Global Archives - GUJRAT INDIA

Offshore Company – Going Global

An offshore company is registered or incorporated outside the country where it has its main offices and operations, or where its principal investors reside. The term “offshore” can refer to any country, but it is mostly associated with certain countries, or jurisdictions, where the local laws offer asset protection, business flexibility, tax minimization and privacy protection. Forming an offshore company begins with choosing a business structure and jurisdiction. Then, the business owners must appoint a registered agent or trustee, incorporate the company and fulfill all financial reporting responsibilities.

Characteristics of offshore companies:

Offshore companies differ depending upon the corporate law in the relevant jurisdiction. All offshore companies have certain characteristics:

They are broadly not subject to taxation in their home jurisdiction.

The corporate regime will be designed to promote business flexibility.

Regulation of corporate activities will normally be lighter than in a developed country.

The absence of taxation or regulation in the home jurisdiction does not exempt the relevant company from taxation or regulation abroad.

Another common characteristic of offshore companies is the limited amount of information available to the public. This varies from jurisdiction to jurisdiction. Most jurisdictions have laws which permit law enforcement authorities (either locally or from overseas) to have access to relevant information, and in some cases, private individuals.

Most offshore jurisdictions normally remove corporate restraints such as thin capitalisation rules, financial assistance rules, and limitations on corporate capacity and corporate benefit. Many have removed rules relating to maintenance of capital or restrictions on payment of dividends. A number of jurisdictions have also enacted special corporate provisions to attract business through offering corporate mechanisms that allow complex business transactions or reorganisations.

Uses of offshore companies:

There are frequent allegations that offshore companies are used for money laundering, tax evasion, fraud, and other forms of white collar crime. Offshore companies are also used in a wide variety of commercial transactions from holding companies, to joint ventures and listing vehicles. Offshore companies are also used widely in connection with private wealth for tax mitigation and privacy. The use of offshore companies, particularly in tax planning, has become controversial in recent years, and a number of high-profile companies have ceased using offshore entities in their group structure as a result of public campaigns for such companies to pay their “fair share” of Government taxes.

Tax Haven:

A tax haven is a jurisdiction that offers favorable tax or other conditions to its taxpayers as relative to other jurisdictions. Particular taxes, such as an inheritance tax or income tax, are levied at a low rate or not at all. Maintains a system of financial secrecy, which enables foreign individuals to hide assets or income to avoid or reduce taxes in the home jurisdiction.

The following jurisdictions are considered the major destinations:

(1.) Bermuda:

Bermuda earned the dubious distinction of ranking No.1 on Oxfam’s 2016 list of the world’s worst corporate tax havens. Bermuda features a zero percent corporate tax rate, as well as no personal income tax rate. Due to the lack of corporate taxes, multinational companies have raked in huge amounts of money in Bermuda.

(2.) Netherlands:

The most popular tax haven among the Fortune 500 is the Netherlands, with more than half of the Fortune 500 reporting at least one subsidiary there. Oxfam’s list of the worst corporate tax havens placed this Benelux country at No.3.

National governments often use tax incentives to lure businesses to invest in their country. However, far too often tax incentives have been found to be ineffective, inefficient and costly, according to Oxfam.

(3.) Luxembourg:

This tiny EU member state remains a center of relaxed fiscal regulation through which multinationals are helped to avoid paying taxes. It’s the leading banking center in the Euro zone, with 143 banks that manage assets of around 800 billion dollars.

Pros: In Luxembourg, disclosure of professional secrecy may be punished with imprisonment. Asides from that, many international corporations choose Luxembourg as location for their headquarters and logistics centers, due to low taxes and excellent European location.

Cons: Tax exemptions on intellectual property rights may come up to 80% in Luxembourg, which is why many companies choose to manage their IP rights from here. However, it’s important to note that the tax exemption applies only to intellectual property rights instituted after December 31 2007.

(4.) Cayman Islands:

Assets of 1.4 trillion dollars are managed through the banks in this country right now. Being a British territory, which has 200 banks and more than 95,000 companies registered, the Cayman Islands is the world leader in hosting investment funds and the second country in the world where captive insurance companies are registered (designed to ensure the assets of a parent company having another object of activity). Over half of GDP is provided by the Cayman Islands financial services sector.

Pros: The Cayman Islands is one of the few countries or territories in which the law allows companies to be formed and manage assets without paying tax. This is considered legal and it’s not seen as a strategy to avoid taxes.

Cons: The tax benefits for incorporating in the Cayman Islands exists mainly for companies who are doing business in several countries, in order to avoid the hassle of dealing with various taxation systems.

(5.) Singapore:

Strategically located, the Republic of Singapore has a reputation as a financial center that’s really attractive to “offshore” funds of Asian companies and entrepreneurs.

Pros: Legislation on the confidentiality of banking information entered into force in 2001 and since then, the electrifying city-state is recognized by the strictness with which it implements that law. And Singapore does not waive these rules, in spite of pressure from foreign governments.

Cons: Singapore is not a country used by wealthy individuals seeking important tax benefits, as most countries from this region offer a relaxed tax regime.

(6.) Channel Islands:

Located between England and France, the Channel Islands host hundreds of international corporate subsidiaries.

The Channel Islands consist of two British Crown dependencies:

The Bailiwick of Jersey, consisting of Jersey
The Bailiwick of Guernsey, consisting of three separate jurisdictions: Guernsey, Alderney and Sark

Crown dependencies are not part of the United Kingdom, but are instead self-governing territories.

There is no inheritance tax, capital gains tax or standard corporate tax. This has made Jersey a popular tax haven, and the island now houses $5 billion worth of assets per square mile. Maybe you should add the Channel Islands to your list when you look for cheap places to retire.

(7.) Isle of Man:

The Isle of Man is considered somewhat of a financial center for low taxes. This tiny island, located between England and Ireland has a very low income tax, of maximum 20% and no more than 120,000 pounds.

Pros: Low tax rates are not the only advantages offered by this small island. Their pension plan is also really great, which is way many companies choose to have their employee pension plans held in accounts in this country. It’s possible to benefit from these pension plans starting from the age of 50 and onwards.

Cons: Establishing companies in the Isle of Man may be costly, especially for non – commercial activities and the registration process can be quite complex.

(8.) Ireland:

Ireland is often referred to as a tax haven, despite Irish officials asserting that is not the case. However, a Congressional Research Service report found that American multinational companies collectively reported 43 percent of their foreign earnings in five small tax haven countries: Bermuda, Luxembourg, the Netherlands, Switzerland and Ireland.

(9.) Mauritius:

Located in the Indian Ocean, near Madagascar, Mauritius is another island that attracts many foreign investments. A large number of international corporations have subsidiaries established in Mauritius.

Pros: The corporate tax levied in Mauritius is really low, compared with other jurisdictions, of only 15%. Capital gains and interest are not taxed in Mauritius and residents can also benefit from various tax exemptions, due to double tax treaties.

Cons: Mauritius was used as a location for investments, especially for those directed towards India, but in May 2016, a new protocol amending the double taxation treaty between India and Mauritius was signed. This gives India a source based right to tax capital gains, which arise from alienation of shares of Indian resident companies acquired by Mauritius residents.

(10.) Monaco:

This tiny state has only 36,000 residents, but it attracts many entrepreneurs and companies willing to invest in this small country. Why? Because the income tax for residents hasn’t changed since 1869.

Pros: Once a person has become a Monaco resident, they are allowed to keep all the income they make, without any limitations. It’s no wonder that most of the world’s millionaires are residents of Monaco. Corporate taxes are also really low, which makes Monaco a great location to start a company.

