

Indonesia is Giving Proof of a Zakat Paradigm Shift

Jakarta, Indonesia-November 19, 2011: People are moving at traditional market that selling any kind of vegetables at kebayoran lama market in south jakarta. This is one of the biggest market in south jakarta.

By Greget Kalla Buana

The similarities between the foundation goals of SDGs and zakat resulted in a paradigm shift, and Indonesia is providing evidences of its occurrence.

 

The Government of Indonesia has launched the book ‘Fikih Zakat on Sustainable Development Goals’ strengthening the country’s position in leading zakat empowerment and providing fundamental instruments in the global level. The piece is an endeavour to reveal how to composite zakat and SDGs: (1) zakat as an instrument to help achieve the SDGs and (2) implication of SDGs spirit within zakat management. Finding the Islamic argument in the SDG concept is not an easy task given the meaning of fiqh is always referring to a process of deep understanding of Islamic law (Sharia). So is the SDGs as a man-made concept with different dynamics. The fact that both are human product puts niche where interconnectedness between the two does exist.

Body of knowledge and researches demonstrated zakat and the SDGs overlap in terms of the foundational goals of Islam (Maqasid al-Sharia). Agreeing with the premise, the 17 UN’s SDGs are relevant and perfectly matched with the Maqasid al-Sharia. The elaboration on such commonalities resulted in a zakat paradigm shift, which focuses on two aspects: productive approach and zakat institutionalisation. Moving from a focus on charitable giving to broader productive activities was also pioneered by the National Board of Zakat (Baznas) supported by United Nations Development Programme by joining forces on renewable energy project in Jambi, to build four micro hydro power plant installations. The initiative is intended to raise the proportion of people benefiting from electrification and to likewise bolster rural livelihoods. Observing the example of harnessing the potential of zakat for SDG-related practices, willingness to institutionalise zakat management has been taken into consideration by stakeholders, including the Government and private sectors.  

 

Zakat redistributes wealth from the rich to the poor. But, the transfer of such charitable giving should not have adversely affected the consumption of the payer (muzaki).

Following a 38 percent average annual growth of zakat, infaq, and sadaqa (ZIS) accumulation between 2002 and 2016 as reported by Baznas, which is far outstripping GDP growth, the Government of Indonesia has started to consider zakat as an alternative financing for development. Instead of mimicking Malaysia’s impactful policy of tax rebate for zakat payer, the country is imposing a 2.5 percent cut on salaries received by Civil Servant (PNS). The new regulation is intended to boost zakat collection up to Rp10 trillion (US$740 million) where the potential of national zakat is forecasted Rp217 trillion (US$16 billion), yet only 3 percent was realised in 2017.

Zakat is a compulsory annual levy on wealth when it has reached a certain amount that by God’s order is to be given to the deserving people (ashnaf). Hence, zakat redistributes wealth from the rich to the poor. But, the transfer of such charitable giving should not have adversely affected the consumption of the payer (muzaki). The understanding of zakat as an inherent religious injunction for every eligible Muslim puts zakat in a private niche. This assumption that underlies the opinion on zakat arrangements by the Government is considered excessive.

The zakat commands are written in the Qur’an, among others At-Taubah (3): “Take alms from some of their possessions, by charity ye clean and purify them and pray for them”. The verse was revealed to the Prophet Muhammad in his capacity as a state leader. Zakat management at the beginning of history was done by assigning zakat officers. This mechanism lasted until the era of Abu Bakr Ash-Shiddiq’s (632-634) and even at the time of Umar Bin Khattab (634-644) zakat could have a remarkable impact on a zero-poverty rate or no zakat recipient (mustahik).

The above-mentioned fact explicitly reflected zakat managed by the state. In the context of non-secular ideology, if the state agrees to legislate religious affairs, zakat should be facilitated by the government. Comparing to the individual Muslim pilgrimage called hajj, the Qur’an does not order the state to take over the management and implementation of hajj. However, given the large number of pilgrims, chaos will arise if the process is not accommodated as it exists today.

Same implication is supposed to apply for zakat. The definition of zakat as a mustahik’s right over muzaki’s wealth will result in harm and problems in society, if it is not well-performed. Thus, zakat cannot be simply perceived as a personal matter. Therefore, the state is encouraged to take a role in it. Unlike the five-daily prayer and fast which are both relationship between humans directly to God, zakat incorporates human relationship with each other.

Continuous annual growth of ZIS indicates high public awareness to pay zakat through formal organisations or agents. However, a considerable gap between the actual and the potential amount collected is influenced by various factors. The presence of direct contact with mustahik could be one reason why muzaki choose to channel their zakat informally, which enables them to know where the funds will be utilised.

The zakat collection and distribution are ideally committed to the state. Consequently, Zakat may serve as a direct substitute for taxation that should be allowed to become tax credit as applicable in Malaysia.

The gap is also driven by the treatment of zakat towards tax. Law No. 17/2000 puts zakat as a deduction of taxable income. This policy leads to double payment: zakat and taxes. Another approach may occur when zakat is positioned as a tax credit (tax rebate). Moreover, the reduction of taxable income shall not apply if the taxpayer fails to show the proof of payment of zakat as obliged by the Directorate of Taxation.

To add zakat into an aggregate resource of a country, the zakat collection and distribution are ideally committed to the state. Consequently, zakat may serve as a direct substitute for taxation that should be allowed to become tax credit as applicable in Malaysia. This mechanism needs coordination between zakat and tax authorities. Indeed, such procedure is more likely to increase national zakat collection although on the other hand it will affect tax income.

According to the Global Report on Islamic Finance published by the World Bank and Islamic Development Bank (2016), zakat in Sudan is managed by government with an average annual growth of 19 percent or Rp3 trillion (US$206 million). Although the nominal revenue is lower than in Indonesia, the policy of zakat management by the state in Sudan can be said to be much better in terms of per capita collection.

Another consideration must be emphasised. If properly managed by the state where zakat applies tax-deductible like Indonesia, zakat funds should be separated from the collected taxes and other receipts, because zakat cannot be used to finance infrastructure projects. Noting that the infrastructure is beneficial to both the poor and the rich who do not deserve to receive zakat, unless specified only for the poor and other deserving categories.        

About the Author

Greget Kalla Buana is an Islamic Finance Specialist at the United Nations Development Programme and graduated from Master of Islamic Finance and Management, Durham University, UK. His work experiences have always been in Islamic finance sector, such as Dompet Dhuafa, Islamic Banking Department of Indonesia Financial Services Authority, and UNDP where they established partnership with Islamic Research and Training Institute of Islamic Development Bank.

Empowering Lives With Zakat: Why We Need More Transparency And Innovation

Nizwa, Oman - Nov 10, 2017: Omani men participating in a goat auction on Nizwa market lighted by the early morning light.

By Namira Samir and Imad el Fadili

A recent study by Sumner (2012) suggested that approximately 960 million people from 1.3 billion poor people in the world live in Middle-Income countries1. This evidence is being referred to as the “new bottom billion”. Somehow startling that the extreme poor no longer live in the world’s poorest countries, it is even more alarming to realise that roughly one-fourth of the world’s Muslims live in these less-developed countries. Muslims are often backed by its obligatory tax required of Muslims which is also known as zakat. However, the rising criticism over the negligence of zakat on resolving poverty is seemingly becoming more intense than ever. This article argues that improving transparency and promoting innovation can help effectuate the enormous potential of zakat for poverty alleviation.

 

Ending poverty and inequality is one of the greatest challenges of the current decade until the next. Various charities and non-governmental organisations (NGOs) are encountering these challenges in our society. These organisations depend on either philanthropy or public financing to do their work. Although, the amount of charitable giving increases over the last years there is still a gap between need and funding2.  Moreover, this gap might become bigger since the distrust of people on charitable organisations are increasing3.  So, how to fill this growing gap?

The branch of Islamic finance, Islamic Social Finance, incorporates a number of tools, both mandatory and voluntary, that can be used to reduce inequality and achieve socio-economic justice.

The Sustainable Development Goals (SDGs) encourage humanity to cooperate in order to achieve the 17 SDGs. The UN World Investment Report shows that this cooperation is paramount since there is an average investment gap of $2.5 trillion for developing countries4.  This gap can only be filled when more funds are attracted from current givers and by untapping new areas of social finance.

Perhaps countries with low Muslim population are less familiar with “Islamic finance”, a new approach on how to conduct the economy with ethical and social considerations. The branch of Islamic finance, Islamic Social Finance, incorporates a number of tools, both mandatory and voluntary, that can be used to reduce inequality and achieve socio-economic justice. While it is never mandatory to help the poor, in Islam, it is required to give a portion of wealth to the needy. As a mandatory Islamic financial instrument, zakat can be viewed as a wealth tax on Muslims who have wealth that exceed a certain threshold (nisab).

Zakat should be distributed to eight types of recipients (asnaf). The most relevant types of recipients for the SDGs are the poor (fuqara) and the needy (masakin). The main purposes of zakat are poverty relief, economic empowerment, and community development. A number of researches elaborated the potential impact of zakat to several SDGs objectives, which include: no poverty (SDG1), zero hunger (SDG2), good health and well-being (SDG3), quality education (SDG4), clean water and sanitation for all (SDG6), and reduced inequalities (SDG10)5.

 

According to IRTI, the potential of zakat can reach $1 trillion annually.6  While the potential contribution of zakat might be perpetual, it has not yet reached its highest capacity. For instance, in Indonesia the zakat has the potential to contribute 217 trillion rupiah ($15 billion) per year7. The state zakat authority in Indonesia, BAZNAS, attracts only USD 261.178 million, which is only 1.28 percent of its potential zakat collection of USD 20,263 million8.

Zakat should be distributed to eight types of recipients (asnaf). The most relevant types of recipients for the SDGs are the poor (fuqara) and the needy (masakin). The main purposes of zakat are poverty relief, economic empowerment, and community development.

Reasons that are often put forward for failing to achieve the potential is the lack of awareness or education and the informal channeling of zakat. Even though the channel to which a Muslim decides to use to fulfill his or her obligation is entirely unrestricted, paying zakat directly to individuals has its cons. An analogy with a membership of a gymnasium should be made for clarification. Suppose that you have a gymnasium membership and the owner of the gymnasium tells you that you do not need to pay the monthly contribution yet instead you are required to buy sports equipment for the gymnasium. If everyone does that on their own, we might end up with a gymnasium with too many of the same instruments or too less.

