VAT mixed with low -skill jobs and low wages is a stalled economy
September 1st, 2012 and Saint Lucia is scheduled to be shackled to the core by the economic witches of two political parties.
One on the right and the other on the left, both trapped with incomplete reasoning, non – existent visions and ill – defined long – term solutions.
Indeed, the conservative right played mass, and shadow – boxed their way out, but the left wing liberal government will have to do the dance.
The economy continues to be weak, demand for goods and service has been slow to recover, and household wealth continues to decline.
Continued high unemployment is the new norm, while government spending has been unchecked in a bureaucratic haze.
After so many wrangles in opposition and on the campaign trail, apparently commonsense economic theory is so alien to the chief policy makers that high unemployment will persist.
Contrast this with poor economic conditions, a VAT, low skill jobs, low wages and deflated consumer spending to the painting of a rosy picture of proposed robust job growth and the absence of a well thought – out blueprint for growth to better days.
How real can this be?
Oh yes, the economy is in retreat losing jobs faster than it can create? True or false – eh rouge, eh rouge.
Saint Lucia can no longer accept cumbersome drags on the economy, such as high corporate tax, none visionary leadership to alternative energy, technology, research and development (R&D), access to investment funding and policy guidelines that would propel the economy to spark growth and employment.
In a nutshell the economic recovery is poised to remain anemic and would be unable to break the witches spell with a VAT that is mixed with low job skills and low wages.
What’s more: up to this point, the VAT represents an attempt by those producing largely confusing explanations and interpretations of what they themselves have not yet fully understood.
This quantum leap to a VAT has failed to manifest the baby steps that are required before the implementation and must now match rhetoric to deliver on the blueprint to growth in light of the VAT.
Under this scenario, the VAT is a no – win proposition without rationalization of both personal and corporate income tax yields.
It must replace other forms of taxations and facilitate a reduction in other taxes.
In its present form, a VAT will further slow economic growth and destroy jobs on the bases of production between pre-tax income and post tax consumption.
With the capacity of a VAT to generate large amounts of tax revenue, like the gas tax, a liberal government would easily expand the size and offer new ways to finance bigger government – and not necessarily smarter government.
This has already begun with the formation of new committees, consultants and advisors.
With a VAT implementation, small business will have to painfully consider compliance cost, (act as a tax collector for the government), and keep it well below 2 percent of sales.
Or they may be forced into the underground economy or resort to barter.
Taking a VAT out of consumers’ pockets in the medium – to low- income brackets would reduce private savings and alter patterns of consumer spending, as well as personal investment options.
Once more – there is a need to streamline and prioritize the development model.
When a VAT is enacted – a decline in real wages would be noticed leading to reduced spending power on consumption and luxury items.
As a consequence, sectors such as construction, new vehicle purchase, tourism (hotel, restaurant and bars) face uncertainties in an economy characterized by high unemployment, with stifled and constrained demand.
A VAT, low skill jobs and low wages will not grow business and speed up economic recovery to get Saint Lucia back on track.
At this time, with the current economic outlook, a VAT would hurt the economy, kill jobs, grow the size of a liberal government, push small business in the underground economy and permanently reduce family’s wealth and incomes.
The gap between theory and reality is a live spectacle, playing out free of charge in Europe – no consultant or advisors are required.
Therefore, if it is not suitable and sustainable for Europe, why take their advice and mimic them.
By Melanius Alphonse
Citigroup investors reject bigger executive pay deal
Citigroup shareholders have voted against giving top executives a bigger pay deal in a rare show of investor discontent.
The package, which had increased chief executive Vikram Pandit's pay to $15m (£9m), was backed by just 45% of shareholders.
Citigroup's board said it would meet shareholders to discuss what it called a "serious matter".
High executive pay has come into focus after the global financial crisis.
Citigroup, which was one of the many banks to be rescued during the crisis, received $45bn in bailout funds from the government in 2008.
"It's a loud clarion call and an embarrassment to the directors, who now have to clarify compensation metrics they use," said Jeffrey Sonnenfeld of Yale University's School of Management.
However, the shareholder vote is not binding on the bank.
'Disconnect'
A number of issues have combined to prompt many shareholders to question the amount of money that top executives are now being paid.
On Tuesday, Citigroup said its net income declined 2% to $2.9bn (£1.3bn) in the first three months of the year, when compared with the same period last year.