Cons: In order to become a Monaco resident, a person needs to be a citizen of an EU – member state or have a long-term French visa. It’s also necessary to deposit at least 100,000 Euro in a bank in Monaco, to have private health insurance and to buy a property in Monaco.

(11.) Switzerland:

Switzerland has in its banks right now the equivalent of 6.5 trillion dollars of assets under management, and 51% of that comes from abroad, so it’s not really a surprise the country is also a global leader in asset management, with a market share of 28%.

Under international pressure, Switzerland has relaxed slightly in recent years its laws on fiscal secrecy, but the lobby for keeping these regulations remains strong as evidenced by the aggressive policy of the country against pressures for disclosure of information in this sector.

Pros: Combining low taxes with a top – notch banking system, it’s no wonder that Switzerland is one of the most popular tax havens in Europe. Opening a Swiss company is a relatively fast process, compared with the legal hurdles of other European states.

Cons: Although any individual or legal entity is allowed to register a company in Switzerland, one of the conditions required by Swiss law is to have at least one Swiss company director. To solve the Swiss directorship issue and tackle company formation Switzerland you should talk to experts.

(12.) Bahamas:

Pros: In the Bahamas, the personal income tax rate is zero. It can’t get any lower than that, right? There is also no wealth tax, no capital gains tax, no withholding tax and various other tax benefits both for individuals and for companies.

Cons: Not everyone can take advantage of a tax exemption on personal income, just those who are also residents of the Bahamas. Obtaining the residence here requires, in particular, the realization of an investment in a local property of a minimum value of $500, 000 (or a minimum of $1,5 million for the accelerated procedure).

The Bahamas doesn’t levy direct taxes, so there are no double tax treaties with other countries, but this tiny country has signed tax information agreements with 29 other countries, including USA, UK and Canada. However, information disclosure is limited to criminal matters.

(13.) Hong Kong:

Hong Kong is one of the emerging tax havens, as here assets of 2.1 trillion dollars are managed right now. It has the second largest stock market in Asia, after Tokyo, and shows the highest density of people with fortunes of more than 100 million dollars. Just under half of foreign investment in China went to Hong Kong in 2012 for example.

Pros: Companies incorporated in Hong Kong pay tax only on profits sourced in Hong Kong and the tax rate is currently at 16.5%. There is no withholding tax on dividends paid to foreign shareholders and no tax on capital gain.

Cons: China’s control over Hong Kong hinder initiatives to increase transparency and further enables the holders of bearer securities – instruments for some of the most harmful criminal activity – to remain unidentified. This damages somewhat the credibility and the reputation of companies registered in Hong Kong.

(14.) Malta:

Malta makes it on the top of the list of the countries with the lowest taxes in the world in 2016, which is why is one of the best tax havens in 2017. Living on the small Mediterranean island makes it possible to gain the status of resident and to be thus taxed only on income from local sources.

Pros: One of the best tax advantages for individuals and companies is that there is no tax levied in Malta for revenues obtained abroad.

Cons: Maltese nationality can also be obtained through a citizenship by investment program, for those who want a faster process. However, in order to obtain Maltese citizenship, it is necessary to make investments in Malta worth about 1 million Euros.

(15.) Panama, which is a significant international maritime centre. Although Panama (with Bermuda) was one of the earliest offshore corporate domiciles, Panama lost significance in the early 1990s. Panama is now second only to the British Virgin Islands in volumes of incorporations.

(16.) New Zealand, the remotest jurisdiction, has the advantage of being a true primary jurisdiction but with a tough but practical regulatory regime. It is well positioned for the Asian market but retains close ties to Europe.

(17.) Nevis: the offshore companies located in this Caribbean island of the Federation of Saint Kitts and Nevis are exempt from all local taxes, including income, withholding, capital gain taxes, stamp duties and other fees or taxes based upon income or assets originating outside of Nevis or in connection with other activities outside of Nevis.

Investing In A Developing Economy – A Possible Solution To Global Financial Crisis

INTRODUCTION

If there were security problems in Nigeria, no businessman would go to the country to explore opportunities, companies like Celtel, MTN, Etisalat, would not have ventured into security risk country to do business. Those who spread rumour about security and corruption problems in Nigeria are saying so to stop others from making money in the country. Figures don’t lie. They are the biggest testimonies for how conducive Nigeria’s environment for business and opportunities are. If you want to do business in Africa and record good returns on your investment, I welcome you to come to Nigeria. The political environment in Africa, particularly in Nigeria is tremendous.

Dr. Hamadoun Toure,

Secretary General,

International Telecommunications Union,

Cited in the Punch Newspaper, May 13, 2008)

What is happening currently with the Nigerian financial system is far from being affected in any way by the global credit crisis. At global level currently, the banks are under-capitalised, but Nigerian banks are over-capitalised. And I do not think this is a problem at all. I believe that Nigerian banks are under pressure from other economies within Africa continent that are affected by the credit challenges.

– Gordon Smith,

Head of Research, Africa and the Middle East, International Consilium,

(Reported in the Punch Newspaper, June 30th, 2008).

The foregoing statements aptly connote two understandings of the state of Nigerian economy. These understandings show that, the economy is one of the fastest growing economies in Africa and in the world. Although Nigeria has had hash economic history, it has undergone and still undergoing economic reforms, which are aimed at making Nigeria the Africa’s financial hub and one of the twenty largest economies in the world by the year 2020. Needless to say that the country has experienced political instability, corruption, and poor macroeconomic management in the past, this was responsible for unpleasant and harsh economic situation. The government relentless efforts to reposition the economy have translated into a remarkable economic growth and development. Several mechanisms have been put in place to sustain this growth and development, capable of balancing the interests of stakeholders. Perhaps, this view must have influenced Gordon Smith submission. He described Nigeria as the most dynamic market in Africa, which is under severe pressure from some countries in Africa to serve as a cushion against the effects of global turbulence. He also noted that some countries like Ghana, Malawi, Mauritius, among others were depending on her at the moment due to global risk exposure and that the country’s economy, led by the consolidated banks, was far from being affected by the global credit crisis currently rocking the world’s financial giants. He stressed further that foreign investors, who will be patient enough to weigh the Nigerian financial system on the credit risk perspective relative to global events, will find the nation’s financial sector more interesting to invest and raise capital from.

Faced with numerous challenges, Nigerian government is determined to strengthen, diversify and make the economy attractive and investment-friendly to both local and foreign investors. The government has adopted total liberalization and globalization as the economic policy, instituted privatization and commercialization programmes of public enterprises, provided total security for business and people, extended invitation to domestic and foreign investors, abolished laws inhibiting competition, embraced and fine-tuned policies to ensure quick realization of growth and development of all sectors of the economy. The effort is already paying off as Nigeria is now the focus for foreign investment thereby increased exponentially Foreign Direct Investment (FDI). Scores of economic missions and delegations from developed and developing countries have visited Nigeria, thus accelerating the growth of the economy at a very fast rate.

It becomes pertinent to direct the course of this discussion to embrace the second understanding of the above statements made by Hamadoun Toure and Gordon Smith. However, it becomes more pertinent to enumerate the inherent investment opportunities in Nigerian economy before discussing the issue of security as raised by Toure.

INVESTMENT OPPORTUNITIES AND SECURITY ISSUE IN NIGERIA

No doubt, Nigeria is an investment haven with countless and lucrative investment opportunities including oil and gas, solid mineral, agriculture, tourism, telecommunication, power and steel, transport, trade processing zone, financial sector, real estate / property, manufacturing, sport and entertainment, and fashion industry. Investors have a wide range of opportunities to choose from. It is important to note that the rate of growth of investment is fantastic and exponential in any of these sectors. Investors are at advantage of presenting their products and services to already-made market taking advantage of the population of over 140 million.