Hence, it is important to have more zakat payers who contribute to centralised zakat institutions. These zakat institutions can pool the money and invest in a sustainable way in a group of recipients and ensure that those recipients become economically empowered. But before being able to do that, it is important to find out why some people prefer to give money directly to eligible recipients. A reason for this is that some zakat payers attain an individual satisfaction when interacting directly with the counterparty which they do not think to perceive when paying directly to a centralised institution. When giving the zakat directly to an individual, the payer directly views the impact and in case of a zakat institution mostly the payers only get an annual report to assess how the money has been used. Another reason must be the distrust that more and more people have towards charitable organisations9.  There is no specific trust barometer on zakat funds but a recent research showed that the trust towards charities decreases over time. Due to inefficient use of funds and different scandals this trust has been deteriorated.

A solution to stabilise more people to pay zakat and pay the zakat to an institution is twofold. Firstly, governments (in countries with Muslim majority) and institutions should embark on awareness programs. Potential zakat payers should be effectively targeted in universities, mosques, business associations, and others. Those awareness programs should emphasise the impact of zakat on a society and the added value of paying zakat to a zakat institution which can pool the money and allocate it in a sustainable way. Secondly, zakat institutions should make significant steps forward regarding transparency and trust by engaging in new technologies. To maintain the aforementioned satisfaction of a payer, zakat institutions can provide zakat payers with a certain traceability of funds. Hereby, the payer can trace the impact that he made on the society with the paid zakat.

After stabilising people to pay to centralised zakat institutions, another challenge awaits us with regards to utilising funds in a sustainable way to achieve the real goal of zakat; transform the zakat recipients into zakat payers.

Recently, a new zakat app has been introduced through a cooperation between International Federation of Red Cross and Red Crescent (IFRC), AidTech, and INCEIF. This app endeavours to resolve the issue of transparency and inefficiency. It allows payers to choose certain zakat-eligible projects and they get a notification once the funds are utilised. Although, these are good steps forward, much more which still needs to be done. After stabilising people to pay to centralised zakat institutions, another challenge awaits us with regards to utilising funds in a sustainable way to achieve the real goal of zakat; transform the zakat recipients into zakat payers.

The current impasse directed to zakat is its inability to go beyond resolving income poverty. Having the necessary material needs does not guarantee the person or household free of deprivation. To this day, zakat has not been able to combat other layers of poverty. To name a few, a lack of quality education, proper sanitation, and malnutrition are some of the issues that are most often faced by the bottom billion. These different dimensions of poverty can now be measured by the Multidimensional Poverty Index10  developed in the year of 2010 by Oxford Poverty and Human Development Initiative (OPHI) in collaboration with UNDP. The measurement follows the Alkire-Foster Methodology (AF)11 which can determine the multidimensional poverty rate and its intensity.

The ongoing critique toward zakat is the inabilities to contribute to the abovementioned dimensions of poverty. Aside from the lack of transparency, we believe that zakat needs to utilise some innovative approaches. It needs to be integrated with other forms of technology which can extend the impact of zakat on poverty.

In concluding this article, we therefore argue that the ability of zakat to tackle social issues such as poverty is being prevented by the lack of transparency and innovation. Collaborative action between different actors can improve the situation and help zakat achieve its desired impacts.

About the Authors  

Namira Samir is a researcher and consultant with main interests in multidimensional poverty alleviation, regional inequality and Islamic social finance. She holds a Master’s Degree in Islamic Finance and Management from Durham University, UK.

Imad el Fadili is a consultant with main interests in Islamic social finance, sustainability and poverty alleviation. Imad is also founder of FinEthical which innovates with zakat and technology to enhance transparency and sustainability. He holds a Master’s Degree in Finance from Vrije Universiteit, Amsterdam and is currently pursuing a Master’s Degree in Islamic Finance from INCEIF, Malaysia.

References

1) Sumner, A. (2012). Global Poverty and the “New Bottom Billion” Revisited: Exploring The Paradox That Most Of The World’s Extreme Poor No Longer Live In The World’s Poorest Countries. (2012). IDS Working Paper.

2) Stirk, C. (2015). An Act of Faith: Humanitarian financing and Zakat. Global Humanitarian Assistance.

3) Trust in Charities, July 2018 (Charity Commission for England and Wales)

4) UNCTAD. (2014). World Investment Report 2014 – Investing in the SDGs: An Action Plan. United Nations Conference on Trade and Development, 2014.

5) Nurzaman et al. (2018). The Role of Zakat in Sustainable Development Goals for Achieving Maqashid Shari’ah. Centre for Strategic Studies, BAZNAS Indonesia

6) Obaidullah, M., & Shirazi, N. S. (2015). Islamic Social Finance Report 1436H.

7) Firdaus, M., Beik, I. S., Irawan, T., & Juanda, B. (2012). Economic estimation and determinations of Zakat potential in Indonesia. Jeddah: Islamic Research and Training Institute

8) BAZNAS (2011-2016), Country Economy (2011-2016), Indonesian Statistics (2011-2016), the Indonesian Ministry of Religion (2011-2016) and World Bank (2011-2016). The data is calculated by Authors.

9) Trust in Charities, July 2018 (Charity Commission for England and Wales)

10) UNDP (2015). Multidimensional Poverty Index. http://hdr.undp.org/en/content/multidimensional-poverty-index-mpi

11) Alkire et al. (2015). Multidimensional Poverty Measurement and Analysis: Chapter 5- The Alkire-Foster Counting Methodology. OPHI Working Paper, 86(1), pp. 1-53.

Darker Clouds over Europe

By Dan Steinbock

Not only is Europe’s expansionary cycle fading, but the region is about to face challenges that it has to tackle amid growing political fragmentation.

Italy slipped into recession in the fourth quarter of 2018, according to new data. France continues to be haunted by Yellow vests protests. Germany has entered an era of uncertainty. And Brexit overshadows the UK future.

In the absence of Trump’s tariffs, Europe could have benefited from a nascent recovery of world trade, investment and finance. But now even these hopes are diminishing.

End of expansionary cycle, rise of political fragmentation

Historically, four economies – Germany, France, Italy, and the UK – have accounted for much of the region’s growth. Yet, the expansionary cycle has eclipsed in each.

Through the crisis years, the steady leadership of Chancellor Angela Merkel’s Germany supported European integration and migration. However, the Trump administration’s tariff policies cost Merkel nightmares at home and abroad. The uneasy coalition between her center-right CDU and the center-left SPD has been strained, while the left-leaning Greens and radical right AfD have gained. As a result, the ruling coalition suffered an electoral defeat of the ruling coalition in regional polls. In 2018, German economy grew by 1.5% and continues to slow.

After his 2016 election win, President Emmanuel Macron was seen as Europe’s new savior, though mainly in the U.S. Yet, as a business-friendly economy minister in Hollande’s government, he had alienated most socialists while failing to win over most conservatives. His movement En Marche! served as a façade for French corporate giants in banking, real estate and finance, which he was quick to reward after the election. As Macron’s tax reforms fell disproportionately on the working and middle classes, the Yellow vests movement spread like a wildfire. In the fourth quarter of 2018, French growth slowed to 0.9%, despite Macron’s €10 billion stimulus package to appease the Yellow Vest protests.

In the early 2010s, UK was among the fastest growing EU economies; today, it is among the slowest. In the three months to last November, it grew only by 0.3%. Almost three years since the Brexit vote, there is little consensus on the terms of the UK-EU divorce, despite the looming March deadline. Thereafter, UK is likely to face higher tariff and non-tariff trade barriers, reduced foreign investment and lower migration inflows. Relative to a no-Brexit scenario, the divorce threatens to penalize UK GDP by 5 to 8%.

In the short-term, the Eurozone’s perceived risk is Italy. Now its economy has slipped into recession, for a third time in a decade. The antipathy against the political ruling class is so immense that the country is governed by a coalition of radical right (Matteo Salvini’s League, LN) and radical left (Luigi di Maio’s Five Star Movement, M5S). The friction with the Eurozone has escalated about Italy’s spending plans and debt ratio, which now exceeds 132% of GDP.

If Brussels takes a harder line that would cause havoc in Italian bond markets, which, in turn, could have contagion effects – which is why Brussels waits anxiously, while Rome refuses to budge.

Monetary and institutional uncertainty

Until recently, European Central Bank head Mario Draghi described the Eurozone’s risks as “broadly balanced between better and worse outcomes.” On January 25, he acknowledged that risks have “moved to the downside.”

Draghi has pledged that the ECB will use all its monetary levers in case the slowdown takes a turn for the worse. Unfortunately, those levers may not be adequate and a new ECB Governor will be elected next November. Theoretically, the lost momentum could be re-captured in a year or two, but that would require a favorable external environment. Thanks to President Trump’s tariffs, worse is likely ahead.

European Central Bank hoped to end quantitative easing (QE) in 2018. Since interest rates remain at zero, they cannot be further cut, even if conditions deteriorate significantly and normalization is likely to be deferred (Figure). What’s more likely is another round of QE – likely through cheap financing programs– to support growth and infuse liquidity. However, the absence of common institutions will prevent the kind of fiscal adjustment that’s possible in the U.S., Japan, and China.

Uncertainty is not alleviated by the fact that critical institutional shifts loom ahead. In addition to Draghi’s expected departure, the European Commission should get a new head in October after Jean-Claude Juncker’s 5-year term. Unless Brexit is significantly delayed in which case Juncker might seek to maintain his position to steer the bloc through the Brexit process.

In May, the election of the European Parliament will be affected by slowing regional economy, migration crises, anti-EU and anti-migration movements. Mainstream right (Christian-Democrats, EPP) and left (Socialists and Democrats, S&D) will continue to shrink, but may still garner 40 to 45% of all seats. Neoconservatives (liberal ALDE) could up their share to more than 10%. The greatest advances are expected among the radical right and the radical left, which together might grab every fourth seat.

Despite erosion, global actor

Despite the erosion of the federalists in Brussels, the GDP economy remains highly consequential. The EU GDP exceeds $19 trillion; the Eurozone, $13 trillion. The actions of European multinationals, investors and governments have a critical role in shaping global growth prospects.

An independent European foreign policy, as evidenced by Brussels’ stance toward Iran, nuclear weapons and nation-building, is greatly needed as a peaceful balance in a multipolar world.

Nevertheless, a unified, sovereign Europe needs a political rethink before its economic erosion will spread further.

About the Author

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

The Contemporary Value of Marx’s Practice of Civilisation

By Bao Zonghao

Karl Marx’s practice of civilisation was used as a reference to this article. However, this is not the full and systematic explanation like the original one authored by him. Rather it is about the judgment that “civilisation is a practical thing,” which supports the logical reason: why the building of culturally advanced cities has been long going on extensively nationwide over the past ten years. Furthermore, has become a cornerstone theory in China in the new era.

