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Hi Terry and all –
Here is a related analysis I’ve just worked up from a domain far outside this group’s usual focus on disasters.
In the U.S, the government’s Special Supplemental Nutrition Program for Women, Infants, and Children (known as WIC) recognizes that feeding with infant formula is worse for infants’ health than breastfeeding. Yet that program hands out free infant formula for about half the infants in the U.S., worth about ten billion dollars a years (retail value) from the WIC participants’ perspective. WIC’s spending on breastfeeding promotion runs about 100 million dollars a year. Thus the value of the formula is about one hundred times as much as the value of the breastfeeding support.
For Radix this is a “far out” example, but it illustrates what Terry calls, “the ‘cure to damage ratio' - in other words, the disparity between the finance available to 'solve' a problem and the vastly larger amounts that are used to cause it.”
Aloha, George
On Sun, Sep 13, 2015 at 8:16 AM, Terry Cannon
<[log in to unmask]>
wrote:
Thanks for this James - very important and
I really want to support and use the notion of disaster risk creation.
In a parallel way, I have been using a set of figures that started out
with Rob van den Berg of the GEF, which are very instructive. Although
they focus on public spending (the origin is partly the IMF and i am sure
it is part of their argument against irrational state subsidies), I am
compiling related private sector (and kleptopcracy/ tax dodging/ criminal)
figures that are like those for Myanmar below. I call this the 'cure to
damage ratio' - in other words, the disparity between the finance available
to 'solve' a problem and the vastly larger amounts that are used to cause
it. This approach exposes the whole argument of donors that they are supporting
the "building of resilience" as a complete lie.
I cannot send attachments, so the figures here may not align properly.
Maybe the election of Corbyn to lead the UK Labour party is a sign of hope
that we can shift things away from the victory of neo-liberalism...
best wishes to all
Terry Cannon
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The 1:100:1000 “cure to damage” ratio for climate change
The amount being spent (public funds only) that increases the problem of
climate change is currently a thousand times greater than the funds available
to help overcome the problems (adaptation)
$1 billion
current estimate of what is available annually for public funding of climate
change support to developing countries for adaptation (for mitigation estimate
about $10 billion)
$100 billion
Most conservative estimate of what is required for adaptation (Green Growth
report provides an overview of various needs assessments and does this
for adaptation as well as mitigation)
$1 trillion
Conservative estimate of amounts of public funding available for harmful
practices: subsidies for fossil fuels, water practices that deplete resources,
fisheries and agriculture. More recently IMF increased this to $2 trillion
Source: Inclusive Green Growth World Bank 2012 and Rob van den Berg (Global
Environment Facility). See also Fifth Overall Performance Study of the
GEF: Cumulative Evidence on the Challenging Pathways to Impact www.gefeo.org
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Private sector/ kleptocrats/ criminals/ politicians
Top 200 energy companies spent to explore for more oil, gas, coal - $674
billion (The Guardian 19 April 2013)
Estimated wealth kept in secret tax haven accounts $21 trillion ($21,000,000,000,000)
BBC News 22 July 2012 http://www.bbc.co.uk/news/business-18944097
US costs of wars in Iraq, Afghanistan, “on terror”, 2006 (estimate) $80
trillion
Oxfam report (Jan 2014) that the richest 85 people in the world have as
much wealth as the world’s poorest 3.5 billion people.
1% of the world’s people own half the world’s wealth ($110 trillion)
At 12:16 PM 10-09-15, James Lewis wrote:
Realities for Radix.
Only a month ago, extensive flooding in Myanmar was reported world-wide,
eg : http://www.bbc.co.uk/news/world-asia-33844076
news items for which were followed by numerous appeals for contributions
to aid programmes.
It is in this recent but repetitive context that I am forwarding today's
press release from Global Financial Integrity, a voluntary non-governmental
Washington DC based organisation, regarding the imminent release of their
report of "illicit financial flows' and their economic and social
effects upon Myanmar's population; increased inequality, reduced education
and health services can be quickly translated as increased vulnerability
to natural hazards.
