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Global Investment Falters But Tax Havens Prosper, U.N. Finds
By Tom Miles GENEVA | Wed Jun 26, 2013 6:05pm BST (Reuters) – Efforts to stop companies syphoning money through tax havens are failing and offshore centres increased their share of foreign direct investment (FDI) again last year, according to a U.N. report. “Tackling offshore financial centres alone is clearly not enough, and is not addressing the main problem,” said the annual World Investment Report, published on Wednesday by economic thinktank UNCTAD. While investment sinks in many economies, one country is enjoying above all is enjoying a boom: the British Virgin Islands, with a population of 30,000, is now the fifth biggest recipient of FDI in the world, the report said. The Caribbean archipelago welcomed almost $65 billion (42.4 billion pounds) of inward investment flows in 2012, just less than fourth-ranked Brazil , and 10 times the amount of FDI it received in 2006. FDI flows to such offshore tax havens have soared in the past five years, rising from an average of $15 billion in 2000-2006 to $75 billion per year in 2007-2012, the report said. “Tax haven economies now account for a non-negligible and increasing share of global FDI flows, at about 6 percent,” the United Nations thinktank said. Meanwhile, traditional FDI – cross-border corporate acquisitions and overseas expansions – has slumped. Among the worst hit are rich euro zone countries such as Belgium, which attracted $103 billion in 2011 but lost money in 2012 as existing investors sold up. The Netherlands saw a similar but smaller reversal, while Germany ‘s $49 billion haul of FDI in 2011 shrivelled to less than $7 billion in 2012. Global foreign direct investment shrank by 18 percent to $1.35 trillion in 2012 and is likely to remain at a similar level this year, the report said. UNCTAD forecasts global flows of $1.6 trillion next year and $1.8 trillion in 2015. In tax havens, the vast majority of FDI flows do not go into projects based in the country. Instead they are redirected back to the source country, a process known as “round tripping”. “For example, the top three destinations of FDI flows from the Russia n Federation – Cyprus, the Netherlands and the British Virgin Islands – coincide with the top three investors in the Russian Federation,” the report said. That could mean that global FDI is actually even weaker than it appears, since a growing proportion is simply round-tripping. Even more money is channelled through “special purpose entities” (SPEs). Firms set up these foreign affiliates for specific purposes such as managing foreign exchange risk or facilitating the financing of an investment. Money flowing to SPEs in just three countries – Hungary, Luxembourg and the Netherlands – amounted to $600 billion in 2011, dwarfing the $90 billion of flows to tax havens. Those countries’ SPE flows were not counted as FDI in the report. However, the report said SPEs were gaining importance relative to FDI flows and anecdotal evidence showed that most of the money sent to SPEs was invested in third countries. Still more tax is avoided through cross-border transfer pricing schemes, which companies can use to shift profits into low-tax jurisdictions and show apparent losses in high-tax markets, the report said. Despite the OECD trying to stem the flow of FDI to tax havens, the overall flows to tax havens overall “do not appear to be decreasing”, the report said, partly because big companies still needed somewhere to park their cash mountains. “Efforts since 2008 to reduce flows to OFCs (offshore financial centres) have coincided with record increases in retained earnings and cash holdings,” the report said. Also, although big investors such as Japan and the United States had succeeded in cutting the amount of flows to tax havens, many non-OECD members had now taken their place, ensuring the flows to tax havens continued and grew. The report called for a discussion of corporate tax rate differentials between countries, extraterritorial tax regimes and tax levied on repatriated earnings . “Without parallel action on these fronts, efforts to reduce tax avoidance through OFCs and SPEs remain akin to swimming against the tide,” the report said. (Reporting by Tom Miles; Editing by Ruth Pitchford) Continue reading
Wood Pellets Exports From North America To Europe Reached A New Record
SEATTLE, WA, Apr. 27, 2013/ Troy Media/ – The wood pellet export industry in North America has grown exponentially in a relatively short period of time. The export value has increased from an estimated $40 million in 2004 to almost $400 million in 2012. This fairly new trade development is the result of Europe’s quest to reduce its dependence on fossil fuels and to reduce CO2 emissions. Energy generation from renewable resources has, with varying pace, gone up in all countries in the EU the past decade. Woody biomass, including wood pellets, is one energy source that has attracted both much attention and investments in a number of countries on the European continent. With limited domestic wood raw-material sources, countries such as the UK, Belgium and the Netherlands have increasingly relied on the importation of industrial wood pellets to reduce the usage of coal at