 

I. The Practical Nature of Civilisation

Marx made a systematic and complete analysis of civilisation. According to incomplete statistics, the term “civilisation” was used more than 2,600 times in volumes one to thirty of the Collected Works of Marx and Engels.3  His research on the origin of civilisation was based on the results of Lewis Henry Morgan’s research on differentiating civilisation and barbarity,4  but it is not limited to the history of the origin and evolution of civilisation. On the contrary, it exposed the origin of the human social civilisation by integrating history and logic based on the practice of human labor. It was believed that human civilisation originated in the biggest division of two kinds of labor—the division of material and intellectual labor; and that the division of labor was an important symbol of the era of civilisation and represented the exploitation of one class by another. Marx studied civilisation as part of the practice of it and based on the connection between the development of civilisation and certain production modes and between its development and the resulting class relations.5

1. In essence, civilisation is a practical thing.

Marx said, “Civilisation is a practical thing.” This means civilisation falls under the category of practice and is practical in nature. Practice is the material activity through which people transform the objective world. Labor is the fundamental form of practice. Without labor, there would be neither labor practice nor humanity and human social civilisation. Practice did not only enable humanity to create civilsation but also promoted the development of social civilisation. In their (labor) practice, there exists a dual – relationship interaction between subjects (humans engaged in practice) and objects (the objective world in the field of practice): The objects constantly turn into subjects, and the nature at ease becomes a humanised nature while the subjects keep becoming objects, leaving their prints on nature and turning into materialised objective targets. This dialectical unity between subjects and objects in practice shows that while transforming the objective world and creating the material world, people are also changing the objective world and creating a material world. The combination of these positive material and intellectual results are civilisation—a state of progress at certain stages of the development of human society. In this sense, civilisation is essentially the material and intellectual result of people’s essential strength becoming the target in the process of practice (labor practice, interaction practice and creation practice). This result reflects the state and tendency of civilisation. This is why in this sense; civilisation is essentially a practical thing.

 

2. Civilisation is the practice of everyday life based on different time and space.

Marx’s statement about civilisation and practice shows that:

First, as a concept of practical value, civilisation proves the turning of the essential human strength into the target and the value of practice. Humanity created civilisation in practice, and in turn, it proved the value of the practice of humanity and raised the level of civilisation. Civilisation also led humanity to evolve from the barbarous state of living, and improved the quality of human survival. Moreover, it paved the development through the process of constantly creating new production tools and promoting the progress of productive forces.

Second, civilisation is a concept of practical time and space. Civilisation is both diachronic and synchronic, that is, it has conspicuous regional characteristics—geographical civilisation. This is precisely because the time and space of the practice of civilisation differ from the East to the West; they have different civilisations and different cultures for different races and ethnicities.

Third, civilisation is a concept of practice of everyday life. Civilisation is a positive, progressive, and human way of living people have in a certain era and a given society. It includes specific living conditions, norms, customs, relations, content, concepts and other factors for civilised lives. These civilised lives distinguish humans from animals and tell the different levels, quality and degrees of development humanity has had in different times. Different practical living needs that result from different regions and historical conditions to give rise to the different needs of people for development and enable them to create different civilisations and cultures. The differences, conflicts and rivalries between different civilisations in the world reflect the long – term practice of lives in different regions.

Different civilisations and cultures developed by one generation after another based on their long-term living practice naturally exclude each other. It is natural for different civilisations to enter into rivalry. When rivalry involves the interests of peoples and nations and is affected by the needs of capital, it will reach an unprecedented level of acuteness. Therefore, when economic globalisation deepens, it is necessary to build a global community of shared future that would serve as the target and means for promoting the contact, exchange, and integration of different civilisations. In addition, this could minimise the negative impact that the rivalry and conflict of different civilisations may have.

 

Different practical living needs that result from different regions and historical conditions give rise to the different needs of people for development and enable them to create different civilisations and cultures.

II. The Fundamental Characteristics of the Practice of Civilisation

Marx’s statement on the practice of civilisation not only reveals the nature of civilisation but also shows that the practice of it is geographical and explains the logic of the evolution of the practice of different civilisations. This logic exemplifies the cultural genes of the civilisations from different localities and common cultural genes determine the choice of the practice of civilisation and the logic of its evolution.

 

1. The geographical nature of the practice of civilisation

Practice is historical and regional, which determines that the practice of civilisation is geographical and varied. This is a fundamental characteristic of the practice of civilisation. The argument that practice of civilisation is geographical means a combination of specific geographical conditions and natural environments, including not only landforms and terrains but also climate and mineral resources. Just as French historian Fernand Braudel said, “Discussing civilisation means discussing space, land, terrain, climate, crops, animal species, and the advantages of nature and others.” Discussing civilisation means discussing how humanity makes use of these basic conditions. The values, way of thinking, customs and habits in a civilisation are all determined by geographical – natural conditions.6

This does not at all mean that the geographical environment determines everything; this is meant to stress:

First, civilisations in different localities generally originated in the same geographical world, or started from an intuitive space that is there for you to see and feel. For example, people from the Indian civilisation mostly lived in the South Asian Subcontinent. People from the Western civilisation lived in central and western Europe 1,500 years ago and started to move to the Americas, Australia, New Zealand and southern Africa after 16th century. People from the Islamic civilisation mostly lived in a narrow yet large area from North Africa, the Middle East, Afghanistan to Indonesia. People from the Orthodox civilisation mostly lived in east Europe and north Asia east of the Ural Mountains.

Second, civilisations resulting from the same geographical world are deeply affected by their common cultural genes. For example, Jewish civilisations (which are controversial) all originated in Palestine. In the first half of the 2nd century, the Jews lost their home in and around today’s Palestine. This led to the diaspora of Jewish civilisations to all over the world. On the one hand, the Jews living scattered in different countries share the same genes of the Jewish civilisation. In addition, while integrating themselves with the culture of their host countries and assimilating themselves with local culture and civilisation, they also developed Jewish civilisations with the cultural characteristics of their host countries. For example, the French and US Jews had a better sense of belonging with French and US cultures than they did with their own culture in the 18th century. This led to the differences between Jews in Ethiopia, Morocco, Germany, Poland, Russia and the United States. On the other hand, Jewish civilisations scattered across the world share the same cultural genes and beliefs of the Jews. As a result, the Jews away from Palestine pray toward Jerusalem every day and founded the state of Israel belonging to the Jewish civilisation in 1948.7

Obviously, the cultural genes reflected in the geographical nature of the practice of civilisation very much determine and affect the path of the practice of civilisation and affect the historical and present choice of the practice of civilisation. The process of choice of different civilisations is full of conflict, integration, transformation, and generation. The choice of paths for the evolution of the Chinese, Indian, Islamic, and Jewish civilisations was a natural and historical choice made by people living under different geographical conditions based on the cultural genes of their countries’ history. In the 5,000-year history of the Chinese civilisation, choices were also made based on its cultural genes that had been developed in the practice of civilisation over the same period. The choices based on the Chinese cultural genes took different forms and had different spirit in ancient and modern times. It is of particular note that the moving national spirit and culture that have been developed by the Chinese nation since modern times in its resistance to foreign aggression and enslavement have shaped the form and spirit of the Chinese civilisation in modern times that is different the ancient Chinese civilisation.

The Chinese civilisation in different times absorbed advanced foreign civilisations and generated different new forms of civilisation. In the present new era, millions of Chinese people are pursuing urban civilisation, which is developed based on the common choice made by these people based on the practice of civilisation in this era. It is a conscious choice made based on the historical logic of the practice of civilisation of the Chinese nation over the past millennia.

 

Discussing civilisation means discussing space, land, terrain, climate, crops, animal species, and the advantages of nature and others.

2. The consciousness of the practice of civilisation

Another fundamental characteristic of the practice of civilisation is that the human practice of civilisation is a reflection of people’s free and conscious activity and is the humanity’s free pursuit of the practice of civilisation. The common pursuit of culturally advanced cities by millions of people in the new era under socialism with Chinese characteristics is the new need of the Chinese practice of civilisation in the new era as well as the conscious choice and idealistic pursuit of focusing the practice of civilisation on urban civilisation in the new era.

First, The conscious choice and creation of civilisation

The conscious practice of civilisation means the conscious choice and creation of civilisation made by humanity in certain historical conditions.

It is justifiable to say that cultural and ethical progress in the axial period was not there until after humanity had free and conscious practice of civilisation. In other words, the practice of civilisation was the driving force behind humanity entering the axial period and a cornerstone marking the difference between civilisation in the axial period and civilisation in the non-axial period. The different practice of civilisation in the East and the West led to cultural and ethical progress with Eastern and Western historical and cultural characteristics. The development of Eastern and Western civilisations today is still conditioned by the consciousness of the practice of civilisation. The features of this are: whether the practice of civilisation can be guided with the people and humanity as the center and guide determines the nature of the practice of civilisation under different systems. Under the capitalist system, the practice of civilisation with capital at the core and orientation will naturally conflict with the practice of civilisation with the people and humanity at the core and guide and will definitely be eliminated by the history of civilisation with the people and humanity at the core.

Second, The conscious pursuit of urban civilisation

From the perspective of the practice of civilisation of the people and humanity, researching the practical creation of culturally advanced cities in contemporary China is a theoretical reflection over the conscious pursuit and practice of the creation of such cities by millions of people in contemporary China. It is also an introspection and criticism of different kinds of inappropriate and unharmonious ways of urban development — a realistic choice made to abandon the misconceptions that lead to inappropriate and unharmonious urbanisation, and a realistic choice made to embrace a sustainable mode of urbanisation.

The practical means of urban development in contemporary China suggests that misconceptions leading to unsustainable urbanisation still exist to varying degrees. For example, urban transformation and expansion are taken as urban development. This results in the visual pollution in cities, and the loss of characteristics, cultural awareness, and cultural spirit of cities. This deviates from the value orientation of the practice of civilisation and the purpose and means for appropriate and harmonious development that put people first. During recent years, the unsustainable urban development in China, the different varieties of urban maladies, unexpected floods and other natural disasters have repeatedly warned that urban development must be based on the practice of civilisation.

Cities are the combined results of civilisation in different stages of the history of human society and the products of a certain stage of human civilisation. For the first time the civilisation era makes cities significant as such and enables them to start the chapter of urban civilisation. In the Urban model, people are at the center of the new era making them the target of the conscious practice and pursuit by millions of people. Culturally advanced cities are also an urban model because they are based on the practice of civilisation and are guided by the new development philosophy, as well as the worldview and methodology that features appropriate development. These are the values chosen by China in the said era to take up the challenges affecting the urbanisation. Moreover, these values are said to be strategic choices that would have major impacts on the urban lives in China.

 

Another fundamental characteristic of the practice of civilisation is that the human practice of civilisation is a reflection of people’s free and conscious activity and is the humanity’s free pursuit of the practice of civilisation.