In telecommunication, statistics reveals that mobile phone users in Africa were about 280 million, overtaking United States and Canada with their 277 million users in the opening quarter of 2008. With 70 million connections in 2007, the Continent became the fastest growing region in the world, representing a growth of 38 per cent, ahead of the Middle-East (33 per cent) and the Asia-Pacific (29 per cent).It was also revealed that the fastest growing markets are located in northern and western Africa, representing altogether 63 per cent of the total connections in the region. The record showed that Nigeria, Zambia, Tanzania, The Democratic Republic of Congo, Kenya, Algeria, Tunisia, Ghana and South Africa are highly competitive markets in the Region. The record further contends that two-third of Africa’s telephony are in their early phase of development, with penetration rates below 30 per cent at the end of 2007.In percentage terms, it was noted that Africa is the fastest growing market in the world, but also the second smallest in terms of connections after Middle-East.

As Nigeria accounts for 57 per cent of the West Africa mobile phones, the country is acknowledged as the leading and the fastest growing telecom market in Africa. With mobile phone users at 44,932,181 and 734,444 for GSM and mobile CDMA respectively, her contributions to West Africa and Africa’s telecommunication growth can not be overemphasized. While the overall economic growth rate stands at 7% per annum, the mobile telephony is about 35-50%. Assuming that each of these connections was busy for a minute in a day, the country telecoms market has the capacity to generate over USD 16 million per day (USD16, 666,667) and close to USD 6 billion per year (USD 5,833,333,300). This is why telecom companies such as Visafone and Etisalat quickly joined the likes of MTN, Globacom, Celtel and other telecoms service providers in exploiting opportunities in the country.

Early this year, one of the main GSM service providers with a subscriber base of over 15 million announced a profit after taxation of USD650 million (78 billion naira) for the year 2007.Putting all these together, one can easily understand Toure’s submission describing Nigerian telecoms market as the best investment destination in Africa.

Recognizing the fact that the Nigeria telecoms industry is enormous and there is need to further exploit the sector to its fullest, the Nigeria Communication Commission (NCC) and the Ministry of State for Information and Communications have made their positions clear by extending invitation to global investors for active participation in the sector as they are willing to grant pioneer status and license for prospective applicants for various undertaking such as Fixed telephony, Mobile telephony, Fixed satellite (VSAT),Paging, Payphone, Internet and other value added services.

With the above facts, one can safely conclude that Nigerian telecom sector offers fantastic and lucrative investment opportunities to global investors. And putting into consideration 40% GSM market growth rate in the first quarter of this year (2008), there is potential for high return on investment in this sector.

Agriculture, the dominant sector of Nigeria economy, engages about 70 per cent of the population directly and provides nearly 88 percent of non-oil foreign exchange earnings. It contributes about 41 per cent of the GDP of the country. The sector recorded an overall growth rate average of 7 per cent in the last three years, a major improvement from under 3 per cent in the 90’s.

Statistically, 91 million hectares of the country’s total land area of 92.4 million hectares is adjudged to be suitable for cultivation. Approximately half of this cultivable land is effectively under permanent and arable crops, while the rest is covered by forest wood land, permanent pasture and built up areas. Among the states, which have the most abundant land, areas are Niger (7.6 million hectares) and Borno (2.8 million hectares).

Agriculture crops in Nigeria are grouped into cereals, root and tuber crops, grains legumes and other legumes, oil seeds and nuts, tree crops, and vegetable and fruits. Governments and the Ministries of Agriculture have made land acquisition easy, encouraged agricultural practices, extended (still extending) invitation to foreign investors and have put in place several incentives to stimulate growth in the sector. Despite, the agricultural potential of Nigeria is barely being tapped and this explains the inability of the country to meet the ever-increasing demand for agricultural products and her rank as 55th in the world (although first in Africa) in farm output.

As the world experiences food crisis and persistent rise in fuel price, the country’s agriculture offers unlimited opportunities for foreign investors and the world at large to provide solutions to these crises. Foreign investors will find investments in cultivation of sugar cane, sugar beet, sweet sorghum, starch (corn/maize), palm oil, soybeans, jatropha, and algae. These products are lucrative as they are potential for biofuels, a good substitute for fossil fuel. Presently, there is a very high demand for these crops from the developed economies.

Solid Mineral is another sector with great investment opportunities. Nigeria is endowed with numerous mineral resources. Recent policy reforms have brought the solid minerals sector to the fore. The emphasis is on encouraging massive foreign investors’ participation in this sector as less than 0.5 per cent is contributed to the Gross Domestic Products from Solid mineral sector. However, the Ministry of Mines and Steel and the Ministry of state’s focal attention in the last one year is to strategically place the country in a better position to explore and exploit just seven minerals in the plethora of minerals so as to increase Gross Domestic Product to 5 per cent within the next few years. The seven strategic minerals are coal, bitumen, limestone, iron-ore, barite, gold and lead / zinc.

Coal can be found in Enugu, Benue and Kogi. Within these three districts 396 million metric tones can be demonstrated using JORC classification criteria, while an additional 1,091 million tones of inferred and hypothetical coal resourced for the areas studied is 1481 million tones.

Knowing fully that development of coal will assist in the realization of energy, the Government and the Ministries are inviting foreign investors to participate actively in the exploration and exploitation of the mineral. Companies such as Denver Resources and Western Metals have already committed US$10 million and US$15 million respectively for two coal fields in the country. Another Chinese firm, Grid Xin Yuan International Investment Company that is providing more than half of China’s electricity needs is also in the country, indicating their interest in the development of a coal field in Kogi State.

The Bitumen reserve in the country is estimated at more than 27 billion barrels of oil equivalent while iron-ore is estimated at over 5 billion inferred reserves with presence in Kogi, Enugu, Niger, Zamfara and Kaduna States. Gold in just 10 locations is estimated at 50,000 ounces, barites 10 million metric tones and limestone at 2.3 trillion reserves.

Talc with an estimated reserve of over 100 million tones can be found in Niger, Osun, Kogi, Kwara, Ogun, Taraba and Kaduna States.The colour of the Nigerian talc varies from white through milky-white to grey. The talc industry represents one of the most versatile sectors of the industrial minerals in the world. The exploitation of the vast talc deposits in Nigeria would therefore satisfy not only the local demands but also that of the international market as well.

The national demand for table salt, caustic soda, chlorine, sodium bicarbonate, sodium hydrochloric acid and hydrogen peroxide exceeds one million tones. A colossal amount of money is expended annually to import these chemicals. There are salt springs at Awe (Platue State), Enugu, and Uburu ( Imo State), while rock salt is available in Benue State. A total reserve of 1.5 billion tones has been indicated. Government, to ascertain the quantum of reserves, is now carrying out further investigations.

In the same vain, large bentonite reserves of 700 million tones are available in many states of federation ready for massive development and exploitation, over 7.5 million tones of barite been identified in Taraba and Bauchi states, and an estimated reserve of 3 billion tones of good kaolinific clays has also been identified.

Gemstone mining has boomed in various parts of Plateau, Kaduna and Bauchi States for years. Some of these gemstones include Sapphire, Ruby, Aquamarine, Emerald, Tourmaline, Topaz, Gamet, Amethyst, Zircon, and Fluorspar, which are among the best in world. Good prospects exist in this area for viable investment. Understanding that this sector requires urgent investment, the Ministry has directed miners who are still in small artisan levels to form cooperatives so as to benefit from World Bank US$10 million assistance. Apart from this, three Nigerian Banks have also established solid minerals desk with fund of over US$ 8 million each for the development of the sector.

