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Economy Current Affairs
Economy Current Affairs October 3rd Week 2017
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Economy Current Affairs October 3rd Week 2017

1. Vanuatu became the First Nation to accept bitcoin as Payment for its Citizenship Program.

Earlier this week, Vanuatu became the first sovereign nation to accept bitcoins in return for granting citizenship through its DSP Citizenship Program.

The Chairman of the Vanuatu Information Center (VIC) – which oversees Vanuatu citizenship applications -  Geoffrey Bond, had sent an official request earlier this month seeking permission to accept bitcoin as a form of payment. Andrew Solomon Napuat MP, the Parliamentary Secretary to the Prime Minister of Vanuatu, affirmed the decision last week.   

In a statement to news media, Bond stated that “While attempts have been made in the past to effect payments for citizenship by investment programs via Bitcoin, these efforts never had government approval, and were shut down as a consequence. However, in this case, the Government of Vanuatu has explicitly expressed a desire to be at the forefront of adopting new technologies, officially encouraging the VIC to receive payments in Bitcoin.”

The Chairman added that an unnamed Australian bitcoin exchange, which follows Australian KYC and AML regulations, would handle the bitcoin transaction at the time of payment, which occurs at the end of the application process.

The Managing Director of the VIC, James Harris, explained that there was initially some concern and suspicion about cryptocurrencies due to bitcoin’s reputed use in black markets and other undesirable activities. “In fact, the opposite is true,” he stated, “as crypto-currency exists in a fully traceable ledger, where the entire history of its creation and trading is visible.” Harris added that the use of bitcoin would greatly improve the flexibility of international financial transactions.

Vanuatu has a population of about 286,000 residents, and is composed of 82 relatively small islands in the south Pacific, nestled between Australia and Fiji. The 810-mile (1,300 kilometer) archipelago has 65 inhabited islands among eight active volcanoes. The country has its own money, the Vatu, but is relatively poor with few natural resources. The country’s primary industry is fishing. Roughly one-third of the residents speak English, an official language of the country along with Bislama and French.

The islands of Vanuatu have been reeling under several natural disasters in recent history such as volcanic eruptions, earthquakes, and cyclones. In March 2015, Vanuatu suffered a direct hit from category five cyclone Pam, which reduced its infrastructure considerably. More recently, the 11,000 residents of the island of Ambae had to be evacuated when its volcano erupted with little warning.

Perhaps to offset the costs of these disasters, the country has made a concerted effort to attract affluent investors as residents and citizens. The VIC states that Vanuatu has zero corporate tax, no income tax, no capital gains tax, no estate tax, no wealth tax, no withholding tax, no gift tax and no other personal income taxes.

According to the World Bank, Vanuatu has the lowest tax rate for businesses, recorded globally at 8.5% of a company’s annual profit. Often praised for being one of the world’s leading tax havens, Singapore’s tax rate is nearly double that of Vanuatu. Most other countries tax their businesses at a much higher rate, some as high as 108% of profits, according to the World Bank.

Within the 8.5% tax rate of Vanuatu, there is a mandatory 4.51% social security tax program for employees, a 3% business license, and approximately 1% for land, developed property, and vehicle taxes in the country. Apart from that, even residents without a business pay no other taxes to Vanuatu outside of a single 12.5% VAT tax that is locally applied, according to the VIC website.

Being a British Commonwealth nation, Vanuatu has a very desirable passport due to the visa-free travel to other commonwealth nations. Additionally, it has signed mutual visa waiver agreements with Russia and the European Schengen area countries in the last couple of years.

While the number of countries that a Vanuatu passport grants access to changes often, as of January this year the VIC states that they allow citizens visa-free travel to 125 countries including the UK, the whole of Europe, Russia, Hong Kong, and Singapore. This ranks the passport 45th in terms of travel freedom according to the Henley visa restrictions index.

The cost to become a lifetime, hereditary, Vanuatu citizen through the VIC’s program is US$200,000 per individual or $235,000 for a family of up to four. At the time of writing, that places the cost of an individual citizenship at just under 42 bitcoins. Additional family members can be added for $10,000 each, and only $5,000 each if they are under the age of 18.