III. The Value of Urban Civilisation Based on the Practice of Civilisation

On two occasions in 2015 on 2017, General Secretary Xi Jinping met with representatives of culturally advanced cities, villages, towns, and organizations from all over China and delivered major speeches. He chartered the course for creating culturally advanced cities in China. This has led to an unprecedented rise in the enthusiasm of China’s 31 provinces, autonomous regions and municipalities directly under the central government for building such cities and more cities and municipal districts have begun to work for the value of urban civilisation.

1. The consensus on pursuing the value of urban civilisation

Having entered the new era under socialism with Chinese characteristics, China is faced with deep economic and social transformation, reform is deepening, major adjustments are being made in interests, an array of views are coming up, and risks and challenges are cropping up. All these has helped bring about consensus on the value of urban civilisation from the practice of civilisation. This came in a tough course roughly divided into three main stages:

First stage: the development of the value of urban civilisation from 1996 to late 2004. In 1996, the Resolution on Certain Major Issues concerning Strengthening Social Culture and Ethics was adopted at the Sixth Plenary Session of the 14th Central Committee of the Communist Party of China. This kicked off efforts to create culturally advanced cities nationwide. In addition, this helped curb the expansion of self – centered behavior and narrow the gap between collective awareness and individual awareness that resulted from the incomplete market economy, and as public awareness of urban development, the awareness of urban civilisation began to be fostered and developed.

Second stage: the formation of the consensus on the value of urban civilisation from 2005 to 2011. In 2002, work began to formulate the System for Evaluating China’s Culturally Advanced Cities (hereinafter referred to as the Evaluation System). In 2005, the first group of China’s culturally advanced cities were elected and 118 cities (urban districts) in China’s 31 provinces, autonomous regions and municipalities directly under the central government began to create culturally advanced cities in accordance with the standards and measures specified in the Evaluation System for evaluating urban civilisation. In the evaluation of the second and third groups of culturally advanced cities in China in 2008 and 2011 respectively, requirements were raised for improving the cultural environment, the market environment, and other soft environments and strengthening people’s wellbeing projects. The initiative to promote civilisation and wellbeing made it possible for the force for promoting civilisation to strengthen public powers that were weakened at a point.

Third stage: the improvement of the consensus on the value of urban civilisation from 2012 to 2017. In 2013, in the campaign to heighten awareness of and implement the mass line of the CPC, criticisms and comments were made on some cities that were merely keen on being elected a culturally advanced city to save face without really working to get the job done. Criticisms and comments were also made on other cities that worked to please leaders to the neglect of the public, had a lop – sided approach to their performances, and merely went through the motions by building vanity projects.

From late 2013 to March 2014, leaders of the Civilisation Office of the CPC Central Committee made research in 35 cities in 12 provinces, autonomous regions and municipalities directly under the central government including Shanghai, Shandong, Hubei, and Sichuan. They found all the leaders and lower – level officials of these areas agreed: The initiative to create culturally advanced cities gave cities targets and a direction. During the initiative, practical work was done for the good of the people and the initiative really had value and was cultural. Creating culturally advanced cities was the most important part of the initiative to promote cultural and ethical progress. It had the highest approval rating from the public and received the most attention from local CPC committees and governments. It was the leading project in promoting cultural and ethical progress. It significantly improved the urban and rural environment and public mentality. It made cities more intellectually, ethically sound, and develop a healthier culture. Through practice, the consensus on the value of urban civilisation became a value increasingly pursued by millions of people in cities of all sizes all over China in the new era.

 

Cities are the combined results of civilisation in different stages of the history of human society and the products of a certain stage of human civilisation.

2. The building of the consensus on the value of urban civilisation

The consensus on the value of culturally advanced cities reached based on the practice of civilisation over the past more than ten years is becoming the common value pursued by millions of people in the capital cities of provinces, prefectural and county cities, and districts of municipalities directly under the central government. The consensus on the value of urban civilisation in China in the new era is being built and improved in the following four respects.

First, The consensus on the convictions of urban civilisation

Conviction means belief and respect. One’s convictions determine all of his or her behavior; a nation’s convictions determine the future of the people and their country. The country’s prosperity cannot be achieved without intellectual support; a nation’s progress depends on the development of civilisation. Since ancient times, the notion “backwardness leaves the country vulnerable” has become the unbreakable truth of all countries and their people. However, what is worse to a country and its people is the people’s intellectual decadence and voidness. The 5,000-year history of China shows that a country and its people cannot afford not to have convictions. Xi Jinping stressed, “When the people have convictions, their country will have strength, and their nation will have a bright future.” “Ideals and convictions are as essential to Communists as calcium is to bone. Without them, or with them only in weak measure, we would be without the stuff of our strength and develop fragility of the bone.” Xi added, “This is already the case for some Party members and officials who have acted improperly due to weak convictions and uncertain faith.” This means it is necessary to work to foster and live by core socialist values, raise public ethical standards, enhance work ethics, family virtues, and personal integrity, and develop a social environment encourage people to esteem virtue and perform good deeds. To ensure that the people have convictions, every family and household should start to make an effort, you and I begin to make an effort, and it is necessary to start by improving Party conduct, government conduct, social conduct, and conduct in the home. To ensure that the people have convictions, everyone should become aware of the need to become culturally advanced and work to become model citizens. More importantly, you people should be encouraged to promote the traditional cultural genes of the Chinese nation and convictions should be made to become in full blossom from generation to generation.

Second, The consensus on the ethics of urban civilisation

The consensus on the ethics of urban civilisation is generally referred to the moral consensus reached on how to make cities more culturally advanced and the civility of their residents. In the course of building culturally advanced cities all over China in the new era, the consensus on the ethics of urban civilisation has cultivated and rebuilt three types of spirit and three types of awareness:

The rebuilt of three types of spirit: (1) The rebuilt of cultural spirit. In accordance with the Evaluation System, cities have made in-depth efforts to carry out the program “Our Festival.” They have conducted education in core socialist values based on patriotic education centers and moral lecture rooms. They launched the initiative to improve everyone’s awareness of science. They also worked to ensure that intangible cultural heritage was passed on and strengthened the protection of sites of historical and cultural interest, artifacts, and traditional villages. (2) The rebuilt of moral spirit. The cities did the following in accordance with the Evaluation System. Carry out through the media — Moral China program to publicize moral paragons, work to develop fine conduct, home education, ensure that officials promote family integrity (as well as improve party spirit), hold exhibitions about the deeds of moral paragons, and lastly, have these paragons give lectures at the community level.  Since 2008, the government has elected and commended 173 national moral paragons on a yearly basis, and listed 6,819 people as Morally Advanced People in China. (3) The rebuilt of volunteer spirit. The Evaluation System requires not only that to become a culturally advanced city, the number of its registered volunteers must account for 13 percent or more of the permanent residents in its districts, but also that 70 percent of its total registered volunteers must have provided in volunteer services. In addition to that, these registered volunteers must provide 25 hours or more of volunteer services a year per capita.

The cultivation of three types of awareness: (1) The cultivation of awareness of rules. In accordance with the Evaluation System, the cities not only extensively conducted education in the residents’ conventions, industrial norms, and occupational rules, but also strengthened education in villagers’ conventions, students’ rules, and articles of association for organisations. All this was designed to improve everyone’s awareness of rules. (2) The cultivation of awareness of integrity. In accordance with the Evaluation System, the cities extensively implemented the “Integrity for All in the City” initiative, developed integrity demonstration streets, integrity demonstration shops, integrity organisations, and integrity industries, and promoted every aspect of China’s integrity ethics. (3) The cultivation of awareness of the need to be culturally advanced. In accordance with the Evaluation System, the cities worked to create culturally advanced communities, organisations, families, villages, towns, and websites to ensure that families, communities, villages, towns, and organisations are well aware of the need to be culturally advanced, and disseminate this awareness online. In addition, the cities organised the campaigns to improve social conduct in light of the CPC and the Chinese government’s major work and activities and China’s major festivals and celebrations. Based on newspapers, broadcasting stations, TV stations, smart phones, the internet, and other media, great efforts were made to publicise and universalise etiquettes and encourage everyone to live by them.

The cultivation of these three types of spirit and three types of awareness is designed to turn intellectual and cultural content into unified norms, requirements, and evaluation standards and integrate them with the day – to – day work of every city across the country and the everyday life of their residents. In the activities to rebuild cultural and ethical progress that millions of people can feel, participate, repeat, revise and improve, city residents will gradually become aware of the need to reshape themselves intellectually and culturally and do so in their everyday life. Thus, the institutional arrangements will be made under which the government and these residents work together to promote cultural and ethical progress and share the results.8

The process of cultivating and rebuilding these three types of spirit and three types of awareness is also a process of rebuilding the city spirit of a city. For example, during the process of promoting cultural and ethical progress, Beijing developed the city spirit of patriotism, dedication, justice, and inclusiveness, while Shanghai developed the city spirit of inclusiveness, excellence, wisdom, and generosity. The spirit of different cities is an epitome of the contemporary spirit of China and reflects different aspects of the city dream and the Chinese Dream. The city spirit is the intellectual strength sustaining residents’ value orientation, ways of behavior, and psychological orientation and is the soul of a city.

 

In the course of building culturally advanced cities all over China in the new era, the consensus on the ethics of urban civilisation has cultivated and rebuilt three types of spirit and three types of awareness.

3. The consensus on the institutions for urban civilisation

Today, there is an outbreak of urban maladies in large numbers. Traffic jams, high property prices, ecological degradation and environmental pollution, soaring social risks, and aggravated disparity between rich and poor are all inexplicit or explicit manifestations of the incivility of cities. The root causes of them are often a lack of institutions and their improper implementation. Historical experiences show that a transition society is often exposed to risk and conflict. During their nearly 200 years of urbanisation, Western countries were also laden with crises and risks. China has been urbanising quickly for only a little more than 30 years and is faced with the pressure from the goal of reaching the urbanisation rate of 60% by 2020, so it is necessary to take an urbanisation path with Chinese characteristics and institutions must be used to resolve conflicts. The consensus on urban civilisation that was achieved in creating culturally advanced cities contains complete and systematic institutional arrangements and is an institutional arrangement that promotes the sustainable urbanisation with Chinese characteristics.

