Geopolitical rivalry, and the reasons that sustain it, has not stopped with coronavirus. Depending on its depth and duration, the crisis could lead to a more cooperative or a more divided world. Or it could lead to ongoing tension between these two alternatives for an indefinite period. Here are some core tenets of the current geopolitical environment: In absolute terms all states or groups of states are going to emerge weakened from this crisis. Andres Ortega, Senior Research fellow at the Elcano Royal Institute in Spain stated that the world may witness greater or lesser geopolitical rivalry, but based on weaker powers. This could possibly result in temptations to overreach.
However, they come along with reduced abilities to act upon them. The UN has been completely absent during the crisis. Only a restoration of trust among the great powers will be capable of establishing the centrality of the UN Security Council. The WHO has proved inadequate. A much better equipped global health system is needed. The G20 worked in 2018 because there was United States, British and French leadership.
Andres Ortega noted that now, with the Saudis in the chair not so much. At the present time, the G20 is being reduced to a framework lacking genuine capacity for coordination. The existing structures do not work. Here are some of the most likely structural developments: Acceleration of the process of de-Westernization. This was already underway owing to the rise of the East, which could, nonetheless, be slowed down, although not reversed by the crisis, as well as because of the internal divisions within the West. One of the intriguing questions: Will we become more “Asiatic” in terms of a general mindset, and therefore more community-minded and less individualistic?
According to Andres Ortega, the decline of Europe has been described for a long, long time. Currently, there are even real concerns about the collapse of the EU if it is not able to react in a concerted fashion post-COVID 19. Conversely, the reality shock of, and the pressures from, the COVID 19 crisis may be strong enough to bring about new economic and geopolitical progress towards European integration. During the pandemic, United States global leadership has been completely absent, in marked contrast to the Obama administration’s reaction to the Ebola epidemic. One factor that will weigh decisively on scenarios over the medium term is whether President Donald Trump is re-elected in November.
Alexei Bayer, a New York based Economic Analyst stressed that a Democrat such as Joe Biden in the White House from January – likely with a female Vice President who could replace him at any time, if needed – could drive a more multilateral approach. That would imply more attention being given to the importance of allies to the United States, while the United States distancing to Russia and China would be maintained.
Alexei Bayer further noted that, the United States Chinese rivalry will continue. This rivalry will become a structural factor in the new world order, especially with regard to the struggle for technological and ideological domination. China, following its management of the health crisis, has seen an opportunity to bolster its international image and utility. However, as more becomes known about what actually happened with the outbreak, China’s currently rather good image may change. In addition, China has major internal economic and social problems, which may undermine the financial capabilities it has earmarked for some of its geopolitical instruments, such as the Belt and Road Initiative. Even so, the world’s center of gravity will continue shifting towards the East, including in ideological terms.
Frank Vogl, Co-founder of Transparency International and author of “Waging War on Corruption: Inside the Movement Fighting the Abuse of Power” stated that there are many other pressing issues to be dealt with. On most of them, trendlines are not moving in a positive direction. For example, the need to prioritize national aid for the underprivileged will reduce development aid even further and also cast even greater doubt on the attainment of the 2030 Sustainable Development Goals. And, of course, we are back at a time where countries only a short while ago being deemed as emerging may well be submerging. That isn’t just true for Africa and Latin America. Due to the steep fall in the oil price, Russia faces severe problems.
Andres Ortega adamantly argued that there will be three scenarios for the path ahead. Amidst this convoluted and heavily burdened global landscape, let me set out three illustrative examples as base scenarios. In doing that, I am fully aware of the dangers of simplification. But one way or another, we need to attempt to get a grasp of a reality that is enormously complex.