Foreign investors will find this sector worth-investing on as Nigerian governments have put in place various incentives and strategies for investment such as 3-5 years tax holiday, deferred royalty payments, possible capitalization of expenditure on exploration and surveys, extension of infrastructure and provision of 100% foreign ownership of mining concerns.

Recognizing that only a sustained macroeconomic environment and a sound and vibrant financial system can propel the economy to achieve the country’s desire to become one of 20 largest economies in the world by the year 2020, on the July 6, 2004 the Federal Government through the Central Bank of Nigeria (CBN), under the leadership of its Governor, Professor Charles Soludo launched a 13-point reform agenda to restructure, refocus and strengthen the Nigerian Financial System. To complement this agenda, another comprehensive long-term reform agenda for the Financial System (the Financial System Strategy 2020-FSS2020) was launched. The grand objectives of these agendas are substantially being achieved. The country financial system now comprises of strong, efficient and internationally competitive banks with an eye for global markets, a capital market with highest returns on investment, in dollar terms, a sound and rewarding insurance industry and other competitive financial participants.

Gordon was right in his submission to have described Nigeria as the most dynamic market in Africa. His view that “foreign investors, who will be patient enough to weigh the Nigerian Financial System on the credit risk perspective relative to the global event, will find the nation’s financial sector more interesting to invest and raise funds from” x-rays the truth about the country’s financial sector.

The country’s banking system is the safest and the soundest it has ever produced in history. It is the fastest growing banking system in Africa and one of the fastest in the world. In fact, the most outstanding contribution towards realization of the country’s dream came from this sub-sector. Economic analysts have observed that it has taken Nigeria less than 3 years to achieve what it took South Africa 20 years to achieve in the area of banking. In a short word, a world-class banking system has emerged in Nigeria.

Statistically, banking sector contributes 10 per cent to the Gross Domestic Product (GDP) and represents 60 per cent of the stock market capitalization, while there was a reduction in the number of banks from 89 to 25, the number of banks branches rose by 33 per cent from 3383 in 2004 to 4500 in 2007. The total asset base of banks rose by 104 per cent from $ 26.8 billions ( 3.21 trillion naira) in 2004 to $54.7 billion ( 6.56 trillion naira) by mid 2007; capital and reserves rose by 192 per cent from $2.72 billion (327 billion naira) to $7.98 billion ( 957 billion naira); capital adequacy ratio rose by 42.6 per cent, point from 15.18 per cent to 21.6 per cent and ratio of non-performing loans total loan improved massively by 51.3 per cent, point from 19.5 per cent to 9.5 per cent. The sector has also remained one of the most profitable in the country’s capital market. It was noted that 13 out of 21 quoted banks on the Nigerian Stock Exchange recorded returns in excess of 100 per cent since January 2007.

According to the April 2008 edition of the African Business, (the best-selling Pan-African Business Magazine published in London) 18 out of 28 West African Companies with market capitalisation of more than $1 billion are Nigerian Banks. The magazine stated that First Bank Nigeria Plc with market capitalization of $7.4 billion remains the largest company in West Africa. Two other Nigerian banks namely Intercontinental Bank Plc and United Bank for Africa (UBA) remain the second and the third largest companies in the sub-region with market capitalization of $6.2 billion and $4.6 billion respectively.

Apparently, the rising tide of banks in the country from all indications has made the sub-sector very attractive, not only to local investors, but also to foreign investors, and in particular, foreign banks. For instance, the consolidation of Regent Bank, Chartered Bank and IBTC to form IBTC Chartered Bank attracted the interest of the Standard Bank Group, the largest financial institution in Africa with a market capitalization of $ 17.8 billion, whose subsidiary Stanbic Bank, also of South Africa has just sealed a Merger deal for the latest Merger in the country, Stanbic IBTC Bank Plc. In this direction, other foreign banks have started making enquiries with CBN of a possible Merger or take-over.

To further substantiate the opportunities the banking sub-sector offers the global investors, a cursory look into Intercontinental Bank Plc will reveal the success of banking system in the country. Intercontinental Bank Plc is known to be the second largest companies in West Africa to have recorded a phenomenal growth in gross earnings, which stood at $1.45 billion ( 173.5 billion naira) in 2008. This is an increase of 99 per cent over the $728 million (87.4 billion naira) in 2007, profit after tax grew by 102 per cent to $380 million ( 45.6 billion naira) as against $188 million (22.6 billion) in 2007, while the capital base rose to $1.67 billion from $1.31 billion. The bank deposit base soared to $8.75 billion ( 1.05 trillion naira), an increase of 126 per cent from $3.9 billion (468 billion naira) in 2007, while the total assets also recorded a quantum leap to $14.2 billion (1.7 trillion naira), representing a growth of 108 per cent from $6.86 billion( 823 billion).

The bank is also in strategic partnership with BNP Paribas, the world leading energy financing bank, Afrexim Bank; Export Development Canada (EDC); Finance for Development (FMO); China Exim Bank; Export-Import of United States; International Finance Corporation in financing projects in different sectors of the economy. However, it is relevant to say that the success recorded by Intercontinental bank is a good example of the Nigerian banks’ strength and prospects, and a testimony to opportunities available to global investors in the country’ financial sector.

Apart from the above, Nigerian Capital Market offers viable opportunities as it is positioned to help companies to raise capital, and to generate high returns on investment. Its total market capitalization has grown by over 4000 per cent to $100 billion (12 trillion naira) in March, 2008, up from $2.39 billion (287 billion naira ) in August 1999.Among emerging markets, the Nigerian Capital market remains one of the most viable in terms of returns on equity. Historically, the market has delivered 28 per cent returns.

Insurance industry is not an exemption to this growth and development the country’s financial sector is witnessing. Although there are few black spots on the regulatory handling, the industry has equally recorded success in their reforms and operations. With the inflow of robust capital, insurance companies are now faced with the challenges of delivering returns to shareholders, maximizing value and exploring overseas markets. Their presence can be felt in countries like Ghana, Liberia, Sierra Leone, Sao Tome, South Africa among others.

Although Goldman Sachs’ report titled “New Market Analyst” with issue number 08/09 released on March 13, 2008 (cited in the Thisday newspaper March 19,2008) posited that Nigeria is a better economy than South Africa, International Monetary Fund (IMF) reported that Nigeria and South Africa got close to 50 per cent of the $53 billion private equity and debt flow to Sub-Saharan Africa in 2007. This underscores the growing confidence of International bodies and foreign investors in country’s financial sector and economy at large.

Furthermore, Fitch Rating Agency and the Standard and Poor rated Nigeria BB-(minus) in the area of sovereign credit, high in development of local currency debt market, and low in the areas of debt to GDP ratio and inflation. The opportunities for growth in Nigeria financial sector are still strong as the underlying fundamentals driving the growth are still present. All these and more, position the financial sector and the country at large as a leading and most dynamic market in Africa and present viable investment opportunities to global investors.

Needless to say that the opportunities presented above are typical examples and an evidence of opportunities awaiting foreign investors in other sectors of the economy.

Nigeria is the largest producer and exporter of oil in Africa (although recently placed second behind Angola in the latest OPEC report as a result of Niger Delta Crisis) with a production of 2.5 million barrels and above a day. Besides, the Nigeria is the 7th world’s gas reserve holder and the highest flaring nation in the world, with the potential to become a major player in LNG export. It has annual gas flares’ capacity to generate over 12000 MW of electricity needed to catalyze the growth of any economy. Although it currently flares an average of 1.2 TCF of gas annually, the sector has the potential to generate great returns on investment.