The institutional arrangements for the evaluation items, indexes and measures of the Evaluation System completely and systematically reflect and integrate the cultural progress in the cities’ appearances, functions, and qualities. By completely and systematically reviewing and evaluating the level of sustainability of urbanisation based on the evaluation of more than 380 items including the city’s software and hardware, facilities and management, people and activities, standard and guidance, education and development. It is of particular note that the evaluation of the soft environments for developing urban civilisation including the three modules as well as the twelve evaluation items guide cities in creating a social and living environment for people’s lives and work. Thus, promoting the civilisation and harmony of cities in the process of changing and improving the soft environments such as political affairs, rule of law, market, culture, security, and stability. Therefore, about 95 percent of the more than 500 cities that had run for nationwide culturally advanced cities since 2005 enjoyed their support of their residents.

 

The spirit of different cities is an epitome of the contemporary spirit of China and reflects different aspects of the city dream and the Chinese Dream. The city spirit is the intellectual strength sustaining residents’ value orientation, ways of behavior, and psychological orientation and is the soul of a city.

The Evaluation System makes soft indexes compulsory requirements, reinforces the social foundation for modernising urban governance systems and capacity, provides something that can be held on to for meticulous urban management and points the direction for the practice of civilisation. For example, the community – level cultural facility index in the Evaluation System has specific requirements for building a modern public cultural service system, that is, “every neighborhood must has at least five fitness centers for morning and evening exercise and the per capita sports area must be more than 1.08 square meters.” These institutional constraints get the government to put finds, space, and resources into the programs of immediate interest to the people. In addition, the environment management and environmental quality index in the Evaluation System has quantitative requirements for improving polluted waters, disposing household garbage, and improving urban air quality. These required institutional arrangements, which were formerly optional requirements, not only give government the targets, driving forces, and direction for its social governance, but also work with the urban management systems. This is further achieved through the administrative assessment, public evaluation, getting the institutional arrangements, improvisation of the urban governance system (and its capacity), and lastly, creation of social environment in which residents live by the core socialist.

The Evaluation System has been proved by practice to be an institutional design and framework that can promote the appropriate and harmonious development of cities.

First, the Evaluation System not only has evaluation items and content concerning the political, economic, cultural and social development of cities, but also contains quantitative evaluation standards for the level and quality of economic and social development of cities. It not only specifies clear targets for evaluation in terms of the cultural progress in the cities’ appearances, functions, and qualities, but also holds government bodies accountable for these targets. The 2005–2017 Evaluation System of the Central Guiding Committee for the Promotion of Cultural and Ethical Progress incorporates the indexes of the general offices of 40 ministries and commissions including the General Office of the Central Guiding Committee for the Promotion of Cultural and Ethical Progress, the Central Committee for Improving Every Aspect of Law and Order, the Central Commission for Discipline Inspection, the Ministry of Public Security, the Ministry of Housing and Construction, the Ministry of Education, the Ministry of Culture, and the Ministry of Civil Affairs. This ensures that the index requirements of these general offices for the appropriate, harmonious, and sustainable development of cities are met by the relevant committees, general offices, and bureaus of cities. This is an institutional design that has the evaluation indexes as a bridge and integrates national and local resources in a joint effort to create culturally advanced cities and promote sustainable urbanization.

Second, as an institutional design, the Evaluation System is identical with the administrative management model of the Chinese government. As I said above, the index system and model has been formulated and revised to incorporate the indexes of the general offices of China’s 40 ministries and commissions and the revised indexes have all been approved by the general offices of relevant ministries and commissions. The evaluation indexes require that the government must do solid and effective work to promote the creation of culturally advanced cities and sustainable development urbanisation. They are an effective test of how well the government promoted the creation of culturally advanced cities and sustainable development urbanisation; they are also the best test of the performance of the government in urban construction and management. More importantly, they provide an all-around oversight of how the government promotes the building of a moderately prosperous society in all respects and a harmonious society.

 

By showing concern and evaluating public space, demand, morals, services, management, and security, the Evaluation System materialised the consensus on the value of urban civilisation in order to raise the level of urban civilisation and the civility of residents.

4. The consensus on the evaluation of urban civilisation

From 2005 through 2017, the Evaluation System was expanded from the original eight evaluation dimensions (items) to three modules with 12 evaluation items. Reductions and additions were made to the Evaluation System’s evaluation items, content, indexes, and standards to keep up with the Party and government’s requirements for the development of urban civilisation and reflect the latest demands and results in urbanisation in China and elsewhere. However, an evaluation consensus was reached on the fundamental framework and structure and the measures and path for comprehensively evaluating urban civilisation in cities based on collecting data through field investigations, questionnaires and material reviews. By showing concern and evaluating public space, demand, morals, services, management, and security, the Evaluation System materialised the consensus on the value of urban civilisation in order to raise the level of urban civilisation and the civility of residents.

First, the evaluation of public space. If urban public space is given more cultural sentiments and concern, then the city will make everyone feel better. How to solve the lack of space in the process of urbanisation and modernisation and give more cultural concern to public space? The Evaluation System evaluates the public space for the residents of a city or a municipal district through the quantitative evaluation of the city’s public space such as parks, squares, scenic spots, and community sports facilities.

Second, the evaluation of public needs. To be sustainable development, urbanisation and modernisation must be based on meeting public needs. One is the need of a living environment. The Evaluation System determines how well residents’ public needs are met by evaluating public services such as the neighborhood facilities and community living environments. The other is the need of public cultural services. The Evaluation System evaluates how well culture centers, libraries, and museums meet the needs of the residents by evaluating the supply of public services.

 

A city’s public service capacity and level is the key to attracting and keeping human resources and becoming the livable city; it is the symbol of the city’s urbanisation and modernisation.

Third, the evaluation of public morals. The cultural and moral quantities the residents have in the public areas in a city constitute that city’s public morals. Public morals are the common cultural and ethical qualities residents progressively develop through their activities and exchanges in urban public areas and are the requirements for the cultural and ethical quantities that residents must have in their activities and exchanges in public areas. They are also an important symbol of the civility of a city and a country.

The concern for and the evaluation of public morals are fundamentally designed to develop the public morals of the residents of a city and the citizens of a country. The Evaluation System examines the morals a city’s residents have in public areas by evaluating appropriate conduct, observance of traffic rules, and comity. The process of ensuring the people of a city and a country develop their public morals is both a process of improving the residents’ cultural and ethical qualities and the level of urban civilisation and the process of improving the soft power of a city and a country. More importantly, it is a process for improve the soft environment for the development of a city and a country.

Fourth, the evaluation of public services. A city’s public service capacity and level is the key to attracting and keeping human resources and becoming the livable city; it is the symbol of the city’s urbanisation and modernisation. The Evaluation System evaluates the 38 service industries of a city to see if it meets the standard for “Proper and Honest Services” in order to promote its public services.

Fifth, the evaluation of public management. Thanks to the development of economic globalisation and the application of information technology, traditional social management is being replaced by new urban public management and social governance. Public management stresses public affairs at society and seeks to realise public management of the public affairs of cities by advocating public spirit and achieving public leadership. Therefore, the concern for and evaluation of public management reflect the good governance of society with multiple entities (the government and the market, governmental and nongovernmental organizations, etc.) interacting with each other, and reflects the good governance of urban public affairs by public leaders with public spirit.

Therefore, in the institutionalisation of volunteer services and volunteer service activities, the Evaluation System evaluates how well volunteer service culture and community volunteer service culture are cultivated to guide residents to participate in urban governance. It also evaluates the cities’ public management level by reviewing their food and drug security administration and response to public emergencies.

Sixth, the evaluation of public security. Public security is an important social issue of great concern to both the government and the public. It is one of the major functions of the government. By evaluating public security guarantee, drinking water safety, and law and order management, the Evaluation System integrates the urban social public service system with the public security system, in order to mobilize all positive factors to participate in urban social public security services, safeguard law and order in society, and protect public security.

 

The Chinese people have a sense of belonging in the development of urban civilisation, in the people’s wellbeing, in the CPC – led path of urbanisation and modernisation with Chinese characteristics, and in the 5,000 – year history of the development of the Chinese nation’s civilisation as well as their nation and country.

The consensus on convictions, ethics, institutions and evaluation mentioned above constitute the four – pronged value system for urban civilisation. The application and improvement of this system means that the conscious awareness of the ethics of urban civilisation in the new era has been formed. It also means that the Chinese people have a sense of belonging in the development of urban civilisation, in the people’s wellbeing, in the CPC – led path of urbanisation and modernisation with Chinese characteristics, and in the 5,000 – year history of the development of the Chinese nation’s civilisation as well as their nation and country. All this is based on the practice of urban civilisation with Chinese characteristics and the practice of China’s sustainable urban civilisation. It is also the creative practice for the city dream based on the notion “better city, better life” and for the Chinese Dream, made by millions of people. It will also continue improve and develop as the practice of urban civilisation deepens. 

About the Author

Bao Zonghao is professor of philosophy at the School of Humanities, East China University of Science and Technology; president of Shanghai Academy of Huaxia Social Development Research; distinguished research fellow at Urban Culture E-institute of Shanghai Higher Education.

References

1. The mid-term result of the major project “Research on Promoting the Balanced Development of Material Progress and Cultural and Ethical Progress: The Theory, Practice, and System of Culturally Advanced Cities over the Past Ten Years” (Approval Document No. 15ZDC007) funded through NSSFC.

2. About Author: Bao Zonghao, Professor of East China University of Science and Technology,  President of Shanghai  Academy of Huaxia Social Development Research

3. Collected Works of Marx and Engels, Chinese ed., People’s Publishing House, Beijing, vol. 1, 2009, p. 97.

4. Lewis Henry Morgan, Ancient Society, Chinese ed., The Commercial Press, Shanghai, 1977, p. 28.

5. Collected Works of Marx and Engels, Chinese ed., People’s Publishing House, Beijing, vol. 3, 2009, p. 258.

6. Bao Zonghao, “Research on Civilization in Contemporary China from a New Perspective,” Academic Monthly, No. 5, 2011.

7. Bao Zonghao and Xiang Kun, A New Model of Urban Civilization in Contemporary China, Xuelin Press, Shanghai, 2015, pp. 40–41.

8. Bao Zonghao and Xiang Kun, The Civilization Index of Chinese Cities, Xuelin Press, Shanghai, 2015, p. 31.

Philippine Peso Stability Relies on Duterte’s Infrastructure Success

construction site

By Dan Steinbock                                      

Recent concerns about peso’s depreciation have been exaggerated. In the most dangerous international environment since the postwar era, there is no room for complacency, however.

In the past, international and domestic critics of the Duterte government have complained that the Philippine peso has fallen “six straight years,” which is seen as a sign of the failure of Duterte agenda.

In March 2017, Bloomberg reported that “Asia’s ugly duckling of 2017 is the peso, thanks to Duterte.” At the time, peso’s weakening was explained, oddly enough, by investors who had been spooked by allegations of “unlawful killings and corruption.”