The bank's shares have also taken a beating, falling by 24% in the past twelve months. The stock has lost more than 90% of its value in the past five years.
To make matters worse, Citigroup was one of the four major US banks that failed a stress test carried out by the authorities earlier this year.
The tests were conducted to gauge if the banks would be able to withstand a serious downturn in the financial markets.
That led to the US Federal Reserve turning down a request by the bank to buy back shares or pay a higher dividend.
Analysts said that shareholders were not happy with the fact that the bank was increasing compensation to its top executives while investors were losing out.
"Citigroup is one of most egregious examples of disconnect between incentives of top management and value creation of shareholders," said Mike Mayo, bank analyst at brokers CLSA.
"The owners of the big banks, namely the shareholders, are finally taking a greater amount of responsibility by speaking up."
Italy slashes its 2012 growth forecast
The Italian government has slashed its forecast for the economy in 2012.
It was previously predicting a 0.4% contraction in the economy, but has cut that to a 1.2% contraction.
The government has also admitted that it will not be able to meet its target of balancing the budget by 2013.
It now says that it will be able to balance the budget by 2015, which is still more optimistic than the IMF, which says Italy will not have a balanced budget until at least 2018.
The IMF expects the Italian economy to contract by 1.9% in 2012.
The government has raised its forecast for growth in 2013 from 0.3% to 0.5%.
The announcements followed a cabinet meeting to approve the new Economic and Financial Document.
The document predicts that Italy's debt will increase from 120% of GDP in 2011 to 123.4% in 2012.
"Despite the progress made, there is still a long way to go in a context that is more favourable but still characterised by elements of uncertainty," the report said.
Prime Minister Mario Monti had previously said that he would keep to his predecessor's pledge to balance the budget by 2013.
He stressed that the new forecast of a 0.5% deficit in 2013 would still be in line with eurozone rules.
Tesco unveils profits rise and £1bn investment in UK
Tesco will invest £1bn in its UK business this year in an attempt to revive its flagging domestic operation.
The company is accelerating the revamp of UK stores and promises to hire more staff. That follows falling sales and profits at the UK business.
Speaking about the company's problems, chief executive Philip Clarke said: "Tesco didn't put enough into the stores and maybe took a little out".
Overall, group pre-tax profits rose 5.3% to £3.8bn in the year to February.
But profits at the UK operation fell 1% to £2.5bn compared with the year earlier.
Tesco also said that UK sales fell by 1.2% in the second half of its financial year.
The company blamed, in part, an aggressive programme of discount coupons issued by its rivals.
To try to help reverse that decline, Mr Clarke took control of the UK business in March from Richard Brasher, who stepped down as UK boss.
Analysts say that Tesco's management has been distracted in the past few years by expansion in Asia and the United States and, as a result, the UK business has stalled.
"Whilst our international business is delivering excellent growth, contributing £1.1 billion of profit to the group, we fully recognise that we need to raise our game in the UK," Mr Clarke said in a statement with its annual results.
"As a result, we are committing over £1bn to make the UK shopping trip better for customers," Mr Clarke told BBC News.
Tesco said it had started taking on and training 8,000 staff for its existing stores. Some of them will be part of a new focus on fresh food departments.
The new jobs are part of 20,000 it expects to create over the next two years.
The company is slowing down its expansion programme in the UK, so it can focus on overhauling the existing chain.
"Tesco has had its knuckles rapped but it's clever enough to learn from this," said Phil Dorrell, a director at retail consultants, Retail Remedy.
"Its focus now is on consolidating and improving its existing portfolio, which even it admits has become pretty shabby of late.
We expect the recent spate of bad news to be more of a hiccup, not the beginning of a trend," he said.
Tesco's US supermarket chain, Fresh and Easy, narrowed losses to £153m last year and expects further losses this year.
The chain has 185 stores and will add another 45 by February 2013.
"The further changes we have been rolling out to the stores, as we adapt the offer better to the needs of local customers, have been very well-received," Tesco said.
"These include introducing in-store bakeries, loose produce, additional ranges in grocery, as well as many new Fresh & Easy products."
Profits in Asia rose by almost 22% to £737m
Heineken hit by higher barley prices
Europe's biggest brewer sold more beer than had been expected in the first three months of the year, but was hit by higher costs.
Heineken sold 4.7% more beer by volume in the first quarter than it had in the first quarter of 2011.
But it said that higher raw materials had hit its profits.