Applying for the citizenship plan is a six-step process that begins with an initial $5,000 deposit at the time of application. The process lasts between 30 and 90 days, with the balance amount due at completion. There is no requirement for the new citizen to visit Vanuatu, according to the VIC. Although the country has other residency options, they currently do not accept bitcoin as a payment method.

Christian Nesheim, an investment migration specialist who advised VIC officials to accept bitcoin, is optimistic about the move. He asserts that accepting bitcoin will give Vanuatu a competitive advantage in the citizenship market, as investors in Bitcoin would be able to realize some of their earnings without incurring large capital gains taxes.
 
2. Indian Airports need $45 billion investment to improve capacity by 2030.
Indian Airports need $45 billion investment to improve capacity by 2030
India needs to invest up to $45 billion to create an additional capacity of handling 500- 600 million passengers at its airports by 2030 as their capacity is likely to saturate within the next five years, a study by an aviation think-tank said.

According to Centre for Asia Pacific Aviation (CAPA) estimates, the current capacity of the country’s top 17 airports is between 298-316.5 million passengers per annum. This is expected to increase to 431-463 million once the existing airport sites are completely built and achieve their maximum structural capacity.

CAPA notes that airports at Mumbai, Chennai, Delhi and Kolkata will reach their maximum capacity in the next one to five years, i.e. between 2019 and 2022, assuming passenger growth rate is 10% per annum.

Also, 10 airports—Pune, Jaipur, Srinagar, Lucknow, Dehradun, Agartala, Guwahati, Kozhikode, Mangalore, and Trichy—managed by the Airports Authority of India (AAI), are already operating “beyond their design capacity”.

Delhi’s Indira Gandhi International Airport’s current capacity is 64 to 72.5 million passengers per annum and its maximum structural capacity of 90-100 million passengers per annum is likely to be achieved by FY 2022, assuming a growth rate of 10%. Similarly, Mumbai’s Chhatrapati Shivaji International Airport with a maximum capacity of 50-52 million passengers per annum is likely to saturate by FY 2019.

“The airport system is expected to exceed its maximum structural capacity by FY 2022, based on data available to CAPA as of June 2017,” the CAPA report says. It adds that if new projects are delayed and passenger traffic grows faster than the conservative estimate of 10%, the threshold could be breached earlier than 2022. “India will need to build an additional 500-600 million capacity by 2030. This will require $36-45 billion of investment, including $12-15 billion of equity capital,” the report adds.
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There will also be a need to allocate 1,50,000 to 2,00,000 acres of land for 55 new airports by 2030, which CAPA says could be challenging as land banks on such a massive scale will become scarce. As airlines begin to induct 350-400 aircraft in the next five years, problems related to unavailability of slots as well as overnight parking bays will get magnified.

The saturation at metro airports combined with the government’s thrust on enhancing connectivity to tier-2 and tier-3 cities is expected to drive traffic to non-metro airports. The think-tank has recommended setting up a National Airports Commission under the civil aviation ministry which will oversee planning and development of airports.

“The commission should have responsibility for developing a long-term national airports master plan with a 20-30 year horizon, taking into account central and state economic plans and multi-modal transport connectivity,” CAPA proposes.
 
3. First Investment Agreement signed between NIIF and Abu Dhabi Investment Authority.
First Investment Agreement signed between NIIF and Abu Dhabi Investment Authority
The National Investment and Infrastructure Fund (NIIF) of India on Monday said it had signed an investment agreement worth $1 billion with a wholly owned unit of the Abu Dhabi Investment Authority (ADIA).

As part of the partnership agreement, ADIA will become the first institutional investor in NIIF’s Master Fund and a shareholder in National Investment and Infrastructure Ltd, NIIF’s investment management company, NIIF said in a press statement.

“This agreement marks the culmination of an extensive process of collaboration with ADIA to develop an investment structure that is attractive to international investors, while remaining closely aligned with NIIF’s objectives,” said NIIF chief executive officer Sujoy Bose.

NIIF was set up in 2015 as an investment vehicle for funding commercially viable greenfield, brownfield and stalled projects in the infrastructure sector.

NIIF will invest in areas such as energy, transportation, housing, water, waste management and other infrastructure-related sectors in India.
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The corpus of the fund is proposed to be around Rs40,000 crore, with the government investing 49% and the rest to be raised from third-party investors such as sovereign wealth funds, insurance and pension funds, endowments etc.