More recently, the peso is said to face an additional threat, “a mid-term election that may compound concerns about its economy.” This time Bloomberg believes that “political uncertainties” pose an added source of pressure.” Yet, recent surveys do not seem to support such speculation.

Still other reports see “political risks” where such do not necessarily exist, while approaching the peso’s weakening as if it was fueled by mainly internal forces.

In reality, most currencies in emerging markets have depreciated since first expectations that the U.S. will start rate normalization and when the actual rate hikes began – about “six straight years” ago, well before Duterte (Figure).

 

Figure

Since the Fed’s signaling of normalization and rate hikes, Philippine peso has depreciated almost in parallel.

 

Forces behind peso movements

A series of well-known forces have fueled recent peso depreciation. In the fall, inflation reached an intolerable high of 6.7%. It was boosted by a price effect associated with tax reforms (TRAIN), rising oil prices and a failure to manage rice prices. Accordingly, Philippine peso depreciated until early October.

Yet, the pressures that have been associated with overheating are likely to weaken in 2019 as the TRAIN-related price pressures should ease in the coming months.

Also, the slowing international economy has penalized oil. Crude oil exceeded $75 in early October but is now around $55 (a U.S.-Sino trade compromise could contribute to rising prices again, however).

In the past, the quota system failed to keep rice price in control; the new import tariff system should stabilize it.

Moreover, high loan growth has made some observers uneasy. While it is associated with the infrastructure drive, it has to be monitored.

Most importantly perhaps, some observers feel uncomfortable with current account deficit (CAD). Yet, the widening CAD is the effect of the infrastructure drive. It has been expanding as a result of imports, which support infrastructure development.

Furthermore, the slowdown of electronic exports, which account for more than half of Philippine exports, is hardly a domestic challenge. U.S. trade wars have undermined the recovery of world trade. However, there are some possible new shifts in the international horizon.

Last year, the tighter dollar, boosted by the Fed’s rate hikes, went hand in hand with tighter financial conditions. That is no longer the case. Also, last year Trump’s tax cuts gave a one-time high for the U.S. economy. But now U.S. growth may have peaked.

Accordingly, the prospects of slower growth and lower inflation may have made the Fed less hawkish.

 

Risky international environment, budget passage

Nevertheless, the international environment, including U.S. trade wars, poses more threats than ever since the postwar era.

If the U.S.-Sino trade truce paves way to a compromise by March 1, world demand may improve. But if the tensions spread as they did last year; world demand is likely to further deteriorate. And even if trade compromise can be found, tensions are likely to linger in the technology sector.

Moreover, the White House may target the ASEAN in its trade wars, as it has suggested since mid-2018.

In 2018, the Philippines expansion amounted to 6.2%. Although inflation did penalize the government’s downwardly-revised goal of 6.5 to 6.9%, the country is one of the fastest growing economies in Asia and relatively well-positioned to absorb shocks. Moreover, the Bangko Sentral ng Filipinas

(BSP) hiked policy rates several times in 2018, which makes further tightening less likely in 2019.

Yet, the status quo permits no complacency. The inflation-induced reduction of the country’s economic growth in the fourth quarter of 2018, which penalized the annual figure, should serve as a warning sign for a belated 2019 budget passage.

Even if a re-enacted budget were to be passed now, the infrastructure programs that are of critical national importance cannot proceed until after the mid-year. That, in turn, has potential to harm the current year’s economic growth, once again. Time is money. Consequently, a rapid 2019 budget passage is vital.

The Duterte fiscal expansion has potential to continue well into the early 2020s, which bodes well for economic growth – as long as political impasse does not penalize economic progress.

The original commentary was released by The Manila Times on January 28, 2018.

About the Author

Dr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

Understanding Overdraft Protection and Other Banking Fees

Page of paper with words Overdraft and glasses.

Anyone with a bank account has most likely heard of overdraft protection — and most of these people have dealt with it as well. Overdraft protection can come in handy at times, like when you have to pay for something as soon as possible but you lack the necessary funds in your account. However, it’s not all sunshine and roses because nothing comes without pitfalls.

What Is Overdraft Protection?

Overdraft protection funds a bank account that has been overdrawn. In other words, it is a protection against having your transaction declined. Although there are usually hefty fees to pay whenever the account is overdrawn, you can at least rest assured that your check will go through in case of a big withdrawal.

How Does It Work?

When it comes to overdraft protection, there are three types, all of which transfer money to your overdrawn checking account but have different fees:

1. Overdraft Protection Line of Credit

How much you overdraw is subject to a variable interest and a fee.

If you overdraw from your bank account, the line of credit sends some funds to cover the amount that was overdrawn while the fees are charged too. How much you overdraw is subject to a variable interest and a fee.

2. Link Your Checking Account to a Money Market Account, Secondary Checking, Eligible Savings, or Line of Credit Like a Credit Card

If you find yourself in the situation where your account is overdrawn, there will be cash transferred from the account you linked. There may also be an overdraft protection fee, but it’s usually smaller.

3. Opting in for Overdraft Coverage for One-Time Debit Card and ATM Transactions

If you decide to opt for this version, you allow the bank to pay the overdrafts from one-time debit card and ATM transactions. However, the downfall is that banks usually charge very high fees for this service.

How Much Does It Cost?

As you can expect, this service isn’t offered for free. Usually fees are charged in order to prevent people from abusing the service, but it’s also a way to provide the bank with some revenue.

Not all overdraft protection charges are the same, but most big banks get away with massive charges. For example, Bank of America banking fees can really burn a hole in your wallet.

Usually fees are charged in order to prevent people from abusing the service, but it’s also a way to provide the bank with some revenue.

Interest costs may be included as well, and depending on the plan for your overdraft protection, the amount of cash of the plan might be considered a loan. If this is the case, you should be aware that the bank will charge interest until you pay it off. At the same time, it’s a much cheaper option than paying the flat fee for each overdraft.

Furthermore, if the overdraft protection it used too often, the bank might use it as a strike against you and drive down your credit score. It depends on the overdraft protection you use, but make sure to only use it for absolute emergencies.

Overdraft protection can be really helpful in certain situations. At the same time, it has pitfalls, so it’s better to be aware of them before you sign up for this popular banking feature!

 

BVI FINANCE: Your partner of choice for crossborder trade, investment and business

An exclusive interview with Mrs. Lorna Smith, OBE, Interim Executive Director at BVI Finance

 

Recognised as the top offshore jurisdiction in the world, for the eighth consecutive year based on the 2018 edition of the Vistra 2020 Report, the British Virgin Islands (BVI) continue to prove its competitiveness in helping companies, institutions and individuals to safely and efficiently carry out their business and make investments across international borders. Recently, we had the pleasure of speaking with Mrs. Lorna Smith, OBE, Interim Executive Director at BVI Finance, a premier offshore financial centre catering to companies that wish to establish or expand their business in BVI. We talked about the Territory’s highly-regarded business landscape as well as BVI Finance’s role in helping companies succeed across multiple markets even at a time of economic uncertainty.

 

Good day, Mrs. Smith! Thank you so much for taking the time to talk to us today. To start, we would like to know what’s the average day in the life of a senior C-level executive like you?

Pleasure! It’s difficult to say as I work seven days a week – except for the odd vacation or day sail, or something fun with family and friends. But I would say my average day is 14 hours. Of course, during the hurricanes and other near catastrophic events like the “Panama Papers”, sleep was a precious commodity – during those difficult times it was as little as three to four hours per day.

 

How did your decades of experience at the highest levels of the public service in the British Virgin Islands (BVI) help you transition into your current post as Interim Executive Director of BVI Finance?

I had the good fortune during my thirty-plus years of public service of always working on the international scene. My Masters in International Relations from Fletcher School of Law and Diplomacy also prepared me.

I was Chief Advisor to the Minister during the negotiations for the BVI to become associated with regional and international bodies such as the Organization of Eastern Caribbean States (OECS), the Caribbean Community (CARICOM) and the UN. The Premier’s Office (then called Chief Minister’s Office) was responsible for all international relations, so as far back as the late 90’s when “Harmful Tax” reared its head, I was a part of the team that put the Organisation for Economic Co-operation and Development (OECD) on the back foot so to speak with the seminal work, Towards A Level Playing Field, prepared at our request by the law firm Stikeman Elliott. Be that as it may, I am pleased that today BVI has an excellent relationship with the OECD Global Forum – in fact serving as a member of the steering group. So, I developed that international business experience from then.

I was also the first Head of BVI International Finance Centre (now BVI Finance), developing the direct relationships with the island’s financial industry. I also led the tax treaty negotiations with most of the 28 countries as head of the International Finance Centre. Then, two and a half years ago I was running my own business – LGS and Associates – and BVI Finance had found itself in a bit of crisis, I answered the call to take charge once again as Interim Executive Director for six months, which has now turned into two and a half years at the helm.

 

BVI is recognised as the world’s leading jurisdiction for company incorporations as reflected in your latest quarterly results showing an annual increase of 20% in new company incorporations. What is it that enables the BVI to attract such a significant proportion of foreign direct investment on an international level?

The BVI provides companies, institutions and individuals with the legal structures to safely and efficiently carry out their business and make investments across international borders.

The BVI’s popularity is a reflection of a growing preference for tried-and-tested service at a time of economic uncertainty. This was proved this year by our ranking as the top offshore jurisdiction in the world, for the eighth consecutive year, in the 2018 edition of the Vistra 2020 Report.

The BVI provides companies, institutions and individuals with the legal structures to safely and efficiently carry out their business and make investments across international borders. We offer legal and commercial certainty, cost effectiveness and flexibility, backed by a highly qualified, well respected and experienced private sector offering first class expertise.

This, combined with our continued compliance with global standards and tax neutrality, makes the BVI one of the most popular jurisdictions for cross-border trade and investment and sets us apart from our competitors.

 

BVI is highly-regarded by investors because of its “political stability, efficient and reliable legal system and experienced industry practitioners on the ground”. What else sets the territory apart from other international financial centres and why?

The strength of the BVI’s relationship with businesses in Asia is a key differentiator and advantage for the jurisdiction. Often seen as the partner of choice for international business and investment in Asia, the BVI plays a key role in the facilitation of international investment and, given the speed of development in the region, there is considerable scope for the BVI to further build on this relationship moving forward.

Chinese companies in particular are responsible for more than 40% of funds mediated through the BVI. The Belt and Road Initiative is a prime example of a key global programme being supported by the BVI through the strength of our international capabilities and trusted reputation.

Also, with Latin America being our closest neighbour, we pride ourselves on our relationship with the region. Over US$114 billion of outward investment stock is mediated through the BVI in the LatAm region. We intend to build on our relationship further with Latin America in 2019.

 

What are the key growth sectors in the Territory?

