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JUST as politicians in Pakistan were preparing for battle over the Panama Papers, David Cameron, the British prime minister, was hosting a conference on corruption in London. On the eve of this meeting, Cameron dropped a brick of sizeable proportions when he was caught on a live microphone at Buckingham Palace talking to the Queen. He was overheard saying that “some of the most fantastically corrupt countries like Nigeria and Afghanistan” were attending.
Although this was hardly a propitious start to the conference, the Nigerian president, retired general Muhammadu Buhari, graciously replied to questions from journalists by saying that he was not interested in an apology. What he would prefer, he said, was the return of the money looted from his country and invested in the UK. And this is part of the global issue of corruption: the money raked in by crooked politicians, generals, businessmen and bureaucrats finds a home in offshore accounts as well as in Western capitals. In this sense, developed countries benefit hugely from sleaze in the poor nations of the world.
In any case, developing countries do not have a monopoly on illicit fortunes made by powerful and well-connected people. Consider Halliburton, the giant American company based in Texas, and where Dick Cheney, the vice-president under George W Bush, worked for years at the highest levels. This firm received several multibillion dollar contracts on single-bid tenders, and attracted much criticism for overbilling. Or take Tony Blair’s intervention in 2007 to block the Serious Fraud Office’s investigation into charges that BAE, the British aircraft manufacturer, had paid millions of pounds as bribes to Saudi princes to secure a lucrative contract.
These are only a few of the high-profile cases that have made it into the media. But on a much lower level, underhand gratification greases the wheels of business around the world. Thus, a council member opposed to building permission for a housing project could get an invitation for the whole family to go on an expensive skiing holiday. Or doctors prescribing costly drugs are asked to attend medical ‘conferences’ at exotic locations. Of course money does not change hands, but the result is the same.
However, this is not intended to suggest that the scale of corruption in the West is anywhere close to the cancer that is devastating economies in countries like Pakistan. Nevertheless, it is a fact that by permitting and encouraging black money to buy property and businesses in developed countries, these economies benefit directly.
To prevent this in the future, Cameron has promised that the UK will develop a register that will reflect true ownership of property bought in the UK through offshore companies. This would lift the veil of secrecy that currently conceals the identity of many owners of some of the most expensive real estate in London. I can imagine more embarrassment among Pakistan’s elite when we can establish which of our crooked leaders have flats and houses in Mayfair and Knightsbridge.
In a recent issue of the Guardian, Simon Jenkins writes:
“…For decades British governments have maintained offshore vehicles for rich people and corporations to evade their obligations to whatever they call society. British havens were set up as cheap ways of holding colonies without having to subsidise them. They now constitute a massive diversion of global resources away from sovereign states, for no other reason than to avoid taxes.
“Some $20-30 trillion is now estimated to be lurking in tax havens, of which $9 trillion is from poor countries … Offshore finance is way beyond a minimal blip on the world economy. According to an Economist survey, 30pc of global investment is now channelled through havens, mostly British.”
So why doesn’t Britain change the laws in the tax havens that are nominally its territories? For one, these are autonomous states that are thriving thanks to offshore companies: the British Virgin Islands (BVI), for example, has a population of 28,000, and yet is home to 450,000 offshore companies. Sixty pc of the government’s revenue comes from licence fees for new companies. The only way to enforce change would be for Britain to impose governor’s rule and amend the law. No wonder there is resistance from BVI; in fact, it was not represented in the London conference.
In their defence, these tiny statelets say they are being bullied by larger countries that benefit more than them from the flows of unidentified — and often black — money. There is certainly an element of truth in this. In fact, countries like Switzerland and Lichtenstein have long provided secret homes for hot money transferred by criminal and corrupt people around the world. American states like Delaware provide similar services.
In London, property prices are widely expected to fall when ownership of top-end flats and houses becomes public knowledge. Much of this real estate has been bought for millions of pounds each by crooked politicians to serve as a hedge in uncertain times. But even legitimate businessmen from abroad who have bought penthouses in Belgravia for holidays want to remain anonymous. This is the reason they have offshore companies. But if their names are going to be made public, many may wish to go elsewhere.
If the proposal for a property register bears fruit, London’s overheated property market would almost certainly fall. This would be greeted with a sigh of relief by many Londoners who have been priced out of the city. Hundreds of expensive London properties, bought as investments, lie empty and neglected. So this would be bad news for property speculators as well as present owners who would suffer significant losses. But as always, there are winners and losers in every wrenching change, and most people would be glad when rich foreign speculators pack their bags and move out.
Published in Dawn, May 16th, 2016