One of the greatest opportunities awaiting foreign investors is Real Estate / Property. For instance, Lagos Metropolis with a population of about 18 million has attained mega city status. The State has one of the highest urbanization rates in the world according to the World Bank. Consequently, there is an insatiable demand for housing delivery, which has necessitated the introduction of the New Private Estate Developers Scheme. Under the programme, the government will make large parcels of land ranging from 1 to 25 hectares available to corporate organizations capable of undertaking development and delivery of housing units. Such organization must however demonstrate that they have the financial capacity and technical expertise to deliver quality and affordable housing units.

Among other sectors of the economy that foreign investors will find viable and worth-investing on are Transport, Sport and Entertainment, Tourism, Power and Steel, Export Processing Zones, Privatization. And available records reveal that the rate of returns in these sectors is as high as in the sectors discussed above.

Apart from the opportunities mentioned above which our office is strategically positioned to maximize opportunities for the benefit of prospective investors. We also offer consultancy services in the areas of general management, manufacturing, marketing, finance and accounting, personnel, research and development, packaging, administration, international operation, specialized services and other value-adding services. And our strategic partnership with national and international companies put us in position to deliver quality service and high returns on investment.

Nevertheless, there have been fears raised by international observers, agents and bodies that Nigeria is a high-risk nation for investment and other business transactions. This development is attributed to security, multiple taxation, epileptic power supply, bad roads and poor work environment.

It may appear that doing business in Nigeria is challenging because of the activities of a few untrustworthy Nigerians who are unscrupulous. But such are simply characterization of human nature; as it can be found anywhere else in the world. It must be said emphatically that the world has been biased in their judgment and treatment of Nigeria security issue. There have never been terrorist attacks, suicide bombings or kidnapping until recently when the issue of Niger Delta came on board.

Niger Delta region-the source of nation’s oil wealth- has become an area of perennial tension, agitation, and recently, militancy. However, a confluence of factors such as environmental damage by oil exploitation, failure to develop the region, lack of job opportunities and sense of deep deprivation from the low share of derivation revenue accruing to the states in the region, has led to the present situation. Acknowledging their situation, the Federal Government has organised a Summit, to be chaired by Professor Ibrahim Gambari, the United Nations Under Secretary General, to provide everlasting solution to the crisis. Frankly speaking, Nigeria is a safe and investment-friendly place and Nigerians are accommodating and industrious.

Cyber Crime is another fearsome crime, which often put-off prospective investors from involving or investing in the business opportunities in Nigeria. This crime was actually imported into the country by expatriates. It has never been part of Nigeria culture. It is perpetrated by a few section of the population. Their operations are carried out via Internet and their targets are people who transact business via the medium. They pose as government officials and sometimes as businessmen with United Kingdom identity who deal in digital products. However the list of their tricks and operations is not exhaustive. With the help of Economic and Financial Crime Commission (EFCC), Independent Corrupt Practices and Related Commission (ICPC), and other Anti-Criminal Agencies, Cyber Crime and their perpetrators are under control and disappearing.

The grand objective of the present administration, as encapsulated in VISION 2020, is to make Nigeria a major industrial and economic power, and one of the 20 largest economies in the World by the year 2020 by providing enabling investment and business environment and maximum security for active participation of local and particularly, foreign investors. The realization of these aspirations had informed the radical and pragmatic reforms designed to increase the attractiveness of Nigeria’s investment opportunities and foster the growing confidence in the economy. In this direction, the Federal Government has provided incentives and strategies for investment such as 3-5 years tax holiday, deferred royalty, possible capitalization of expenditure and provision of infrastructures such as road and electricity, just to mention a few.

African economy is witnessing the strongest growth in 30 years; no doubt, Nigeria is one of the major contributors to this development. Most commentators have observed that the opportunities for business and investment in the country look increasingly rosy with GDP growth of 7 per cent in 2007 and 13 per cent in the next 12 years. The International Monetary Fund (IMF) forecast of 9 per cent growth rate for Nigeria in 2008 (which is second to India 10 per cent and ahead of China 8 per cent) lays credence to their observations.

Furthermore, the increase in Foreign Direct Investment, the entrance of multinational companies, the strong financial sector, the favourable and tremendous business environment, the government support, the abundant natural resources, and the population of over 140 million people, among others, put Nigeria in a comparative ( and possibly absolute) advantage over other African countries.

Just as it is difficult to ignore China as a market in the global arena, (one out of every five persons in the world is Chinese) so is it very difficult to ignore Nigeria as a market in Africa (one out of every three persons in Africa is Nigerian). With a population of over 140 million people and its economic potential, Nigeria still remains Africa most important market.

IMPACT OF GLOBAL FINANCIAL CRISIS IN A DEVELOPING ECONOMY

Unlike China and India, African economy(developing economies) is yet to be integrated into the world economy. This is as a result of slow rate of integration and globalization at which the economy is being fixed into the global economic and financial system. Consequently, developing economies will only suffer a limited financial impact from the credit crunch. However, this is not to say that developing economies are in isolation and totally free from the crisis.

To grant a point, this paper will continue to use Nigerian economy for its analysis as it represents a paradigm of a developing economy with valid and considerable variables.

According to the report from a recently concluded Bankers Committee Meeting, which ended on October 20 th, 2008 , the Nigerian banks are safe as they operate at 22 per cent capital adequacy ratio( 14 per cent above the world 8 per cent requirement) and the financial sector is far from being affected by the current global financial crisis. The report also posits that any bail-out scheme is unnecessary as the situation that warranted bail-out schemes in developed economies- poor quality assets and heavy loan losses resulting from exposure to inadequately collateralised mortgage loans- is absent in Nigeria. To underscore its point, the report noted that, as the Direct Foreign Investment in Nigerian banks is comparatively low and the banks connection with their foreign counterparts is loosely fixed, the impact of the crisis will be limited and indirect.

Conclusion

The words of Mr. Dominique Strauss-Kahn, the Managing Director of International Monetary Fund, at a meeting in Washington D.C are the corner stones of the concluding thoughts of this paper. He stressed as follow:

We meet at an extra-ordinarily difficult time- a time of uncertainty and insecurity, with a danger that those fears push us away from- not towards- a more inclusive and sustainable globalization….At its best, multilateralism is a means for solving problems among countries, with the group at the table willing to take constructive action together. When multilateralism is dysfunctional, globalization can be a Babel of Tower, with competing national interests colliding to benefit none. The new multilateralism, suiting our times, is likely to be a flexible network, not fixed system. It needs to maximize the strengths of interconnecting actors, public and private, profit-making and civil society Non-Governmental Organisations (NGOs). The multilateralism must respect state sovereignties while solving interconnected problems that transcend borders…The private sector cannot restore confidence on its own. Macroeconomic policy measures by governments cannot restore confidence on their own. Piecemeal measures on financial markets will not restore confidence on their own. What will restore confidence is government intervention which is clear, comprehensive and cooperative among countries..The world must act quickly, forcefully and cooperatively to contain the ongoing financial and economic downturn.

Thus, the position of this paper is that the confidence will only be restored if “government intervention which is clear, comprehensive and cooperative” is complemented with investment in developing economies with less or no crisis impact as “flexible multilateralism” and cooperative and sustainable globalization is solution that suits our time, not” economic isolationism”.

Global Wealth Trade Review – Is Global Wealth Trade a Legitimate Opportunity?

Global Wealth Trade is a recently launched Network Marketing company that is beginning to get MASSIVE attention from industry leaders. Global Wealth Trade is a revolutionary company offering Designer Fine Jewelry, coupled with an industry leading Compensation Plan.