The Territory’s economy is based on the twin pillars of tourism and financial services – the former normally employs one in four people on-island. Although our hotels were severely impacted by the hurricanes, our shoreline businesses and activities were up and running in a matter of months and continues to contribute significantly to our economy – the BVI has always been and continues to be the yachting capital of the world. Also, with the recent signing of a Memorandum of Understanding (MOU) between the BVI and Airbnb, we are able to collaborate more with the company to give visitors more accommodation options in the Territory.

The BVI’s popularity is a reflection of a growing preference for tried-and-tested service at a time of economic uncertainty. This was proved this year by our ranking as the top offshore jurisdiction in the world, for the eighth consecutive year, in the 2018 edition of the Vistra 2020 Report.

In addition to our ongoing work with the Asian and Latin American business community, a key focus for the BVI going forward is the fast-growing, emerging economies of Africa. With six of the ten fastest growing economies in the world located on the African continent, the region is attracting investor interest at a global level. BVI companies have already engaged in direct investment relationships with numerous African countries, including Nigeria, Mozambique, Kenya, Tanzania, Zambia and Botswana. But we believe there is significant opportunity to work more closely with the international business and finance community to facilitate and encourage growth across Africa. Similar to our yearly Asia trade mission trips, the BVI will be visiting several key regions in Africa in 2019 as we look to strengthen ties with businesses in the region.

 

How does the BVI address the ever-changing demands and behaviours of international businesses and ensure that it continues to meet their needs to the highest standard?

The BVI has demonstrated its ongoing dedication to developing new and innovative financial services products to aid international businesses at all levels. We are committed to ensuring that our business legislation is modern and fits market needs, reflecting the real commercial landscape in which companies operate.

For example, over the last year the BVI has worked on our Micro Business Company Act (MBC) which allows small businesses to operate and structure themselves akin to larger businesses operating on an international level. The MBC is designed to be transparent, affordable and easy to use, and will automate both simple and complex multi-party business transactions for small businesses.

We also launched our innovative new Limited Partnership Act (LPA) earlier in the year which provides all the typical benefits of limiting liability, as well as a number of unique features to the benefit of investment funds, private equity funds and joint venture structures.

 

Q: What initiatives are the BVI focussing on at the moment with regard to continuing to foster a business-friendly environment and what should your present and future business partners look forward to in this respect?

Locally we are ensuring that we become a more “business friendly” and welcoming jurisdiction by working directly with leaders in the departments of Immigration and Labour.

In a time of political and economic uncertainty across multiple markets, the BVI is currently focussed on promoting our role within the global economy. Specifically, we are looking at how the BVI can support UK businesses in a post-Brexit world by leveraging our international relationships with key strategic partners in Asia and Africa. More widely, we are also looking for our own opportunities in new markets to further strengthen our global economic position.

Locally we are ensuring that we become a more “business friendly” and welcoming jurisdiction by working directly with leaders in the departments of Immigration and Labour. This initiative is ongoing, and we are already beginning to experience greater ease of doing business in the Territory.

As a respected centre for business and financial services adhering to the highest global standards, we are dedicated to serving the needs of our own people, as well as the international community, and our existing and future business partners can look forward to receiving more of the same going into 2019.

 

What’s the most significant impact your services have to companies across industries? Can you provide an overview of some of the most remarkable achievements you have accomplished?

According to a recent report by Capital Economics, an independent economics consultancy, the BVI mediates over US$1.5 trillion of investment globally and contributes over US$15 billion in tax annually to governments around the world.

As a leading facilitator of cross-border trade, investment and business, the BVI, alongside other International Finance Centres (IFC), is at the heart of the globalisation success story.

We are committed to ensuring that our business legislation is modern and fits market needs, reflecting the real commercial landscape in which companies operate.

Thanks to our unique hub of specialist financial, legal and accounting firms we have enabled numerous emerging markets nations, including Africa, Latin America and Asia, to attract increased international investment which, in turn, has led to infrastructure development and economic improvement in these regions.

According to a recent report by Capital Economics, an independent economics consultancy, the BVI mediates over US$1.5 trillion of investment globally and contributes over US$15 billion in tax annually to governments around the world. What’s more, the investment and trade facilitated by the jurisdiction supports more than two million jobs worldwide demonstrating the tangible benefits the BVI brings to the lives of employees, voters, families and businesspeople around the world.

In terms of the latter part of your question, we are pleased to point you to another recent study by a leading international Institution, where BVI structures were shown to be used in infrastructure projects that support economic growth in countries that have high levels of poverty.

For example, the International Finance Corporation made investments through loans from a company domiciled here in the BVI into Pakistan, choosing to do so as our structures provide better protection in relation to creditor rights than those available to onshore investment vehicles in that part of the world. This particular infrastructure investment created 4,000 jobs in 45 cities across Pakistan. That’s just one of many examples of how BVI vehicles facilitate economic growth across the world.

 

Are there any areas that the BVI could strengthen in order to continue to position the region as an attractive place to do business?

 BVI remains committed to working closely and in partnership with the UK and a number of other international bodies to tackle problems of tax evasion and illegal use of the global financial system.

There have been a number of political and regulatory developments over the last year which have posed a threat to the BVI’s business model, including the passage of the Sanctions and Anti-Money Laundering (SAML) Act by the UK government, and the upcoming publication of the EU’s list of non-cooperative jurisdictions for tax purposes.

Nonetheless, despite the challenges these political and regulatory developments may create moving forward, we remain committed to working closely and in partnership with the UK and a number of other international bodies to tackle problems of tax evasion and illegal use of the global financial system. We are an active participant in a number of international initiatives, often exceeding global standards, and operate within a stringent regulatory framework and respected legal system.

 

Is there a key message that you want to get across to businesses that are wondering about the status quo of BVI’s investment opportunities and business environment in today’s environment of political and economic uncertainty and volatility?

In today’s environment of political and economic uncertainty, the BVI provides a tried-and-tested service for international businesses looking for secure and reliable investment channels.

The BVI’s attributes – a legal system based on English common law, internationally compliant regulations and tax neutrality – make it absolutely crucial in making global business happen and will continue to position us as an integral part of the international business and finance community in the coming year.

 

On a lighter note, leaders atop a company naturally have a lot on their plate. What are your favourite routines to keep yourself focussed and healthy at and off work?

Exercise is critical to my well-being and to keeping my energy high, so a three-mile jog three days a week supported by a hike in the hills when I can is a must. Additionally, a daily smoothie of kale and green apples goes a long way. Friday evenings are sacrosanct for a couple of glasses of wine with friends at a favourite bar as all work and no play makes Jill a dull girl.

 

One of the global advocacies we have nowadays is to empower women for leadership roles across all industries. As a female leader yourself, what do you think makes female-led leadership significant?

I have always been a believer in the best person for the job – male or female. I accept that women have to work harder to get noticed but that makes us more resilient in the workplace.

 

What are the three things you will not leave home without?

My phone, my iPad and my smoothie.

 

Thank you very much, Mrs. Smith. It was a real pleasure speaking with you.

About the Interviewee

Lorna Smith is currently the Interim Executive Director of BVI Finance, having previously held the position between 2002 and 2004, and 2005 and 2013. Mrs Smith is responsible for establishing and maintaining sound relationships with the industry and engaging collaborations when appropriate on marketing and promotional strategies for the British Virgin Islands. Other responsibilities include the organisation of promotional tours in key markets, including the US, Hong Kong, Europe, Latin America and other emerging markets to promote the industry’s key messages to potential clients and international investors.

Mrs Smith has more than 30 years of experience at the highest levels of public service in the BVI. Over the course of her senior-level service, she has developed extensive relationships with leaders from the business community, international non-governmental organisations and government leaders from around the world.

She previously served as the founding director of the BVI London Office and BVI House Asia. Currently, amongst other areas, she serves as the Chairman of the Financial Services Business Development Committee, which provides government with strategic advice on Financial Services policies.

She was honoured with an Order of the British Empire (OBE) for her ‘outstanding public services’ to the Government of the British Virgin Islands in 2011.

Venezuela – An Appeal to Russia, China and all Unaligned Countries for Support of Sovereign Venezuela

By Peter Koenig

On 23 January 2018, the United States has initiated a coup against President Nicolás Maduro and his Government, by encouraging and fully supporting the “self-proclaimed” opposition leader, Juan Guaido, as interim President. Already days ago he had received the full support of President Trump, and today, in a special televised speech, US Vice-president Mike Pence declared that Venezuela’s Freedom begins with the new interim president, Juan Guaído https://www.foxbusiness.com/politics/venezuela-established-its-freedom-with-new-interim-president-juan-guaido-vice-president-mike-pence.

RT reports that “the Venezuelan military will not accept a president imposed by ‘dark interests’, Defense Minister Vladimir Padrino said after Washington and a number of its allies recognized a lawmaker [Juan Guaído] as the new leader in Caracas.”

“The army will continue to defend the constitution and national sovereignty, Padrino said on Wednesday afternoon, hours after opposition lawmaker Juan Guaido was proclaimed interim president by the National Assembly, in a direct challenge to President Nicolas Maduro.”

Washington’s immediate recognition of Guaido as Venezuelan’s legitimate leader, was instantly followed by the Organization of American States (OAS), as well as Canada and France. Mexico apparently has declines to do so “for now”. Is the “for now” an indication that Lopez Obrador’s actions are already being controlled by Washington?

 

This is an appeal to Russia and China and to all unaligned nations that love their freedom and sovereignty – to stand up in defense of Venezuela’s freedom and sovereignty.

May they use their diplomatic leverage, and if that does not work on Washington’s ‘savages’ – use other means that the empire understands. Keeping Venezuela free from the yoke of the US and its vassal allies – is essential for all the people in Latin America who have already been subjected to US implanted subjugating and abusing dictators, who not only have ruined their countries’ economies, but created extreme poverty where there was prosperity before, i.e. Argentina, Brazil, Ecuador, Peru, Colombia, Paraguay, Uruguay – and Chile, which is well on her way to an economic and social demise.

Venezuela must stay and remain tall.

President Putin and Jinping – please do whatever you can and whatever you must, to stop the US bulldozer from overtaking Venezuela!

Ongoing unrest in the streets of Caracas and major Venezuelan cities, all inspired and fueled on by the United States, and also the OAS (Organization of American States), the Club of Lima (except for Mexico), its European puppet allies, is confusing and dividing the people and has already killed at least 16. It is not clear who is responsible for the killing, but undoubtedly opposition forces funded by outside sources and / or the Fifth Column (inside Venezuela) have a bloody hand in the Venezuelan violence. A western instigated civil war is a real risk.

