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A sign that Providence is right-wing?

Kitty Miv, Editor
18 March, 2014

Kitty's Kountry Rankings are below, with a description of how they are kompiled. This week, as every week, I give out Encomiums to countries which have done Good Things, and award Execrations for countries which according to my highly personal and partial views have done Bad Things.

It seems a no-brainer that Poland should incentivize shale gas production, which could contribute significantly to lessening its dependence on Russian supplies via Ukraine. Unfortunately 'shale' is one of those words that has acquired cult status for environmentalists, and amid the resulting crescendo of conflicting claims and counter-claims, the truth slips away. I think of those pictures of Oklahoma and Texas during the oil rush, with more nodding donkeys than blades of grass. Of course environmentalists hardly existed back then, but it's difficult to believe that they would have successfully stood in the way of farmers who could suddenly get rich by digging a not very deep hole in their backyards. The difference in the UK at least (I am not so sure about Poland) is that subsoil mineral rights belong to the Crown (i.e. the Government) so that landowners and householders have nothing to gain from fracking and horizontal drilling, and possibly (no-one knows) something to lose through subsidence, over-crowded roads, pubs invaded by oil-workers and the (mostly imaginary) rest. The UK Government has made some fairly feeble gestures towards rewarding communities which sit on gas reserves, but it seems to be doing the minimum consistent with electoral advantage. There are apparently a lot of Tory constituencies with fracking potential - if this is indeed a sign that Providence is right-wing, then it's probably a poisoned chalice. Anyway, Poland isn't likely to be entering into such nice calculations; it's more a question of national interest.

Which brings us to the Ukraine. The EU might wish to call Poland's scheme State Aid (aka "how to abolish competition in one easy lesson") but it won't dare in the context of the ongoing drama over the Crimea. So far, however, the EU's response to the unexpected events which have caused the Ukraine to fall into its lap is distinctly underwhelming. The trade deal being offered, that's to say if it is offered after 28 countries and the deadly European Parliament have crawled all over it, is already festooned with protectionist caveats. The 28 different sets of national priorities in the EU make for paralysis on any important issue, so that a coherent response to Russia's aggression is not to be hoped for. And that of course is Russia's precise calculation, largely based on its energy stranglehold over Western Europe. What the EU ought to do (ought to have done, from at least 2009 when Russia suspended gas deliveries through the Ukraine) is to liberalize and incentivize oil and gas production to the greatest extent possible. But it doesn't have a coherent energy policy, and has no power to control the behaviour of such a major producer as the UK, which therefore taxes hydrocarbon production to the hilt. Absent an effective economic threat to Russia, and it's hard to see how one can be assembled, it will get what it wants, which is the effective annexation of the Crimea and large chunks of Eastern Ukraine. EU policy should now be devoted to securing the annexation of Western Ukraine to the EU. Huffing and puffing over a lost cause will achieve less than nothing. Make the whole place a free trade zone for the next 20 years would be my recommendation; that's what China is doing. But of course Italian and French farmers will have none of it: their soil isn't the equal of Ukraine's, and they are hopelessly uncompetitive after 50 years of molly-coddling under the CAP.

"Hard-Faced International Mining Behemoth Grinds Down 3rd-World Workers." Sounds all too probable, yes? "Corrupt Government Reneges On International Mining Contracts." Sounds even more probable, and there have been lots of cases of that lately. If you don't pay the Ministers then they'll chuck you out; and if you do, you'll end up in Leavenworth. Who'd be a mining executive? Now of course none of the above applies to the saintly mining companies who are helping Indonesia to exploit, sorry, manage, its mineral resources; and of course Indonesian ministers are the cynosure of probity. So how to explain what's going on with Indonesian mining? Presumably the (non-Indonesian) mining companies employ tens of thousands of local workers, and if they are modern, socially responsible companies, no doubt they have an entirely paternalistic attitude towards those workers (no, I am not being sarcastic, it is just how you need to be, nowadays). And not incidentally, they transparently pay vast sums to the government every year through various types of tax. And the Government? It is reasonable to want to trade up, to add value to the resources you have, to increase the skill levels of your citizens, all that good stuff. And why would the mining companies not want to go along? Surely it is in their interest to secure their place in the value chain by having a bigger and more sophisticated stake in the country? So, with all these win-win outcomes, why is it that the mining companies and the Government are at each other's throats? Obviously I am missing something; there must be an obvious answer. But I can't see it. Unless it would be tax? The Government claims that it is not trying to increase its revenues, but to better the country. Well, that's a first! But it does seem strange that their method of encouraging investment is to apply a sort of fiscal Iron Maiden to their biggest taxpayers. Colbert would not have approved: what they're getting is all hiss and no feathers.