The first scenario is “Each for himself”. Andres Ortega stated that the United States, the self-ascribed richest country on earth, has already reached a staggeringly high unemployment levels. But it certainly isn’t just there that the lure of deglobalization (“my country first”) is offered up as a way out. Social unrest can further strengthen the populists and authoritarian regimes. Presumably well-established democracies will possibly have to contend with the collapse of the middle classes. If not global chaos, the forces of de-Westernization and de-Europeanization will find further fuel.
The second scenario is “Collective international intelligence”. According to Andres Ortega, this is the rosy scenario. While the health crisis persists over the mid-long term, the spirit and logic of real international cooperation kicks in, both in the fight against the virus and in the recovery from the economic crisis. The G20 provide useful fiscal stimulus measures and there are moves toward a global health system. There is a gentle reform of capitalism, providing for a greater role for the public sector. Social protests are limited thanks to direct aid and lines of credit for companies.
Thus, there is limited de-globalization. We even see greater European integration, with the financial and political institutions working in the same direction. Trust in governments recovers. Geopolitical confrontation between the United States and China, and with Russia, is considerably lowered. At times, it seems as if the spirit of a single humanity could thrive.
The third scenario is “Step by step muddling through”. Andres Ortega noted that here is the middle scenario: The crisis persists over the short-medium term. There is a degree of international cooperation in the healthcare field, but there is no coordination in the fiscal-economic realm. The economy in the EU as a whole starts to recover slowly, but it does not revert to its position prior to the crisis, remaining for a time in depression. Social protests rise due to the high levels of unemployment which show no sign of abating, but the system does not collapse. While there are localized coronavirus events, we do not see a reactivation of global flows.
What we see is more nationalism and protectionism. The EU remains half-built. The European Central Bank (ECB), the European Investment Bank (EIB) and the Commission all function, but the European Council does not succeed in coordinating itself and acting in an integrated way on the joint fiscal stimulus issue. It is clear that the second scenario is the most advantageous, while the first is the least advantageous. The likely outcome of a “new normality” is a mix.
The post-COVID 19 geopolitics
SONS OF ETHIOPIA & SON OF THE SOIL
“Let’s build a new world together…now go get into good trouble…” Congressman John Miles Lewis.
ADMAS, a 1980’s Ethiopian band consisting of Abegasu Shiota, Henock Temesgen, Tewodros Aklilu and Yosef Tesfaye, recorded “Sons of Ethiopia” in 1984; a long lost album now revived. Washington Post’s Chris Richards, calls the Frederiksberg Records re-release “…rare…precious and inimitable…sounds like nothing else. Admas specialized in paradox, generating exquisite new grooves that felt high-tech and low-budget, worldly and local, futuristic and nostalgic, funky and delicate…an expression of exploration and loss.” Admas was trained in music during the early Derg Era, but following the Red Terror, they fled to Washington DC, creating music to fit those devastating times.
After 35 years in the music industry, working exclusively with artists on the cutting edge of social issues, I can say “Sons of Ethiopia” is a truly delightful discovery. My career in Artists Management began in New York City in 1985 so I am too familiar with the sounds of that period. The last track on the album, “Tez Alegn Yetintu,” is moving with its melodic filled two-minute intro followed by almost six minutes of keys and synthesized sounds including the good ole drum machine keeping copious timing. But if you close your eyes and listen carefully, recalling the rich history of Ethiopian music and maestros like Dr. Mulatu Astatke and crooners like Mahmood Ahmed, you can imagine a stage filled with the Ethiopian band of brothers, donning carefully coiffed afros, dressed in the best Habesha libs, pouring out their hearts – pain and hope, anger and love, despair and defiance – forcing you to sway and groove to their infectious rhythms. Needless to say, this precious find is a great addition to the discography of Ethiopian music, providing both pride and pause, available on youtube.
