NEWS
23 March, 2009 G20 London Summit aims to reshape the global financial and trading system
During March leaders of states and governments of G20 as well as representatives of large international organizations have been working hard to prepare London summit (2 April 2009). A series of broad goals have been endorsed to build new global financial architecture and to overcome world financial crisis. In view of the above, Russian President Dmitry Medvedev stated that he expects the G20 London Summit to “produce the basic parameters of a world financial architecture and adopt international conventions regarding a new financial world order”. He is sure that Russia will overcome the consequences of the global financial crisis without disastrous effects. At the same time Russian Federation Minister of Finance Alexey Kudrin forecasts a demand reduction for Russian commodities – oil, gas, metals, cars, equipment, chemicals, grain etc. However there is no reason to lose hope: the Minister predicts that economic growth will begin next year. "It is necessary to develop and accept international standards in macroeconomic and budgetary policy binding major world economies, including reserve currencies issuers” – quotes official website of Kremlin regarding Russian Federation proposals to London G20 Summit. The Russian Federation’s proposals, deal with ways out of the ongoing financial and economic crisis and for a post-crisis order of the world financial system. Russian party proposals have been dispatched to the leadership of the G20 countries, the CIS and international organizations.
According to Russian President, one of the topics of the forthcoming summit should be the effective control system where financial problems of one country cannot strike the whole world. "Problems of one country cannot cause heavy chain reaction when someone issues massive volume of mortgages and it has disastrous effect on the whole global economy. We need a mechanism to influence to some extent decisions of our partners and on the other hand to protect ourselves from such consequences ", - Russian Federation President said. Medvedev considers audit and accounting issues as very important. "We need clear normal fair rules acceptable by all, not just by a group of very developed countries", - he said. Russia , Medvedev said, proposes “more fair structure of international financial system".
Financial G20 meeting: final communique
In March 2009, on the threshold of London Summit, finance ministers and central bankers of 20 leading economies gathered together at the summit of finance ministers and central bankers. Final communique approved by the members of the two-day G20 financial meeting consists of two parts: Restoring global growth and Strengthening of the financial system. In particular, participants of the meeting made recommendations to the London Summit to ensure that all systemically important financial institutions, markets and instruments are subject to an appropriate degree of regulation and oversight. The Financial G20 noted that hedge funds or their managers are to be registered and disclose appropriate information to assess the risks they pose;
It was stated that a strengthened international cooperation is needed to prevent and resolve crises, including introduction of supervisory colleges, institutional reinforcement of the FSF, and the launch of an IMF/FSF Early Warning Exercise.
In a special attachment to the final communique the financial G20 suggested a framework of measures to support banks during financial crises. Finance ministers and central bankers of the twenty leading economies agreed on four major priorities on the restoration of post crisis banking system. Joint effort should cover the maintenance of the liquidity level, including government guarantees on financial institutions’ liabilities; the influx of capital to financial institutions; protection of savings and deposits; bank accounts bail out, in particular proper handling of bad assets. An attachment to the G20 financial ministers communique describe in detail specific mechanisms and conditions of state’s entry into banks capital – transparency, disclosure of banking information, monitoring. State support to banks is a temporary measure and should provide for the state’s clear exit strategy out of private banking capital as soon as economic situation improves. G20 Finance ministers decided to substantially increase International Monetary Fund resources from the current $250 billion. Precise figures will be agreed in London on G20 Leaders Summit on 2 April.
The two days meeting of G20 finance ministers and central bankers in the suburbs of the English town of Horsham was the last preparatory event for the G20 Leaders Summit. Midland Consult experts believe, that it will allow countries to define jointly how to find ways out of the crisis and to pull the world economy out of recession with minimum losses.
Shipping finance: Russian and International Practice
Shipping finance in banking terminology means the provision of monies or financial means for the purchase of any type of vessel. It is an asset-based finance. One should start from the ship itself: the whole algorithm and structure of loan greatly depend on the physical condition of the vessel. Thus, as a rule, banks differentiate between two vessel groups: second hand ships and newly built. The choice for the future ship-owner in buying a vessel should be based mainly on the type of his business, current competition and availability of funds as well as on operations schedule and availability of the required ship for sale. In practice very often second hand ships are purchased due to lack of new vessels for sale and the busy schedule of shipyards. In the vast majority of transactions the purchased ship is placed as security for loan facilities. As a rule, such ship consequently gets registered in certain foreign jurisdiction for tax and operational purposes.
Panama, Liberia, Bahamas, Greece and Marshall islands occupy the first five places on the tonnage volume of vessels registered in their shipping registries. 959 million dwt or 48% of global tonnage is registered there. Shipping registers of first 12 jurisdictions (including Hong Kong, Singapore, Malta, China, Cyprus and Vanuatu) contain in aggregate 72% of the global fleet. According to international practice shipping finance is available in all well-known types of borrowings: leasing, capital market debt instruments; mezzanine finance; securitization; project finance; finance though export credit agencies financing; bank loans. During financial crisis despite existing demand, many international financial institutions traditionally involved in shipping finance, have to suspend shipping clients loan applications till stabilization in this sector. Experts believe such activity decay can be explained inter alia by cyclic volatility of this sector. Last 5 years volume of shipping finance has increased substantially and reached its ceiling. Shipping finance is expected to start growing again in 1,5–2 years. Proper attention to this topic as well as to other topics related to ships and yachts will be given in a presentation at a Conference organized by Midland Consult to be held on 3 April 2009 in Business center Daev Plaza, Moscow. See details in our web-site.