The outgoing European Parliament is remaining true to its warped principles, and is going out on a high, waving through a suicidal prescription for enhancement of the AMLD. Ah, you didn't know? That stands for the Anti-Money Laundering Directive, and to give you an idea of how it works, last week a friend of mine in Italy received a letter from a local bank (mischievously backdated by two months) demanding immediate compliance with the Directive, on pain of account closure. Passport, utility bill, the usual stuff. He wasn't going to be in Italy for a month, but they wouldn't accept this. So the account will be closed, but by him, not by them! Instead, he will use another, non-EU bank account where they still have human beings rather than bureaucratic automatons in the pay of Strasbourg. How many money-launderers do you know? Terrorists? I thought so: none. My friend and his family had banked with the institution concerned for more than fifty years. Do they not know enough about him already? Now the master-minds in Strasbourg (that's the European Parliament, in case you didn't realize, and they waste millions of my and your money traipsing around Europe with their mistresses and cashiers for no purpose whatsoever except to satisfy their own amour propre and the folie de grandeur of the French) want to establish inter-linked national beneficial ownership registers. Now I'm not going to try to address the issue of whether this is necessary or not, for the stated purpose; I just want to point out that, like my friend, when the settlor of a Luxembourg foundation realises that every snarling journalist in Europe (that's me!) will be able to find out what companies he owns and where, and what assets they have, he will promptly move the whole lot to Labuan, Vanuatu, Curaçao, or wherever the fancy takes him. Goodbye, Europe! And definitely good riddance to this apology for a forum. As Oliver Cromwell said to the Rump Parliament: "You have sat too long for any good you have been doing lately ... Depart, I say; and let us have done with you. In the name of God, go!" Except that the next one will be worse, I suppose.


Kitty's Encomiums and Execrations

Methodology: each week (this is the 96th) two or three countries are given encomiums and two or three are given execrations. Those are the entries below with descriptive links. In the following week, each encomium counts as + 1 for that country, and each execration counts as – 1, being added to that country's existing score. Over time, therefore, a ranking will build up for each country, and further countries will join the listing. Germany is at neutral, since in the second week it had an execration and in the first week it had an encomium, leaving it at neutral; then it had an execration in week four, thus dropping to – 1, and another one in week six, dropping to – 2; finally in week 13 it got something right, so it went back up to – 1; then in week 16 it gained a further star, so then it was in neutral territory until week 23 when it dropped back to minus one, but reverting to neutral territory in the following week, then dropping to minus one in week 50, and back up to plus one in week 51, then to plus two in week 52. Some weeks ago it dropped a place, but then quickly recovered one step. Etc etc and now it's on plus 1 again.

The rankings are intended to be a proxy for business friendliness; evidently they are highly partisan, but as time goes by they are becoming useful for decision-making. For any country in negative territory, you should think carefully before starting a business there.

Kitty's Encomiums:

European Union all at sea

Poland likes gas

And Kitty's Execrations:

Indonesia keeps digging




Tags: Euro | Government | Money | Law

About the Author

Kitty Miv, Editor

Kitty was born in Argentina in 1960 to a Scottish cattle rancher and his Argentine wife. Educated in Edinburgh and at Princeton, Kitty worked for the World Bank as an economist, where she met and married an emigre Iranian banker. During her time with the Bank, Kitty worked in a number of emerging markets, including a spell in the ex-USSR as a Transition Economies Team Leader. Kitty is now a consultant in Brussels and has free-lance writing relationships with a number of prominent economic publications. kitty@lowtax.net


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