All things considered, humanity’s pursuit of happiness has been expressed in many forms worldwide. However, I nominate African Americans for the prize of the broadest spectrum of expressions bringing attention to injustice. Artists like Billie Holiday, John Coltrane and painter Romare Bearden were part of the 1920’s cultural explosion historically known as the Harlem Renaissance. While 1968 Olympic “fists up” athletes Tommie Smith and John Carlos, and most recently NFL’s Colin Kapernick, taking a knee during the anthem, have ensured representation in sports spaces. Naturally African American preachers and politicians have also taken the helm with their voices including the right Reverend Martin Luther King Jr. who preached non-violence from the pulpit of Atlanta’s Ebeneezer Baptist Church. Both King and Ebeneezer would come to the forefront this week as Congressman John Lewis, one of the “Big Six” organizers of the DC rally famous for the MLK “I Have a Dream” speech, was laid to rest at Ebeneezer. Eulogized by President Barak Obama with speeches from Presidents Bush and Clinton, it was a fitting farewell for the congressman dubbed the “Conscience of the Congress”.
Lewis endured police beatings and numerous arrests from the age of 20, all part of plans and sacrifices leading to major changes in America’s racist laws and policies including the 1965 Voting Rights Act. He was a husband, father and mentor to many; a legend who also loved Africa. His visit to Ghana during the Year of Return also commemorating four hundred years of slavery in America was exactly one year ago with U.S. House Speaker Nancy Pelosi, by his side, condemning slavery as a “grave evil”. Honorable John Lewis’ last photo opp at age 80, was just a few hours after receiving chemo therapy for pancreatic cancer last month. Arms crossed, standing strong and steady on the newly named Black Lived Matter Plaza, feet from the Whitehouse and its current clueless occupant; a photo does say a thousand words. But in true Congressman Lewis form, who was always surrounded by young people, you can enjoy his presentation, more like a performance, dancing to “Happy” by Pharrel Williams in his office; recorded by his cajoling staff with the US flag, solemnly standing in the background, reminding us that even the most serious spaces dealing with the most confounding issues, find time to be happy for the blessings we do have.
Lewis’ name was added to the Diaspora African Forum (DAF) Sankofa Wall in Accra Ghana, next to his wife’s name, Lillian Miles Lewis, placed there by the Congressman exactly a year ago. Ambassador Erieka Bennett, Head of DAF Mission, reminded the socially spaced attendees of all walks of life, “As we celebrate 2020 Emancipation Day, we also celebrate the life and legacy of a dear Brother, friend and fighter for equal rights who often urged us saying, “Let’s build a new world together…now go get into good trouble…” “.
Dr. Desta Meghoo is a Jamaican born
Creative Consultant, Curator and cultural promoter based in Ethiopia since 2005. She also serves as Liaison to the AU for the Ghana based, Diaspora African Forum.
Prime Minister Abiy Ahmed held discussion with his cabinet
Prime Minister Abiy Ahmed held discussion with his cabinet on Saturday August 1 to decide the education calendar. The discussion stipulates to take massive COVID 19 samplings and tests in the next two weeks all over the country and to decide after 15 days based on the result of the test. During the discussion Ministers of Health and Education presented their report.
Over invoicing affecting local manufacturers
Local investors are claiming that over invoicing, which is not seen as a priority by the tax authority, is pressuring their activity. Sector experts accepted and said that the claim needs cooperation between revenue office, Customs Commission and financial institutions for a solution.
Investors who came up with their claim told Capital that the investment sector particularly foreign investors are engaged in over invoicing for their imports.
According to these investors, who demanded anonymity, the problem is mainly observed in capital goods and raw material imports that have a customs duty from zero to five percent.
Foreign investors are using this illegal act for different purposes, according to local investors, who are affected highly because of the illegal activity.
Initially in their capital goods import, foreign investors come up with exaggerated cost to get gaps at profit tax, dividend tax and misinform financial firms, according to experts.
“There are two revenue collection bodies, customs and revenue collection offices, who are not sharing information properly regarding this issue,” according one customs expert.
Fekadu Bekele, advisor of the Minister at Ministry of Revenue (MoR), shared the idea. He said that initially the over or under invoice is deliberately done to evade tax and to access huge amount of finance from banks.