I watch new Network Marketing companies pop up everyday, some with great products, some with great comp plans. I have seen lots of products come and go. Therefore, when a new juice or health product comes out, it better be revolutionary for me to even look at. GWT is in a whole different playing field.

Global Wealth Trade is the only “Designer/Manufacturing” Network Marketing company in existence. Out of the thousands of different companies, Global Wealth Trade is HIGHLY Unique. GWT distributors don’t need to fight with thousands of other companies to market their products. At the time of writing this article, there are less than 4000 distributors in the company.

Their Products appear to be revolutionary. After some research, it appears they are the only company offering 21K gold Jewelry with Diamond Settings. According to the company, 85% of the world wears Jewelry. If they have the market cornered with 21K and 19K Jewelry, that makes for a good business opportunity. When a market gets flooded with mass produced product, and something unique comes around, people will be interested in it. General Motors, Ford, and Chrysler/Dodge are filing for bankruptcy, while Rolls Royce experienced a 21% increase in sales last year.

All of their pieces are certified by the worlds largest gemological appraisal institute, IGI. That gives me a sense of quality about the companies products.

In Network Marketing, if you are involved with a company that is Unique, has an Innovative product, and has a Strong Foundation, you are joining a company with the ingredients to offer you massive success.

After reviewing GWT, I would have to say that I believe this company could very easily be one of the next Industry Giants.

Global Wealth Trade has all of the building blocks in place to truly become a great company. When you position yourself in a company like this, especially when the timing is right, you can create true life long success in network marketing.

What Makes Global Wealth Trade the Perfect Network Marketing Business?

Why are Gold, Silver, and Precious Metals so important?

Gold, Silver, and Precious Metals have always been the world’s most valuable commodity. Decades ago, the world used gold as currency. With the US Dollar in constant decline, many feel that investments should be made in Gold, Silver, Precious Stones, and Precious Metals, even Fine Design Jewelry. The whole world agrees that Gold is Money. It just makes sense to invest in these commodities.

I would like to tell you about a company that is directly involved in this secured industry.

Global Wealth Trade Corporation, a Canadian-Based Jewelry company, markets Fine Design Jewelry to a discerning public, worldwide. Global Wealth Trade Corp is a 5 year old company that is dedicated to delivering Designer Fine Jewelry to end users at near wholesale prices. GWT is associated with some of the world’s most prestigious and proficient jewelry makers, gemologists and jewelry manufacturers. This vast trade experience along with ingenious marketing strategies has made Global Wealth Trade Corp. the business opportunity of the millennium.

GWT has been able to accomplish a task never done before. They are able to offer to offer our members the world’s most prestigious products in one of the world’s most protected industries.

Gold and Silver are traded on the stock market. Jewelry isn’t. Individuals looking for an smart, safe investment can appreciate the value of this company, due to the value of the the products sold. Would it not make sense to invest in a company that sells products that are constantly appreciating in value?

Why is GWT so important as a Marketing Company

Besides having products that constantly appreciate and gain value in tough economic times, Global Wealth Trade is completely unique. The Network Marketing Industry is littered with companies promoting Nutritional products, telecommunications, and household item’s. According to the Direct Selling Association, 96% of the companies registered fell into those categories. According to a Wall Street Journal entry, focused on the direct sales industry, a distributor for a nutritional company in the marketing industry was forced to compete with over 30 million other network marketing distributors.

Global Wealth Trade is truly unique as it is the only company that offers Designer Fine Jewelry in the highly competitive direct selling industry. There is no competition for GWT members. They don’t have to convince people that their juice or nutritional product is better than another companies. They don’t have to be a half doctor to explain their product as well.

This makes it easy for the distributor to do what he or she does best. Distribute!

If you would like more information on this wonderful opportunity, check out the link below:

GDI – Global Domains International Inc Review

If you have been on the internet for any length of time looking at business options you will eventually come across someone promoting GDI to you. So this article is to answer some of the basic questions about GDI. Is this Business opportunity a scam? Do they have a product or service that is worthwhile? What is the potential of this opportunity? I will seek to answer these questions as objectively as possible.

Scam!?

If you have come to this article you are probably already considering whether GDI is a serious business opportunity or a scam! To determine if GDI is a scam the first question one must ask is are they marketing a worthwhile product or service or are they just another MLM or pyramid designed to take your money without giving you anything other than promises of great rewards and riches? The answer yes they have a genuine product/ service. In this case web hosting.

The Service Outlined

They provide a web hosting service. It is true you can get free website hosting on the net, in fact this very article is an example of a free web host and you can get good results from them, but there are a number of things you sacrifice.

Firstly if you are using a free web host provider there is always some form of cost, normally they require you to carry free ads on your site. (web1000 is an exception but you can’t even put banners on it and its editor is painful to use).

While having ads on your website at first this may not seem to be a problem, consider this, if you want this site to be your main business portal and hub, you may end up advertising your biggest competitor, not a smart move. You don’t have ownership of your site. You may own the intellectual material but if the free web hoster changes their rules, goes out of business or just updates the way their system works there is not a thing you can do about it. Even with blogger you have to share your AdSense revenue with them 50-50. That’s why I recommend if you are serious about having an online business your main site be one that you own and that means paying for it. Also after I lost 48 blogs overnight because blogger felt they didn’t all fit with their terms of service you learn – you get what you pay for.

In the case of GDI this means $10 a month. That’s US Dollars, so if you are in Australia like me, thats not so good, if you operate in Euro’s or pounds, that’s great for you. For that you get a web site, 10 pages (plus a feedback and guest page 12 total), 10 e-mail addresses and a domain name, its also includes a domain/site builder, domain and e-mail forwarding, use your own web builder, parking service. However each page can have a huge amount of data. The 10 e-mail address means if you have 10 different businesses, affiliates programs or whatever you can devote an individual e-mail to each one and can with the forward even arrange to have them forwarded to a single box.

The other great advantage is the ability to choose a domain name. Most of the good .com names are long since gone. Further in the case of many of the other endings like .au, .us, .uk, etc many companies exist solely in buying up the best domain names to make a killing selling them to someone else at highly inflated prices. GDI with the .ws avoids this pitfall by ensuring the domain name is not sold as a separate entity, but only with the web hosting service. This stops domain name hording in its tracks. .ws is still new and now is the time to get the domain name you want. No additional $20 yearly fee for just the domain name registration.

The Business Opportunity

The fact is not everyone out there needs a web host. Let’s examine why one has a website. Normally one either has a website for one of two reasons – BUSINESS or PERSONAL.

In the case of personal websites many people want their own personal e-mail addresses and have a website for a number of reasons, stay in touch with family with an open letter, express their beliefs or opinions on a world stage, to satisfied their own ego and sense of importance, create photo albums, join a community, etc. Some people will pay the $10 a month to have a website. As time progresses I think this will increase as more and more people become web aware and want to have their own address/ place on the web. With the highly transitive nature of the human population with greater movement than ever before in the history of the world one of the best ways people will be able to stay in contact with friends will be via the net. Consider how many people from school do you know twenty years later. Have you moved city, state, country, if you have you probably have lost contact with them. If you wanted to track them down how would you? I know I would do it via the web. This will be increasingly easy as people have personal web pages.

In the case of a website for Businesses most companies have a website for further advertising their company, some do have direct sales as well over the net, and some are nothing but internet based businesses, e.g. Ebay. In the case of a website for a business, I would think that what GDI offers is not big enough to meet their needs. Save for a landing page, redirect page or just the Domain name, GDI is aimed at the small internet business user. Thats not necessarily a bad thing but it is fact that has a bearing on the business opportunity. If GDI wants to grow further they will need to look at offering reasonable upgrade packages for the bigger players.