some of their power utilities. The relatively high costs for wood pellets in Europe have resulted in increased interest in importing pellets from British Columbia and the southern states of the U.S., where wood raw-material costs are lower than in Europe. A record volume of 3.2 million tons of pellets was exported from North America to Europe in 2012. From the U.S. South, shipments were up over 100 per cent compared to 2011, while Canadian exports increased 25 per cent year-over-year. The expansion of pellet production has been particularly noteworthy in the U.S. South where there have been 14 new pellet plants that are either new or planning to expand production in the coming year. Global timber market reporting is included in the 52-page quarterly publication Wood Resource Quarterly (WRQ). The report, established in 1988 and with subscribers in over 25 countries, tracks sawlog, pulpwood, lumber and pellet prices and market developments in most key regions around the world. To subscribe to the WRQ, please go to www.woodprices.com . Read more Hakan Ekstrom Continue reading
Investment: Czechs Reap Benefits Of Poland’s Slowing Economy
http://www.ft.com/cms/s/0/c8812ae2-8666-11e2-ad73-00144feabdc0.html#ixzz2Rx5WNGO8 By Katka Krosnar In recent years Poland has attracted most of the commercial property investment in central Europe, accounting for more than 75 per cent of the total volume in some years. This is partly because of the size of the market compared with its counterparts and its success at avoiding recession. Poland has become a core investment market for some western European property funds. Over the past few months, however, there has been a shift, with the Czech Republic gaining popularity as Poland’s market becomes static and concerns grow that some sections of the Polish property market may have overheated, says James Chapman, a partner at Cushman & Wakefield in Prague. The total investment volume in the Czech market is expected to double this year compared with 2012 and will reach €1bn, according to Cushman & Wakefield’s statistics. While total investment in central Europe’s property is forecast to rise this year, Poland’s share is expected to fall slightly, from €2.8bn to €2.5bn. Hungary is expected to see about €300m of investment while Slovakia should receive some €140m, less than elsewhere but a big improvement on last year’s mere €17m. “The current development in Prague of four city centre projects that had not been pre-leased before the launch of construction is an important indication of current confidence in the market,” says Omar Sattar, managing director at property brokerage Colliers International in Prague. After a sluggish 2012, caused by lingering fears about the eurozone crisis and uncertainty after the closure of some German open-ended funds, commercial property is expected to pick up significantly in 2013, with several large office transactions set to close in the first half. The Czech Republic has always been popular with international investors, who consider it a stable market and a “nice place to do business”, adds Mr Chapman. One key to its popularity is a dynamic capital city, in which many wealthy people are making property investments, says Mr Chapman. According to Colliers, Prague accounted for almost half of the value of domestic transactions in 2012. For example, CPI, the Czech investor, acquired 18 retail properties in 2012, while CTP, a Czech Republic-based business park developer, bought Belgium company WDP’s Czech portfolio and the Honeywell facility in Brno. While western Europeans, particularly the Germans and UK-managed funds, continue to be core investors, the region has attracted money from Qatar, South Korea, the US and Canada. Investors have focused on prime assets since the crisis. At the 2007 peak, many were happy to buy new buildings in almost any location but now projects have to be in a good location or be top quality to attract investment. In recent months there has been a noticeable shift, with investors showing interest in higher-risk assets, such as those needing reconstruction, says Kinga Barchon, leader of the property team at PwC in Warsaw. Strong macroeconomic indicators and the availability of good-quality assets will still attract investors to Poland, says Ms Barchon. As in other markets, limited access to credit has narrowed the field of investors and developers. Often only those who can fund early stage construction themselves, and find credit later, can start projects that are not pre-leased, Mr Sattar of Colliers says. Office developments accounted for 61 per cent of the total value of investment transactions in the Czech Republic and almost 40 per cent in Poland. These have focused mainly on capital cities, accounting for 90 per cent or more of commercial property investment. In the first three months of this year, some €646m was invested in office developments, with significant transactions including the purchase of New City in Warsaw by Hines, which has its base in Texas. Ms Barchon says Polish cities Wroclaw, Krakow, Gdansk and Poznan are attracting a lot of developer interest. However, residential property investment in Poland is expected to decline following the end of government support for people buying smaller apartments. Continue reading