When will this reality of "disaster risk creation" percolate
through to the creators and followers of Disaster Risk Reduction?
Anyone wanting the imminent report should refer to GFI's website given
at the end of the attached message .
James.
-------- Forwarded Message --------
Subject: Nearly US$100 Billion Flowed Illegally through Myanmar from 1960-2013,
Finds New GFI Report
Date: Wed, 9 Sep 2015 13:35:07 -0400 (EDT)
From: Christine Clough <[log in to unmask]>
Reply-To: [log in to unmask]
To: [log in to unmask]
FOR IMMEDIATE RELEASE:
September 9, 2015
Nearly US$100 Billion Flowed Illegally through Myanmar from 1960-2013,
Finds New GFI Report
Illicit Outflows average 6.5% of Myanmar’s Official GDP; Technical
Smuggling of Imports via Fraudulent Misinvoicing Accounts for 71.0% of
Myanmar’s Illicit Inflows
Underground Economy Averaged 55.1% of Country’s GDP; Drives and is
Driven by Illicit Flows
Tax Loss due to Illicit Flows Greater than Public Spending on Health
Customs Enforcement, Transparency Measures, Political Will Seen as Key
to Curbing Crime, Corruption, and Tax Evasion
Report Launch Event to Be Held at the National Press Club at 2pm
EDT on Thursday, September 10th
WASHINGTON, DC – Nearly US$20 billion flowed illegally out of Myanmar
between 1960 and 2013— draining domestic resources, driving the underground
economy, exacerbating inequality, and facilitating crime and corruption—according
to a new report releassed today by Global Financial Integrity (GFI), a
Washington DC-based research and advocacy organization.
Titled “Flight Capital and Illicit Financial Flows to and from Myanmar:
1960-2013,†the study finds that trade misinvoicing—the fraudulent over-
and under-invoicing of trade transactions—accouunted for the majority
of the country’s illicit financial outflows (59.6 percent) and inflows
(89.2 percent) over the 54-year period analyzed.
“Myanmar has a very serious problem with illicit financial flows, and
curtailing them should be a priority for the government that forms following
the forthcoming elections,†noted GFI President Raymond Baker, a longtime
authority on financial crime. “Illicit flows have drained billions
of dollars from Myanmar’s official economy; this money could have otherwise
been used to help the nation’s economy grow. Beyond the direct
loss to the economy, these flows are driving the underground economy, fueling
crime and corruption, and costing the government significant revenue.â€
Findings
Authored by GFI Chief Economist Dev Kar and Junior Economist Joseph Spanjers,
the study estimates that illicit financial flows from Myanmar totaled US$18.7
billion from 1960 through 2013, with annual average illicit outflows averaging
6.5 percent of the country’s GDP. Illicit inflows totaled a staggering
US$77.7 billion over the 54-year period; nearly half of those inflows (in
real terms) occurred during the last four years of the study, 2010-2013.
On average, Myanmar’s illicit inflows are equivalent to 14.4 percent
of its GDP.
“Illicit outflows drain capital from Myanmar’s economy, facilitate
tax evasion, exacerbate inequality, and deplete domestic savings,†said
Dr. Kar, who served as a senior economist at the International Monetary
Fund before joining GFI. “It is greatly concerning that illicit
inflows have grown significantly in recent years, averaging under US$400
million per annum in the 1960s, they’re averaging over US$8 billion
per year today. Unless corrective actions are taken, the economic
toll of these illicit flows will only continue to grow.â€
Both the inward and outward illicit movements of money deprive the government
of crucial tax revenue. By applying relevant tax rates on illicit flow
figures, the report estimates lost tax revenue due to illicit flows and
compares it to Myanmar’s public spending on health and education.
“Tax losses due to illicit flows have robbed the country of crucial
public funds. The magnitude of this loss is not insignificant; it averaged
122-172 percent of health expenditures and 48-73 percent of education spending
from 1960-2013,†explained Mr. Spanjers, the report’s co-author.