In the case of a small first time business wanting their own website with six pages GDI is not a bad option as it also gives them a source of secondary income.

It has the potential to be a good source of income as each person you bring in gets you $1 a month. Not a huge amount really, you would need 10 people just to pay for you hosting fee, but the winner here its that you get a $1 for each person they introduce down to five levels, the power to leverage the work of those below you is what appeals here. That can result in some good returns. You won’t become a millionaire over night, but you can have a great income stream.

You might be thinking, I’m too late and missed the GDI wave. No I don’t think so, not at this time this article is written. GDI members now are in the tens of thousands, not until its reaches 100’s of millions will the wave subside. I don’t think new customers will ever complete dry up either, because each year more and more tech savvy students finish school, and they brought up to believe they each need their own modern gadgets, including mobile phones, e-mailing, and even their own personal website. For kids who are spending $50 plus a month on mobile phones alone, $10 a month for their own website is nothing. I’m waiting for the day you no longer send in a resume into a prospective employer but just give them your web address and they can look up your life themselves. Thus I think the potential of GDI is long term, yes after the initial wave there will be an eventual slowing – there is no such thing as an infinite possibility – there are 6 Billion people on the planet, once the majority of them is a customer you have reach the finite limit. Any company unless they have plans to further develop a service or introduce new products knows a market does reach a saturation point where growth slows. Not so good for an MLM company as their customers are also their business partners. Any MLM that wants to succeed must either sell a product the needs replacement over time – i.e. tupperware (where did I leave that lid, oh well time to another party and order another), or offer new services or products to the same downlines.

There are numerous ways to advertise GDI online. I myself am no great salesman. I hate cold calling, I hate door knocking, I hate feeling like I am invading someone personal space or coming across as pushy. That’s why I love internet advertising. The buyer is in total control, no pushy salesman, don’t like the sales pitch go to another site. There are several program set up to advertise GDI for you, programs like turbo GDI and Hits2U, both are cost effective.

In summary, if you need a web host, GDI is a option, particularly in relation to Domain names, if you don’t need a web host and don’t know someone else who does then its probably not for you.

The Cure For America’s Economy is to Mainstream a Global Mentality

America’s financial and economic wizards know the world is global but America’s mainstream lags behind. Money news programs such as Jim Kramer’s Mad Money demonstrate daily that stock markets are interdependent, currencies interlinked and commodity prices volatile with their dependence on human factors such as politics as well as on environmental events. Those variables affect business and trade but are not reflected in mainstream news coverage, which leaves the mainstream investor, small business owner and even ordinary job-seeker at a considerable disadvantage.

Most large city American newspapers have separate international and national coverage, as do the New York Times and the Chicago Tribune. The tabloid New York Post, however, does not, nor does the Chicago Sun Times. Smaller city newspapers such as Indian’s Hammond Times carry little news about the world other than major coups, catastrophes and notices about locals in global combat zones.

As a result, the New York Post on Thursday, July 2, as an example, headlined with the recently deceased Michael Jackson, control of local schools and a Yankee baseball team win. Inside stories of international events covered the young French survivor of a plane crash off of the Comoros Islands in the Indian Ocean and an affair between an American state governor and an Argentine mistress. A coup in the Central American country of Honduras received six short paragraphs at the bottom of page 19. Editorials covered Afghanistan and Iran. Marketwatch in the Business section cited nine worldwide indexes, the majority European, while the Foreign Exchange Hotlist cited 17 majors among the world’s 200 countries.

In contrast, Google News that day reported also on Israel, North Korea, Iraq, Indian, Russia, Pakistan, the European Union through Sweden’s newly assumed presidency, the International Atomic Energy Agency, Sri Lanka, Croatia, an African Summit in Libya, France and the question of the Muslim women’s burqa, and finally, the former Soviet satellite country of Georgia.

Throughout the unprecedented global economic crisis of the late first decade of the twenty-first century in which a western industrialized country elected a first nonwhite leader to meet the challenge, the lack of “consumer confidence” was cited as the cause for the continued stagnation of the American economy. Yet in a global world where financial insiders trade on the basis of interdependence, can national “consumer confidence” exist without a broader mainstream context?

American consumers responsible for the robust purchase of products to stimulate the economy through imports, exports, corporate expansion and small business investments, have small chance of resuming their role without a basis for their “confidence” being restored following the crises of American financial institutions and the ensuing bailouts that began with the last conservative administration before the new liberal one went into effect. With trust in the “system” shaken to its core by mortgage defaults stemming from unregulated and unscrupulous banking practices as well as predator banking, in addition to an ill-founded war on the foreign country of Iraq, American consumers are in sore need of reassurance about America’s abilities in a global world, a situation that was a call for the mainstream media to adapt and provide the “medium” circulating pertinent and relevant “news” to the American people.

In a global world, “news” is no longer defined as “man bites dog” versus the other way around. In a world of 200 countries all interlinked, “news” equates with information that is novel, useful and conducive to exchange between little-known neighbors with whom to establish business arrangements for mutual benefit to stimulate growth.

News about the world abounds on the Web but America’s mainstream deserves better than needing to put extraordinary effort into being informed. The mentality of a world leader derives from the “matter of course” attitude with which informed citizens regard the world by knowing its source of information has a finger on the pulse of the world’s workings.

India Vs. Vietnam: – Why India Is Lagging Behind in Competition to Attract Global Manufacturing

Past few months, in fact past couple of years since the trade war has taken off, there has been much talks and actions in global companies to shift their manufacturing base from China to other countries. India has been thinking of itself as the front runner in this golden opportunity but to the surprise of many, came a country which we never thought of, would give us a very tough competition “Vietnam”.

The competition from Vietnam has been so hard for India that as per the report of Nomura capital, in the last year between the period of April 18 to August 19, around 56 US Companies relocated its manufacturing base from china, but only 3 companies came to India, Vietnam took 26 of them (Vietnam – 26, Taiwan – 11, Thailand – 8 Mexico – 6).

Indian government has been on the path of various reforms, Since last five year. Government has taken various initiatives such as “Make In India” lot of efforts has been taken for improving the “Ease of doing business” ranking by almost 65 Ranks up to come to 63rd position in global ranking from 142nd. What’s not working for India, is a serious matter to look into by India.

Let’s have a analysis at various factors that has led Vietnam to be front runner in taking advantage of the Trade war, to understand if in long term Vietnam remains a favourable destination for the global companies to be next global manufacturer, What India need to do to become global manufacturing leader.

Let’s first have highlight of both the countries and analysis:-

Criteria

Viet Nam

India

Political

Single Party Socialist Republic

Federal Parliamentarian Constitution Republic

Population

96.48 Million

1312 Million

GDP Growth rate

3.82%

3.10%

Per Capita Income

1964 USD

2104 USD

Un Employment Rate

2.15%

23.50%

Wages high skilled

465 USD Per month

143 USD Per month

Foreign Exchange Reserve

80741 Billion

501703 Billion

Foreign Direct Investment

6.70

1365

Corporate Tax rate – Manufacturing

20%

15%

Ease of Doing business Ranking

India and Vietnam both liberalized almost in same time period of 19989-90s since then both countries have grown at an average rate of 6-7% annually. But in past few years Vietnam is leapfrogging mainly due to its proximity with china.

Looking at the above global economic parameters, Vietnams population is very small in comparison to India i.e. almost 1/13th which makes itself a small size market comparison to India, but the argument of being a huge market has not worked for India till now. The most important factor in favour of Vietnam is, it’s a Single party socialist republic which is on the similar line of China. China also has exactly similar political environment, this really gives edge to Vietnam over India, as implementation of any policy in socialist country is not as challenging as it is in a democratic country. The companies moving to Vietnam knows that they will find a conducive environment like China in the country, given the authoritarian nature of the political system.