USA owns to Russia $116 billion
From December 2007 till December 2008 Russia more than tripled its investments into American treasuries . At the moment it occupies the fifth place among holders of American debt. According to information from U.S. Treasury Department and Federal Reserve System, last year Russian investments to American treasuries grew from USD 33 billion to 116 billion.
China is the largest American debt holder, investing into US Treasuries USD 727,4 billion. Japan with its USD 626 billion holdings is on the second place. Caribbean Banking Countries such as Bahamas, Bermuda, Cayman Islands, Antilles and Panama are on the third place with USD 197,5 billion. The forth place is occupied by oil exporters as Ecuador, Venezuela, Indonesia, Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, Emirates, Algeria, Gabon, Libya and Nigeria with USD 186,2 billions.
Foreign investments to Russia gradually declining
In 2008 foreign investments into Russian Federation in comparison with 2007 has declined by 14,2% - up to USD 103,8 billion, Russian Statistic Service ROSSTAT quotes.
The most willing investors to Russia are Cyprus companies. Accumulated foreign capital from Cyprus by the end of 2008 reached the amount of USD 56,902 billion, from Netherlands - USD 46,346 billion, Luxemburg – USD 34,402 billion, UK - USD 30,811 billion, Germany – USD 17,425 billion, France – USD 9,542 billion, British Virgin Islands – USD 8,267 billion. 77% of total accumulated foreign investments and 79,4% accumulated direct investments were made by those countries.
At the end of 2008 accumulated foreign capital in Russia equals to USD 264,6 billion which is 19,9% more than last year.
At the same time if serious changes are introduced to Russia & Cyprus Double Tax Treaty, Cyprus share of foreign investments into Russian economy will be reduced substantially.
Cyprus: buy a house or a business and obtain a residence permit
Do you want to live in Cyprus? Buy a house or a business here. Cyprus Minister of Interior Mr Neoclis Sylikiotis made such proposal in order to promote attraction of foreign investments to Cyprus economy. This proposal refers to residence permits of Cyprus companies directors (Midland Consult can assist you in registering such a company) as well as businessmen and investors that have companies in Cyprus. Companies can be involved in any business activities: tourism, construction, banking services etc. Russian businessmen plan to create in Cyprus Tennis Academy. It will be built in Agia Napa. International Tennis Academy will have professional tennis courts as well as four star hotel for 400 beds, swimming pools, restaurants, covered multifunctional hall as well as training halls. Total area of the project is more than 80 000 sq m. Moreover, more than 30 000 sq m will be allocated for construction of elite villas. Sale of houses will partially finance this project. It is not the only Russian business project in Cyprus. In the nearest future in Pyla it is planned to construct quite a large amusement park of Disneyland type. Russians own few hotels, restaurants, tourist companies in Cyprus. At the moment as per data provided by Ministry of Interior of the Republic of Cyprus, apart from Greek Cypriots and Turkish Cypriots, 70 thousand British citizens, 40 thousand Russians, Ukrainians, Byelarussians, Armenians and representatives of other countries of former USSR reside on the island. Share of Chinese, Israeli and Latin population is growing.
Russia - Cyprus cooperation in financial sector
Cyprus Minister of Finance Charilaos Stavrakis in its interview to ÂÍ said that global financial crisis fortunately has not affected Cyprus economy yet. Moreover, 2008 was characterized as the best year for Cyprus economic development. «Our economy, Cyprus Minister said, - has a healthy banking system. We welcome foreign capital and view Russia among our major economic partners». Mr Stavrakis believes that crisis manifestations in Russia are temporary and surmountable and he is sure that the Russian Federation will cope. Speaking on financial cooperation Cyprus Minister said: «We have with Russia a Double Taxation Treaty and now we are in a process of amending such treaty. During the last 12 months I have visited Moscow 6 times and we are achieving mutually beneficial solution. We are doing this thorough work to ensure that foreign companies will continue streamlining their investments to Russia through Cyprus. It is important since Cyprus economic and political life is stable and transparent. Cyprus as you know is the major foreign investor to Russia. Obviously, Cypriots themselves invest their money as well, however in general it is foreign capital. Capital coming through Cyprus it is a controlled capital. It is also important that investments flow through a friendly country that wishes well to Russian economy. Despite our small size we have one vote in European Union and we have proved that we can use it for the benefit of our relations. As I have mentioned, our negotiations are not finalized. But presidents Medvedev and Christofias have reached agreement on the main issue - Cyprus shall remain one of the main centers for attraction of foreign investments to Russia.»
Midland Consult, 19.03.09