“Even more troubling, approximately 30 percent of this tax loss occurred
in the last four years of the study. This means that some individuals have
been taking advantage of increased economic openness for personal gain,
at the expense of the rest of the country.â€
Broad Flight Capital
In addition to estimating illicit flows of capital to and from Myanmar,
the study also estimates that broad capital flight—a combination consistiing
of both licit and illicit flows—amounted to USS$35.9 billion in outflows
between 1960 and 2013. Broad flight capital inflows stood at US$82.8 billion.
Underground Economy
The report also found that the underground economy averaged 55.1 percent
of official GDP over the 54-year period, increasing from an average of
49.3 percent in the 1960s to 66.1 percent in the 1980s before falling from
2008 through 2013, potentially as a result of increasing economic openness.
The study finds that total illicit financial flows drive and are driven
by the underground economy, implying that efforts to curtail illicit financial
flows would also significantly reduce the size of the underground economy.
Policy Recommendations
“Addressing the problem of capital flight and illicit flows is crucial
to the policy reforms Myanmar is pursuing as it opens to the world,â€
stated Tom Cardamone, GFI’s Managing Director, who will launch the
report at an event Thursday afternoon in Washington, DC. “Illicit
financial flows are a real and rapidly growing problem, as our research
shows, one which requires serious attention by policymakers.â€
GFI recommends a number of steps Myanmar’s next government can take
to ameliorate the problem of illicit financial flows from the country revolving
around two principles:
1. Greater
transparency in domestic and international financial transactions.
2. Greater
cooperation between governments to shut down the channels through which
illicit money flows.
These steps include implementing a real-time world market pricing risk
analysis system to curtail trade misinvoicing, making more meaningful progress
on AML/CFT responsibilities, studying physical and technical smuggling
routes to form the basis of an organized and effective program to curb
these illegal transactions, and developing an internal review process that
determines the highest priority areas for technical assistance.
Methodology
The study is a methodologically rigorous analysis of illicit financial
flows. Dr. Kar—assiisted by GFI Junior Economist Joseph Spanjers—developed
robust multi-equation economic models highlighting the interactions between
illicit flows and the underground economy.
Nevertheless, Dr. Kar cautioned that the methodology for estimating illicit
flows is very conservative and that there are likely to be more illicit
flows from Myanmar that are not captured by the estimates, particularly
given its complex history with regards to international sanctions and drug
trafficking.
“The estimates provided by our methodology are likely to be extremely
conservative as they do not include trade misinvoicing in services, same-invoice
trade misinvoicing, hawala transactions, and dealings conducted in bulk
cash,†explained Dr. Kar. “This means that a large amount
of the proceeds of abusive transfer pricing between arms of the same multinational
corporation as well as much of the earnings from drug trafficking, human
smuggling, and other criminal activities—which are often settledd in cash—are
not included in these estimates.ââ€
Report Launch: Thursday
Global Financial Integrity will launch the report at a conference at the
National Press Club in Washington, DC on Thursday, September 10, 2014 at
2pm local time. The event will feature a brief presentation of the
report and its findings by GFI Chief Economist Dr. Dev Kar, followed by
a panel discussion with Vikram Nehru of the Carnegie Endowment for International
Peace and Aaretti Siitonen of the Embassy of Finland and a question &
answer period.
GFI hopes that the report and the conference will begin a constructive
dialogue with Myanmar’s government about measures that can be taken
to curtail illicit flows.
“We hope that this study will spur the Government of Myanmar to consider
effective legislative and regulatory measures to curb the flow of illicit
money from the country, thereby maximizing domestic resources for economic
growth,†added Mr. Baker. “GFI’s goal is to work constructively
in conjunction with government officials to curtail these harmful illicit
flows.â€
Funding
Funding for the new report, “Flight Capital and Illicit Financial Flows
to and from Myanmar: 1960-2013,†was generously provided by the Government
of Finland.