By opting to setup huge manufacturing base in countries like China and Vietnam the global business companies have clearly shown to have their preference to authoritarian economy as compared to democracy. They want to live in a democratic country but they want to economically promote socialist countries. The long term impact of promoting such socialist country can be seen now with the way china is handling its position on global platform & its responsibility as a global power. This can never be expected in a democratic country like India.

The factors like Per capita income, GDP Growth rates are on similar line for both the countries. The Unemployment rate in India is 23.5% which quite high as compared to Vietnam’s 2.15%. This as an economic indicator is in favour of Vietnam but it also implies that the labour cost would be cheap in India as compared to Vietnam at the same time it also indicates availability of huge manpower for the various industry if this unemployed manpower is skilled well, Government of India has already initiated major steps in this direction by giving major boost to various programs of skill development etc.

Vietnams balance of payment is positive, it has more export then import as compared to India where the balance of payment is negative still the foreign exchange reserves of India are way higher then Vietnam. India has consistently shown very high foreign direct investment as compared to Vietnam.

In measures as economic reform Indian government has reduced corporate tax rate for manufacturing companies to 15% making one of most competitive corporate tax rates in the region.

The enormous work that government of India has done in ease of doing business has led to it position coming to 63rd in 2019 from 142nd in 2014, this is a huge jump whereas Vietnam was on 99th Position in 2014, currently it’s on 70th position in 2019.

From the above economic parameters in the table it can be seen that India has potential to become next manufacturer to the world still we have seen that international companies have preferred Vietnam over India.

Based on my reading of various articles on India and Vietnam, comparing various reforms undertaken by both the countries its very much clear that India has been very aggressive in its reform process since last 5 years with new government be it GST implementation, Demonetisation, easing on various FDI Norms, Major steps on ease of doing business, initiatives like Digital India, Skill development mission and many more. Whereas Vietnam has been working on certain fundamentals like education, infrastructure also establishing themselves as investor friendly country to attract the foreign investment in the country.

Now lets have analysis of the major foreign direct investors in Vietnam comparing with the FDI made by these similar countries to India. Let’s have a look at countries investing in Vietnam in the year 2018 & 2019 comparing with investment by similar countries in India.

(B- Billion)

Investment

Vietnam

India

2018

2019

2017-18

2018-19

South Korea

7.20 B

7.92 B

1.05 B

0.98 B (Prov.)

Japan

8.60 B

8.50 B

1.63 B

2.97 B

From the above table we can see that the major FDI investment in Vietnam is received from its two top investors South Korea & Japan, both have been consistently having major FDI share in the Vietnam economy. The third country who’s share has been rising is china which has been investing through Hongkong.

Whereas India’s major FDI has been coming from Mauritius & Singapore which contributes approx. 50% of total FDI. The key thing for India here is to understand about Japans position for investing heavily in Vietnam. Japan has been a friendly country to India, India has always been a pro japan economy due to its friendly relations, but still India is not able to attract FDI from Japan in comparison to Vietnam. I think this shall be one of the major area on which government need to work on as even after such a good relation India is not able to attract FDI from Japan.

Further South Korea’s investment in India has never been that great, India has never focused majorly on building strong relationship with south Korea, as major focus has always been Europe, USA and Japan. It now time that India shall specifically focus Korea which can work very well strategically for India as an alternative to dependency on china at the same time Korea can play a really big role by investing in India to make India a front runner in becoming a global manufacturer.

Major investment in India is coming through Mauritius, a tax heaven country. Which indicates that globally India is not a low tax country. Gradually Mauritius has slipped to second position bringing Singapore to first position. Further the current decision of Government to reduce overall corporate tax rates specifically to manufacturing companies, We can assume that India will start receiving direct FDI from respective countries instead of routing through tax heavens like Mauritius.

With all the above analysis there are certain major factors for India to work on in order to compete with Vietnam, India needs to learn, work really hard on following factors to find some very important solution for the below factors:-

1. Socialist Vs Democratic structure : This is one of the biggest challenge India is facing due to its democratic setup to attract the foreign investment. The investors prefer socialist environment compared to democratic for safety of their investment and business. As they assume socialist environment is better for their business. But in the long term impact of the socialist economy would be similar to china. While china was looking to become economic superpower and a manufacturing hub for the world things were good but gradually it has reached to a stage of strong economic powerhouse it could not sustain in parallel with world on its socialist policies leading the global community to have very low faith.

Also Vietnam being socialist country has observed having issues with various key matters like Human rights, no freedom to press, citizens are surveillance online etc and many more such matter. These scenario India needs to present these factors to global business community with a long term prospective to bring this factor in its favour.

2. Raw Material availability :- India is full of resource and raw material, whereas Vietnam is majorly dependent on china for its raw material requirement it is not a resource producer. That means most of the raw materials need to be purchased outside of Vietnam, its from China. This indicates that even though the companies have shifted out of china still their dependencies will remain on china indirectly. So even after incurring heavy cost on shifting their manufacturing base from China to Vietnam it is really difficult to comment as their dependency will continue to be on china.

3. FDI share of Hong Kong:- Through the above Foreign direct investment data, we could clearly see that the major FDI in Vietnam are from South Korea and Japan, both these countries has been historically investing in Vietnam. But in past few years there is one country whose share of investment in Vietnam has been rapidly increasing from Hong Kong. Over the years, it has become the seventh largest investor in Vietnam. In 2018, it moved up to fifth, is now fourth place in total investment up to 2019. In the year 2019 Hong Kong has become the second largest FDI Country after Korea to make an investment of 7.8 Billion. It is understood that china is making these investment thorough Hong Kong post the trade war push between China & USA, it does not want Vietnam to become cautious of Chinese investment.

This is again alarming situation for companies looking to shift from china. If china continues to invest in Vietnam through Hong Kong then the whole effort of shift from china to Vietnam might be at stake as many of the business in Vietnam are supposed to be invested by Chinese investors.

4. Business Environment : This is one of the major factors which is required to be worked on by India. Vietnamese government is committed to creating a fair and attractive business environment for foreign investors, this can be seen by the 26 out of 56 companies shifting their base to Vietnam. Further being Single party socialist republic framework there is no boreoarctic lethargy. Whereas India in the eyes of global business community “Despite the government focusing on a ‘single-window’ process, it is still multiple doors that big investors, MNCs’ representatives have to go through. When someone is bringing money to your country, you do not sit on his proposal, waiting for him to approach you again & again; you should just decide, convey a “Yes” or “No”. It should be that simple. But that is not the case right now. Even if a ‘yes’ is given, the company’s representatives have to go to multiple offices, meet several officials.Whereas Vietnam provide only one government official who takes care of every requirement of the Investors.

5. Improvement in legal framework: Vietnam has been very aggressive in continues improvement in its legal framework which has really impressed the global business community. India has also taken major steps in these directors in past few years. The results of the same are expected to come in the futures years if India is able to show these efforts on the international platforms and the reach of these framework implementation reaches to the lowest level of its user. As historically India has many times failed to attract global community with its simplified legal framework & structure.

It’s really a right time for India to work very aggressively towards presenting itself as the only best option to the world to become global manufacturer, it must take care of the above key factors in order to be the next leader in the manufacturing sector. With the above key factor for the government of India to take appropriate action in its policy to attract more foreign direct Investment & make India a hub for manufacturing. The global companies looking to shift their manufacturing base shall consider about key factors relevant to the type of economic & political scenario of country where they are investing before taking appropriate decision.