It reported a net profit of 175m euros ($229m; £144m), but that includes an exceptional 20m-euro gain from the revaluation of its Haitian business.
Heineken said that higher prices for malted barley would push up its input costs by about 6%.
It is the world's third-largest brewer and the first of the big four to report quarterly results.
SABMiller will report on Thursday and Anheuser-Busch InBev results are out on 30 April.
Denmark's Carlsberg will report on 9 May.
Syrian Attacks on Homs Continue, Despite Truce
Syrian government forces are continuing to attack rebel-held neighborhoods in the flashpoint city of Homs, despite a near week-old cease-fire brokered by the international community.
The Britain-based Syrian Observatory for Human Rights said troops loyal to President Bashar al-Assad Wednesday resumed heavy shelling in the central city that has been battered by artillery for weeks.
The Observatory, an opposition group that aggregates casualty reports from activists inside Syria, said pro-Assad troops killed at least nine civilians Tuesday as attacks appeared to be expanding to other areas.
The Syrian government says it has the right to attack what it calls terrorists.
The attacks come as a U.N. mission is attempting to monitor cease-fire conditions.
Moroccan Col. Ahmed Himiche, head of an advance team of six U.N. observers that arrived in Syria this week, said the group's first field trip came Tuesday to the southern city of Daraa. The Observatory has reported protracted fighting between rebels and Syrian soldiers.
Himiche did not address the the violence in comments to reporters.
“Our mission is to build a relationship among the Syrian forces, the authorities and the other parties as well. We will try to link with all the parties since our mission is a technical one, basically it is building connections with all the parties.”
Himiche said he expects an additional two dozen unarmed monitors in Syria by Thursday.
United Nations chief Ban Ki-moon is intensifying efforts to get a large contingent of observers on the ground to salvage the truce. He said a team of 250 monitors, as originally envisioned, may not be sufficient. He also has asked the European Union for planes and helicopters to make the mission more effective.
Diplomats say an expanded observer mission is contingent on a verifiable cessation of hostilities.
In Beijing, Syria's foreign minister pledged to respect the peace plan brokered by U.N.-Arab League envoy Kofi Annan and to cooperate with the observer team.
China's foreign ministry quoted Walid Muallem as telling his Chinese counterpart, Yang Jiechi, that “Syria would continue to …respect and implement Mr. Annan's six-point proposal.”
Muallem also said Damascus remained committed to implementing the cease-fire, withdrawing troops and cooperating with U.N. monitors. Meanwhile, world powers are considering tightening economic pressure on Syria.
In Moscow, Morocco's foreign minister urged Russia to press the Syrian government to adhere to the cease-fire and withdraw forces from cities in accordance with Mr. Annan's peace plan.
Russia has provided Syria's government with weapons and – along with China – shielded Mr. Assad by blocking U.N. Security Council resolutions condemning his government for a crackdown which the U.N. says has killed more than 9,000 people since March 2011.
US Warns of Potential Boko Haram Attack in Nigeria
The United States has warned its citizens in Nigeria that the radical Islamist sect Boko Haram may be planning attacks in the capital, Abuja.
The U.S. embassy issued an emergency message saying attacks could target hotels used by Westerners, but that the timing was unknown.
The alert said the Nigerian government was aware of the threat and “actively implementing security measures.”
The embassy cautioned citizens to be especially aware of their security near Nigerian government facilities, diplomatic missions, large gathering places, markets and places of worship.
It issued a similar warning in November after a series of deadly attacks in northern Nigeria. But the Nigerian government criticized the move, saying the U.S. warning was not based on new information and was unnecessarily spreading panic.
Boko Haram has been blamed for a bombing earlier this month that killed dozens of people, but has not claimed responsibility.
The group is believed to have killed about 1,000 people since it began violent operations in 2009, including attacks on churches, the U.N. headquarters in Nigeria, police stations and other government buildings.
NATO Pledges Commitment to Afghanistan Despite Costs
NATO says it will not abandon Afghanistan to its enemies despite the financial costs.
The United States and NATO plan to pull combat troops out of the county by 2014. And in prepared remarks Wednesday, NATO Secretary General Anders Fogh Rasmussen warned those seeking to undermine the Afghan government, “you just can't wait us out,” saying they will find a strong Afghan security force in NATO's place.
Rasmussen also told members of the alliance supporting the Afghan security forces “is a good deal in financial and political terms.”