“NIIF is set to play an important role in facilitating the flow of foreign capital into India’s infrastructure sector. As a long-standing investor in India and in infrastructure globally, ADIA welcomes the opportunity to be the first to partner with NIIF in a platform that is sure to be of interest to other long-term institutional investors,” said Khadem AlRemeithi, executive director of the real estate and infrastructure department at ADIA.

ADIA has been an active investor in the Indian infrastructure space. In October 2015, ADIA led a $265 million investment in Sumant Sinha’s renewable energy company ReNew Power Ventures along with existing investors.

In July, The Economic Times had reported that ADIA was in talks to acquire a 49% stake in infrastructure firm GMR Infrastructure’s Hyderabad airport.
 
4. Bangkok Bank signs deal with Intellect Design for Digital Transaction Banking Platform.
Bangkok Bank signs deal with Intellect Design for Digital Transaction Banking Platform
iGTB, the transaction banking and technology specialist from Intellect Design Arena Ltd, has been selected by Bangkok Bank, Thailand’s market leader in corporate and small and medium-sized enterprise (SME) banking, as a technology partner to implement a comprehensive cash management platform and corporate portal.
The self-service digital portal will integrate a number of previously separate platforms, giving the bank’s clients - from SMEs through to multinational corporations - a consistent and consolidated view of their working capital and payments activities, irrespective of the country they operate in. 

The solution will also provide considerable benefits for the bank, with back-end processing of transactions, risk management and reporting all centralised and handled in one place - leading to vast improvements in STP rates. 

Thanit Sirichote, EVP, Corporate Cash Management at Bangkok Bank, says: “This partnership is a serious statement of intent, and an important component of the broader digital transformation that is underway at the Bank. We will be offering our corporate clients, of all sizes, better, more comprehensive, and more tailored services that increasingly use data analytics to get to the heart of what they are trying to achieve and how best to support them. 

“This solution will also give us a much greater capacity to serve clients internationally - meaning they can consolidate their banking relationships, minimise costs, and access a suite of highly relevant products, all through a single, easy-to-use portal.” 
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Manish Maakan, CEO of iGTB, adds: “This is a key strategic step for iGTB - our first Global Transaction Banking deal in Thailand, signed with the largest commercial corporate bank in the country. Building on our presence in Singapore and Malaysia, this is a statement of our wider ambitions across the region, and we’re delighted that our unique CBX18 based Contextual Banking approach will help Bangkok Bank with their digital transformation. This won’t simply be a “get in, get out” technology implementation, it’s a joint effort where we offer our transaction banking thought leadership and expertise to ensure Bangkok Bank are strategically positioned for the long term.” 

“We are delighted to be a part of Bangkok Bank’s transformational journey!, said K. Srinivasan, President, Emerging Markets , Intellect Design Arena. “This prestigious partnership with Bangkok Bank, Thailand validates our position as the preferred transaction banking specialist in the Asia Pacific region. Intellect will assist Bangkok Bank in its digital journey by proving real-time, flexible, and automated banking processes to maximise operational efficiency and provide best-in-class customer service.”

 5. Income Tax dept Launches ‘Online Chat’ to answer Taxpayers Queries.

The Income Tax Department has launched an ‘online chat’ service for taxpayers so that they can seek answers to their basic queries and doubts relating to direct tax issues.

A window has been hosted on the main page of the department’s website — www.incometaxindia.gov.in/ — with a prominent icon stating ‘Live Chat Online - ask your query.’

“A team of experts from the department and independent tax practitioners has been deputed to answer the general queries of a taxpayer. The first-time initiative is aimed to enhance taxpayer services in the country,” the officer said.

He added that more features would be added to the online chat system based on the feedback received by the department.

“An option has also been provided to the taxpayer for emailing the entire chat to their ids for future reference,” the officer said.

A precautionary note at the beginning of the chat, however, states: “The replies are based on the opinion of the expert and in no manner it should be interpreted as the clarification by the Income-tax Department on any matter.”

Last year, the I-T department had set up a new dedicated directorate within its establishment to monitor and resolve grievances of tax payers.

 

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