This coup attempt is an abject illegal interference in another country’s sovereignty, with the ultimate violent and vicious goal that Washington has been practicing over the past 100 years around the globe – and ever with more impunity – of “regime change” to steel a non-conform, non-submissive government’s resources, and of course, to reach eventually the ultimate goal of full spectrum world dominance. Venezuela has by far the world’s largest known hydrocarbon (petrol and gas) reserves which is two days of shipping time away from Texas oil refineries, versus the Arabian Gulf from where today the US imports 60% of its petrol – a shipping time of 40-45 days, higher shipping costs, plus the risk of having to sail through the Iran-controlled Gulf of Hormuz.

In addition, Washington cannot tolerate any socialist country, let alone, one that is located in what Washington considers its backyard, like Venezuela, or, for that matter Cuba, Nicaragua and Bolivia. The other left-leaning South American country, Ecuador, has recently been “converted” with an internal “soft” coup, aka fake or manipulated elections. Those are usually operated through strong Fifth Columns funded from abroad – and with substantial menaces, including death threats.

The other left-leaning South American country, Ecuador, has recently been “converted” with an internal “soft” coup, aka fake or manipulated elections.

So, Washington is dead set, especially with Trump and Pompeo at the apparent helm, who openly propagate a US (and allied, including NATO) invasion of Venezuela to “free” their “oppressed” people; to bring them from one of the only true democracies in the world (quote by Chomsky and the international election supervising US Carter Institute, among others) under the usurping dictatorship protection of the United States of America. Venezuelans will not tolerate such a farce. The 6 million Venezuelans who stood solidly behind Nicolas Maduro when they voted for him in May 2018, have already stood up – and will continue defending their freely and democratically elected President, despite the western media’s fake images of “tens of thousands” in the streets of Caracas demonstrating against legitimate President Maduro and for the self-proclaimed “interim president”, Juan Guaído.

He is, in fact, a criminal who acts totally against Venezuela’s Constitution on which he swore his allegiance to the country when he took up a seat in the Venezuelan parliament. It is clear that this “mass-movement”, as depicted by western media, was organized from outside, possibly paid for by US sponsored “NGOs” – and Venezuelan “insiders”, covert or openly from the opposition, trained by the CIA and other infiltrated US secret service groups. Clearly the Fifth Column is and was at work in Venezuela for years, bringing about the downfall of the economy by monetary and oil price manipulation from outside and from within; and by diverting food and medicine shipments from being delivered to supermarkets and instead being transferred as contraband into Colombia, where they are sold at dollar-manipulated inflated local currencies.

This coup attempt reminds so much of another US State Department instigated but failed overthrow in April 2002 against President Hugo Chavez. The coup was botched by the Venezuelan military and the people of Venezuela. President Chavez was reinstated within 2 days. And the present coup so far has also failed.

Clearly the Fifth Column is and was at work in Venezuela for years, bringing about the downfall of the economy by monetary and oil price manipulation from outside and from within.

President Maduro’s decision to break diplomatic relations with the US is therefore, not only logical, but totally legal. He has given all US diplomats 72 hours to leave the country. Now comes the other ‘coup’ – the US refuses to accept the legal expulsion of their diplomats from Caracas, because the self-proclaimed and US recognized “interim president” has called for all diplomats, first of all those from Washington, to stay in the country. Pompeo is threating Venezuela for any harm that may happen to US citizens, including diplomats during this upraising and what they consider “change of government”.

Here is Pompeo’s statement with regard to diplomatic relations with Venezuela.

Stay tuned to how this crisis will unfold.

May Venezuela’s friends and allies put all their might, diplomatic and other, at the support of Venezuela’s freedom and sovereignty.

About the Author

Peter Koenig is an economist and geopolitical analyst. He is also a water resources and environmental specialist. He worked for over 30 years with the World Bank and the World Health Organization around the world in the fields of environment and water. He lectures at universities in the US, Europe and South America. He writes regularly for Global Research; ICH; RT; Sputnik; PressTV; The 21st Century; TeleSUR; The Vineyard of The Saker Blog, the New Eastern Outlook (NEO); and other internet sites. He is the author of Implosion – An Economic Thriller about War, Environmental Destruction and Corporate Greed – fiction based on facts and on 30 years of World Bank experience around the globe. He is also a co-author of The World Order and Revolution! – Essays from the Resistance.

Featured image courtesy of: EURACTIV

From ASEAN Economic Development to Militarization

By Dan Steinbock              

In Africa, the Trump administration is setting a precedent by replacing economic development with militarization. In Asia, it seeks to couple “rebalancing” in trade with a rearmament drive.

In a recent editorial, The Manila Times expressed concern that relatively benign economic conditions may lead to a false sense of security as “the United States-China trade war may be starting to inflict collateral damage on the economy.”

In the short-term, it is a valid concern for the Philippines and other ASEAN economies that currently benefit relatively benign economic conditions.

But even if the worst excesses of the trade war could be deterred, there are darker clouds in the longer-term horizon. The Trump administration’s new trade protectionism is accompanied by increasingly military stance. The new US Africa strategy heralds changes in other regions as well, particularly Asia.

 

Setting a precedent in Africa

In 2017, the United States had a $39.0 billion in total goods trade with Sub-Saharan African countries and a trade deficit of $10.8 billion. US investment in Africa grew in the Bush years. But in the Obama 2010s, it collapsed.

In the past, US Africa strategy focused mainly on economic cooperation and aid, and secondarily on military cooperation. In the new strategy, the focus is reversed. It downplays economic efforts to boost African prosperity. Second, it sees Africa mainly as a base of Islamic terrorism, which must be defused in the continent. Third, it will no longer support UN peacekeeping missions.

China’s Africa investment significantly exceeds that of the US. And China is a large source of aid and the largest source of construction financing, which supports Africa’s ambitious infrastructure development.

Meanwhile, China’s economic engagement with Africa has soared. In 2016, the value of China-Africa trade was $128 billion, almost three times more than US trade with the continent. Also, China’s Africa investment significantly exceeds that of the US. And China is a large source of aid and the largest source of construction financing, which supports Africa’s ambitious infrastructure development.

Perhaps that’s why US Africa strategy misrepresents China’s One Road and Belt (OBOR) initiative as a plan of “Chinese global dominance.” Since economic facts do not support the White House’s narrative, it relies on ideological trashing.

Unfortunately, similar developments loom ahead in Southeast Asia – a region that is far more important economically and strategically.

 

ASEAN economic development or trade wars

In the past decade or so, US economic engagement in ASEAN has fallen, while that of China has soared. According to US Trade Representative, US trade with ASEAN amounted to $234 billion in 2016; that’s six times more than with Africa. Yet, China trades with ASEAN soared to $515 billion in 2017.

Indeed, China trades with ASEAN (20%) almost as much as ASEAN economies trade with each other (22%). It is the same story with foreign direct investment (FDI). In 2017, China and Hong Kong accounted for some 15% of all FDI to ASEAN. US figure has plunged to less than 5% (Figure).Some observers argue that the US trade war will hurt China but may benefit ASEAN, thanks to redirected trade and investment. That’s a short-sighted view. While some ASEAN countries may benefit in some sectors for some time, continued US-Sino tensions would overshadow the entire region for years to come.

Moreover, US trade with ASEAN is now subject to the ‘America First’ stance. As the Trump administration puts it, “we need ASEAN to do more for us.” The White House seeks “rebalancing” in ASEAN trade ties. It wants to negotiate deals bilaterally with each ASEAN economy – to maximize its leverage.

The US has a combined trade deficit of $92 billion with ASEAN countries; that is higher than its deficit with Mexico ($71bn), Japan ($69bn) or Germany ($65bn) – all of which have already been hit by the Trump administration’s new protectionism.

The US has a combined trade deficit of $92 billion with ASEAN countries; that is higher than its deficit with Mexico ($71bn), Japan ($69bn) or Germany ($65bn) – all of which have already been hit by the Trump administration’s new protectionism.

In ASEAN, the first targets will be those countries with which US has major trade deficit; i.e., Vietnam ($34 billion), Malaysia ($24 billion), Thailand ($20 billion) and Indonesia ($13 billion), followed by the Philippines and Cambodia. Some will seek exemptions, but they require strategic favors that may prove even costlier over time.

 

The drive to militarize ASEAN

U.S. overall stance toward the ASEAN is changing. Ever since Obama’s security pivot to Asia, Pentagon has been aiming to move 60% it’s warships into the region. The White House has revised its stance accordingly. In the new 2017 National Security Strategy, China is portrayed as America’s “adversary” rather than a partner.

An enemy – real or perceived – is vital for arms sales.

In 2017, military expenditure in Africa was $43 billion (SIPRI). In Asia and Oceania, it amounted to $477 billion, which is almost 11 times more. Southeast Asia alone spends on arms almost as much as Africa.

Pentagon already dominates sales to Australia, Japan, South Korea and Taiwan. Among the greatest arms importers in Southeast Asia, Indonesia buys a third of its military imports from the UK and US; Singapore more than two thirds from the US.

Pentagon wants more deals with Vietnam (which favors Russia), Thailand (which relies on Ukraine and China), and Myanmar (which prefers China and Russia). Outside ASEAN, US wants to sell more to India (which relies mainly on Russia).

An enemy – real or perceived – is vital for arms sales.

As US economic engagement has fallen in the region, rearmament would offset the losses – but that can only happen at the expense of ASEAN’s economic future.

 

The way out

Ultimately, the White House’s changing stances toward Africa and Asia stem from the neoconservative Wolfowitz Doctrine, which in the early ‘90s deemed that the US goal must be “to prevent the re-emergence of a new rival, either on the territory of the former Soviet Union or elsewhere that poses a threat.”

Destabilization and rearmament are the best way to undermine the quest for Asian Century. Catch-up growth and rising prosperity are not viable without peace and stability.

That’s why, like US Africa strategy; American ASEAN strategy is likely to seek to militarize Asia Pacific, which has potential to divide the region. In both regions, the White House seeks to drive rearmament, mainly at the expense of economic development that China promotes. And in both regions, the White House shuns peace-keeping activities in which China is the world’s leading actor today.

Yet, what ASEAN needs is economic development. Destabilization and rearmament are the best way to undermine the quest for Asian Century. Catch-up growth and rising prosperity are not viable without peace and stability.

ASEAN does not need to choose between the US and China. Good diplomacy will choose both. Dishonest diplomacy will choose only one and trash the other.

Featured image courtesy of: U.S. Pacific Command / Flickr

About the Author

dan-steinbock-webDr. Dan Steinbock is the founder of Difference Group and has served at the India, China and America Institute (US), Shanghai Institute for International Studies (China) and the EU Center (Singapore). For more, see http://www.differencegroup.net/

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