Top U.S. and NATO officials are meeting in Brussels to finalize plans to withdraw the remaining 130,000 foreign combat troops from Afghanistan as well as how to pay for an effective Afghan security force. The discussion will lay the groundwork for a summit of NATO leaders in Chicago next month.
On Tuesday, Afghan President Hamid Karzai said he wants the United States to provide $2 billion a year to fund Afghan security forces after the 2014 security handover. But Rasmussen and U.S. officials have suggested the costs could come closer to $4 billion a year.
“You're right that a figure around four billion US dollars a year has been mentioned. I would like to stress that neither this ministers' meeting nor the Chicago summit will be a pledging conference but I would expect that at the Chicago summit we will get a clear picture of the commitment to financing the Afghan Security Forces
Insurgents in Afghanistan have been stepping up their attacks, launching an offensive this week that claimed the lives of four civilians, 11 Afghan security personnel and 36 militants.
On Tuesday, Australian Prime Minister Julia Gillard announced that her country's troops would begin pulling out of Afghanistan one year earlier than planned. She said most of her country's 1,550 troops would return home by the end of 2013, thanks in part to security improvements and the death of Osama bin Laden.
Australia is not the first country to begin accelerating its withdrawal of troops from Afghanistan. Earlier this year, France said its combat forces would also leave the country by the end of 2013, also a year ahead of schedule.
Many observers fear that other countries could follow suit, leading to a dangerous “race to the exits” as the more than decade-long war winds down.
China May Relocate 100,000 Residents From Three Gorges Vicinity
China says about 100,000 people living near the Three Gorges Dam may have to be relocated due to the threat of geological disasters near the massive project.
Liu Yuan, an official with the Ministry of Land Resources, recently told China National Radio the number of landslides and riverbank collapses has increased 70 percent since the waters behind the dam reached their maximum level in 2010.
Liu says the 100,000 residents may have to be moved over the next three to five years to minimize the risk of casualties from such threats. He says work will soon begin to repair rockfalls and landslides at 335 sites near the dam, and that monitoring is under way at 5,386 potential danger sites.
About 1.4 million people living near the Three Gorges Dam have been forced to resettle over the the last decade, when the gates of the dam were closed to create a massive reservoir in Hubei province. A report issued by China's State Council last June said the $25 billion dam — the world's largest hydro-electric project — is fraught with environmental, geologic and economic problems.
Trinidad and Tobago signs loan agreement with Andean Development Bank
Prime minister of Trinidad and Tobago, Kamla Persad-Bissessar began her official engagements at the Sixth Summit of the Americas on Sunday afternoon with the signing of an agreement for her country to become a special member country of the Corporación Andina de Fomento (CAF).
This follows a decision by the Cabinet on February 9, 2012, that the minister of finance implement the agreement between the government of Trinidad and Tobago and the Andean Development Bank for the subscription of common capital and expanded country membership in the institution.
The signing of the loan agreement clears the way for a portfolio of local government projects to become eligible for CAF financing. These include projects regarding infrastructure of roads, transportation, telecommunications, power generation and transmission, water and sanitation.
The prime minister indicated that the occasion of the Sixth Summit of the Americas was an ideal opportunity for Trinidad and Tobago to sign such an Agreement given the theme of this year’s Summit ‘Connecting the Americas; Partners for Prosperity.’
She stated, “The signing of this Agreement sends a strong message of Trinidad and Tobago’s commitment at the highest political level, to deepening regional integration as well as south-south cooperation in advancing development across Latin America and the Caribbean.”
She stressed that Trinidad and Tobago is poised to take on an increasingly active and leading role in strengthening inter-American relations and in the pursuit of fruitful partnerships.
The CAF is a development bank established in 1970 that currently consists of eighteen countries in Latin America, the Caribbean and Europe, as well as fourteen private banks from the Andean region. The organization promotes a model of sustainable development through credit operations, grants and technical support, and offers financial structuring to public and private sector projects in Latin America.
Based in Caracas, Venezuela, CAF has offices in Buenos Aires, La Paz, Brasilia, Bogota, Quito, Madrid, Panama City, Lima and Montevideo.
A CAF mission, headed by its president Enrique Garcia, is scheduled to visit Port of Spain from May 16-18, 2012, to further explore the possibilities arising from Trinidad and Tobago becoming a special member country. The minister of finance affirmed that the signing of the agreement at the Sixth Summit will provide added impetus to these discussions.