“The customs is focusing only on under invoicing because the priority for it is the revenue collection. Due to that the two bodies are going separately and become unable to look the overall economic and revenue impacts for the country that occurred in relation with over invoicing,” he said.
“The two bodies should use each other’s information,” he added.
It is an actual problem that has been stated in different studies, according to experts.
The tax office and customs should look together the information and identify the over or under invoicing clearly to solve the problem and keep the benefit of the country first, they said.
There are post clearance audit by the Customs Commission, which is under MoR, and desk audit by tax office, the two bodies should exchange their information to get clear image and tackle tax evasion.
If the tax office get the information that the import of capital goods is over invoiced it will get a way to get the proper tax and revenue.
The customs have huge database that can easily identify whether the imported goods are over or under invoiced that will help to collect proper tax and duty, according to experts.
“The customs may focus on revenue earnings due to that it may not be concerned when high price or over invoicing come, but it will identify the over and under invoice that can be used by the domestic tax office,” they explained.
“The customs collection information is crucial for tax collection and vice versa due to that they have to give attention for it,” private company tax experts said.
They said that due to the revenue office is not sharing the information with Customs Commission and only give attention for maximizing the tax collection, local investors have become a victim.
“For the same capital goods foreign investors provide highly exaggerated invoice but meanwhile we come up with proper invoice that will not sound correct for the tax authority, that only give focus only on under invoice and will argue that our invoice is under the real price,” they said. “It has affected local investors, who are afraid the tax office might demand exaggerated taxes when it comes to desk audit,” they added.
But if the tax office and customs share their information frequently the problem will be solved and even the tax office can get proper revenue from those who come up with over invoiced documents, according to experts.
“Both offices are looking the situation under their sector interest and that should be changed,” Fekadu, who is an expert in the over and under invoicing at MoR, said.
Experts said that over invoiced capital goods that are mainly included under duty free scheme may not directly pay the customs duty, but when they started paying taxes after the holiday the depreciation is very high that is directly related with inflated costs, which narrowed the profit margin.
“When the profit margin narrowed, these companies may not pay tax or sometimes declare losses,” Fekadu said.
According to experts the implication is not only limited for government revenue but it is also related with banks. Banks are giving loans based on the invoice of capital goods that are over invoiced from the real value. In actual terms banks are approving high amount of money as a loan for the capital goods, which have small real value.
“It may affect the banking industry if the businesses are closed because the actual price of the collateral is very small,” experts said.
“We have seen investors come with old machines but accessed huge amount of money from banks that is not of real value with their assets, but they get the money only because they appear with over invoiced capital goods,” Daniel Getnet, Head of Dabe Investment Consulting and Conveyance PLC, a legal consultancy firm for businesses mainly for FDIs’, told Capital.
He said there are some companies who abuse the legal gaps in Ethiopia. “Mostly they are coming with phony documents for their capital goods and supply of raw material, to abuse the tax system and get false values for their investment,” Daniel said.
“On the other hand they are using two different suppliers one is their own, which is formed to issue over invoiced document, while they are buying the product from other suppliers,” he said how the illegal process is done.
He advised that the government should form a body that follows corporate standard responsibility to closely follow the foreign investment. “Meanwhile there are arguments regarding this, there are countries follow the prudency of foreign investments,” he said.
Experts also claimed that the dividend tax is also evaded since the profit is very limited because of artificially inflated costs.
On the other hand foreign investors are using the over invoicing for capital fleet than using the legal divided flow.
Experts said that officials change within short period at the ministry and that might be the reason to not to fully solve the gap.
Fekadu said that the case has been identified by the ministry and different research papers have been done. “We have given professional opinion about the issue for MoR, due to that anybody who has a concern that might be the chamber or sector associations, can come up with their claim to initiate the case,” Fekadu said.
