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By
Scott B. MacDonald
 Azerbaijan – Changing
of the Guard: OChange in leadership of the former
Soviet republics is gradually occurring as reflected by
the early December ouster of the president of Georgia.
Now Azerbaijan's former President, Heydar Aliyev, has died
at the age of 80 in a US hospital in Cleveland, Ohio, where
he was being treated for heart and kidney problems. Aliyez
had stepped down as president of Azerbaijan in October,
being succeeded by his son Ilham Aliyev, following elections
that were widely regarded as questionable. Aliyev was a
former Soviet Communist leader who reinvented himself in
the 1990s as a post-independence political strongman. His
record on human rights and media freedom was frequently
criticized in the West. At the same time he was credited
with bringing stability to the oil-rich country, and helping
to attract foreign investment.
Brazil – Lula Wins One on Pension Reform: On
December 12th, President Luiz Inacio Lula da Silva won
an important legislative victory after the Senate approved
controversial pension system reforms. Reforming the pension
system was discussed in the early 1990s, but various
attempts to pass legislation were defeated. This time
around, the reforms sparked large protests. However,
Lula stood by his pledge to reform the pension system.
The new measures include raising the age of retirement
and limiting civil servants' pensions, all of which should
help the government to reduce the huge deficit in Brazil's
pension system.
Pension system reform has been the hardest challenge facing Lula since he assumed
office last year. Brazil's Senate voted by 51-24 to give final approval to
proposals to raise the retirement age to 60 for men and 55 for women, phased
in over seven years. Civil service pensions will also be capped and subject
to taxes. The aim is to bring pensions for government workers into line with
those in the private sector, and reduce a system which last year cost 4.3%
of gross domestic product, or 56bn reais ($19bn; £12bn). The Lula administration’s
next major reform is to overhaul the tax system.
Egypt – After Mubarak?: In mid-November
the issue of political succession unexpectedly came into
the living rooms of Egyptians as President Hosni Mubarak
was noticeably ill during a televised broadcast while
addressing a new parliamentary session. One moment the
president was seen at the podium, sweating and looking
unwell. The next moment the camera of the state-owned
television zoomed out as Mubarak stood at the podium,
and seconds later, it tilted to show the fixed picture
of the Egyptian flag. Ten minutes later, Egyptian television
resumed its live broadcast, showing the country's highest
Islamic religious authority, Sheikh Mohamed Sayed Tantawi,
the Grand Imam of Al-Azhar, and Pope Shenouda, Patriarch
of the Coptic Christian church, praying to God to "save
Mubarak". Although the Egyptian leader was to return
to the podium and was given a long applause by the parliament,
the incident underscored the issue that Mubarak has long
been in power, and while healthy he is aging and no one
stands out immediately as the heir apparent. The government
comment that he had the “flu” did little
to stop speculation about the arcane world of Egyptian
politics and who will head it.
During his time in power, Mubarak has survived at least six assassination attempts.
Since he took over power in 1970, he has refused to appoint a vice president.
In recent years, the Egyptian leader has reportedly been grooming his son,
Gamal, to take over power. The 40-year-old graduate of an American university,
suddenly rose to high ranks within the ruling party, and now accompanies his
father on all his external official trips. Although President Mubarak denies
he wants his son to inherit his power, many Egyptians have their doubts. Traditionally
political successors have come from the army, which remains the most powerful
institution in Egypt. This has been the custom since the army overthrew the
monarchy in 1952. Although few fear chaos in Egypt once Mubarak's rule ends,
the incident in parliament has also renewed demands by opposition parties to
press for democratic reforms. After all, Mubarak has run unopposed in four
referendums to renew his presidency. Each time he has won with at least a 96%
majority. Opposition parties have been pressing to change the system, demanding
multi-presidential elections. Thus far, Mubarak has resisted. After Mubarak
maybe the political system will open.
Indonesia – International
Assistance Please: IThe Consultative Group on
Indonesia (CGI), the Asian country’s longstanding
donor country group, pledged in mid-December to provide
$2.8 billion in loans and grants, most of which will be
used for Indonesia’s government budget in 2004. The
international donor group also renewed calls to accelerate
reform measures and to improve the investment climate.
The amount was higher than the $2.7 billion promised for
the current 2003 state budget, partly due to higher spending
for debt repayment, as the expiration of the International
Monetary Fund program later this month deprives the country
of a debt relief facility from the Paris Club of creditor
nations. In addition to the $2.8 billion, donors set aside
$600 million in the form of credit exports and technical
assistance to regional governments and non-governmental
organizations (NGOs), bringing the total loan pledge from
the CGI to $3.4 billion.
During the CGI meeting, while praising the country's macroeconomic and monetary
stability, donors emphasized the need for Indonesia to address corruption,
which retards the inflow of investment, slows economic growth and puts a brake
on poverty eradication drives. "If the government can deliver on the commitments
it has made ... then growth in Indonesia is set to take off," World Bank
East Asia and the Pacific vice president Jemal-ud-in Kassum said in a written
statement. To this he added: "But significant slippage, especially in
improving the investment climate and governance, would put emerging gains in
market confidence at risk.”
The Asian Development Bank (ADB), which provided around $900 million of the
loan pledges, also urged intensified action to reduce corruption to boost investment.
The ADB’s Southeast Asia deputy director Shamshad Akhtar stated: “Weak
governance has acted as a major barrier to sound development in Indonesia,
nurturing corruption and rent-seeking and weakening the impact and effectiveness
of development projects." This message has resonance as foreign direct
investment approvals are currently at only a quarter of the pre-economic crisis
levels. The Japanese government contributed $660 million in the CGI loan pledge.
In addition, Tokyo also set aside $220 million in export credit, bringing the
total lending from Japan to $880 million.
Mexico – One More Time!: In
mid-December, Guillermo Ortiz was approved by the Mexican
Senate by a vote of 84-17 for a second six-year term
as the governor of the central bank of Mexico. There
was some concern that his re-appointment would be held
back by political infighting between Mexico’s
major political parties, who have been more interested
in blocking each others legislative agenda than advancing
any meaningful reform for the country. Ortiz’s
reappointment was a positive development as he is widely
respected as one of the key forces behind Mexico’s
fall in inflation (below 4%). If his re-appointment
had failed, it would have sent a very negative signal
to domestic and international investors.
Nauru – Back to Being In the Club: In early
December 2003, the Organization for Economic Co-operation and Development
(OECD) acknowledged that the government of Nauru is improving transparency
and has established effective exchange of information for tax matters
with OECD countries which will be fully effective by December 31,
2005. Consequentially, Nauru becomes the second country to be removed
from the OECD's list of uncooperative tax havens (frequently referred
to as a black list) published in April 2002.
Along these lines, Nauru joins OECD countries and more than 30 other jurisdictions
in working toward implementing international standards and achieving a level
playing field in the areas of transparency and international co-operation in
tax matters. In addition, Nauru will be invited to join OECD member countries
and other participating countries in meetings of the OECD's Global Forum to discuss
the design of standards related to its commitment. Only 5 jurisdictions remain
on the OECD’s list of uncooperative tax havens: Andorra, Liberia, Liechtenstein,
the Marshall Islands and Monaco.
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