Friday, October 30, 2009

How secrecy jurisdictions undermine markets - Part 2

Recently we ran a blog entitled How secrecy jurisdictions undermine markets, looking at how offshore secrecy may be stifling competition in the Kenya telecoms market, raising prices for all concerned with potentially devastating long-term impacts on Kenya's economic growth prospects.

Today the UK's Independent newspaper is running an excellent piece raising a lot of questions about Lord Ashcroft, who may or may not be resident in the UK for tax purposes (watch this priceless interview to see this explored, and see the extraordinary role Ashcroft plays in British and Belize politics, here and here.) The Independent investigation asks a question about competition in Belize's telecoms market which is similar to, though separate from, one we raised a month ago with respect to Kenya.

First, having interviewed the Belize prime Minister Dean Barrow, The Independent notes:

"Mr Barrow's nationalisation of the country's major telecoms company, Telemedia, in August was portrayed as a means of crushing the peer (Ashcroft) – and it passed through parliament with barely a squeak of opposition."

(Read Barrow's introduction of the bill to take over Telemedia here.) Now Telemedia had a competitor in the Belize telecoms market, SpeedNet. And The Independent continues:

"In the teeth of repeated denials by the peer's allies, the prime minister says that Ashcroft-related trusts control SpeedNet, too. The government has been following a complex paper trail that leads to trust companies controlled by the peer's long-time lieutenant . . . a "financial consultant" in documents filed by Lord Ashcroft's companies at the London Stock Exchange, and he has sat on several of the peer's boards."

Read more about trusts here. Lord Ashcroft's spokesman, Alan Kilkenny, in the UK denies the allegations, asking: "How do you prove a negative?"

Could the peer be stifling competition in the Belize telecommunications market? We can't be sure - as we have said before, trusts potentially provide deeper and more devious forms of secrecy than what can be obtained by Swiss-style bank secrecy alone, and as The Independent notes:

"Between the byzantine network of Caribbean trusts set and the viciously polarised atmosphere of the local politics, truth is something of an elusive concept in Belize."

Whatever the truth, there can be no doubt that offshore secrecy is routinely abused, around the world, in order to stifle competition. Now read the rest of the article and the ones that accompany it: they are fascinating.

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