Friday, September 04, 2009
SERBIA - LOW CORPORATION TAX & NO ASSISTANCE FROM EU REGULATORS
Yesterday I blogged on Corporation tax rates worldwide & the relationship to growth. Something I had not realised before is that Serbia's CT is 10% (the only lower one in the world being Montenegro at 9% which I assume is to prove they are different). Regular readers here will know my interest in Serbia.
So I checked out the progress of their economy since we stopped bombing & ethnically cleansing them. This is from the Wiki article:
"the country went through the economic liberalization, and experienced fast economic growth (GDP per capita went from $1,160 in 2000 to $6,782 in 2008[3]). Furthermore, it has been preparing for the membership in the European Union, its most important trading partner. Estimated GDP (by purchasing power parity) of Serbia for 2008 is $78.83 billion which is $10 679 per capita. At present, main economic problems are high unemployment rate (14%) and large trade deficit ($11 billion). Being the only European country with free trades agreements with both the EU and Russia, Serbia expects more economic impulses and high growth rates in the coming years.
In recent years, Serbia has seen an increasingly swift foreign direct investment trend, including many blue-chip companies"
Tables are even more impressive:
Year GDP/growth/Per Capita
2000 8.7 _4.5% 1,160
2001 11.5 4.8% 1,536 [+32%]
2002 15.3 4.2% 2,036 [+33%]
2003 19.8 2.5% 2,640 [+29%}
2004 23.8 8.2% 3,186 [+20%]
2005 25.3 6.0% 3,408 [+6.3%]
2006 29.7 5.6% 4,009 [+17%]
2007 39.9 7.1% 5,387 [+34%]
2008 50.0 5.6% 7,054 [+25%]
That is pretty creditable. I am assuming that the disparity between the official GDP growth rate, averaging 5.4% (6.5% from 2004) & the increase in per capita income is because of the ending of distortions caused by official & semi-official sanctions.
Compared to the German per capita GDP of $31,800 they clearly have some way to go (4.5 times more)(3 by PPP) on the other hand they have gone up 6 times between 2000 & 2008. If my assessment is right future growth will be more like the 6.5% recently in which case average Serb GDP will be passing Germany's today in 2026 by PPP (2030 by exchange rates)
Living well is the best revenge.
George Herbert
Of course it is likely Germany will be a bit better off by then too but not that much. An obvious reason the other EU powers supported Germany's "recognition" of the statelets of openly genocidal (ex-)Nazi German satellites was because, with the reunion of Germany it would become easily the dominant economic & therefore every other sort of, power in Europe. Instead their economy has pretty well sat there & at present growth rates the dominant power by 2030 will easily be Russia, with Turkey possibly in 2nd place.
Which brings up the question of what Serbia should do regarding EU membership. I am writing only in economic not cultural terms. On the one hand membership, if offered on proper terms, would mean a considerable amount of money flowing their way. On the other it would mean all the EU bureaucracy flowing their way too. The EU has been the slowest growing part of the world economy & their regulations, even according to their own commissioners cost £405 bn in 2006, probably £500bn now. Britain could easily ignore the EU because we are an offshore island with easy access to the world while Serbia has merely the same luck as Switzerland. Nonetheless I think they would, except for a short term bonus, prosper more by staying out of the EU & trading freely with everybody, like Switzerland, than by joining the EU's regulatory morass. Unlike Switzerland they do actually have access to the world's oceans via the Danube.
To get most of my hobbyhorses into 1 thread I would also suggest they start building nuclear reactors. I have previously pointed out how available off the shelf reactors can, in a sensible regulatory regime, provide the cheapest & most reliable electricity & probably the best value is from the Russian VVER 1200. Though the Non-Proliferation Treaty prevents countries getting nuclear weapons it specifically assures all countries of the right to commercial nuclear. Now that Russia is stronger & Germany weaker even the EU Nazis are likely to respect international law now. A Serbia, outside the EU, could build nukes & become the France of eastern Europe doing very nicely by keeping the lights on in neighbours hobbled by eco-fascist eurocrats. Serbia is capable of setting its own nuclear regulatory regime, unlike surrounding countries & I suspect in a free market foreign investors would be queuing up to build them knowing the likelihood of blackouts across the EU - so restricted is this industry. Along with economic freedom readily available inexpensive power are the reliable drivers of growth.
It has been pointed out that countries with a high degree of self respect (eg France) tend to be more successful than those who rely on international institutions. I think Serbia can & should set itself national goals, primarily to become as economically powerful, per capita, as Germany. The lesson is not only that free markets produce better growth than controlled ones but that countries which make growth their priority (Stalin's USSR) do better than those with a culture overly downgrades the importance of growth (late Victorian Britain, current USA & UK). I think a market orientated, pro-nuclear, Serbia outside the EU could achieve all that.
I have no idea what their housebuilding regulations are like but since we have forced refugees on them exceeding 10% of their population I assume they are pretty free. In Britain housing costs 4 times the construction costs because of regulation but I assume such silliness doesn't occur there.
They should also put some effort, very small in terms of national income, into suing every unfriendly foreign politician, involved in genocide, in their own countries - call it a contribution to peace.
OK to force the last hobbyhorse in they should negotiate a joint small X-Prize Foundation with Australia (it has possible equatorial launch sites & a sizable expatiate Yugoslav population.
Looking at the later statistics in the article is even better news. Government debt has halved in money terms & sixtht in GNP terms, while foreign exchange reserves are not merely healthy but larger than public debt. What that means is that the dinar is being artificially kept down to make industry more competitive. It is what China has also been doing by lending money to the USA. It sacrifices present wealth for growth & future wealth (we are doing the opposite) so the PPP figure for national wealth is certainly more accurate than the exchange rate version & even then probably understates intrinsic wealth. It is also an option that would not be available if Serbia joined the euro.
So I checked out the progress of their economy since we stopped bombing & ethnically cleansing them. This is from the Wiki article:
"the country went through the economic liberalization, and experienced fast economic growth (GDP per capita went from $1,160 in 2000 to $6,782 in 2008[3]). Furthermore, it has been preparing for the membership in the European Union, its most important trading partner. Estimated GDP (by purchasing power parity) of Serbia for 2008 is $78.83 billion which is $10 679 per capita. At present, main economic problems are high unemployment rate (14%) and large trade deficit ($11 billion). Being the only European country with free trades agreements with both the EU and Russia, Serbia expects more economic impulses and high growth rates in the coming years.
In recent years, Serbia has seen an increasingly swift foreign direct investment trend, including many blue-chip companies"
Tables are even more impressive:
Year GDP/growth/Per Capita
2000 8.7 _4.5% 1,160
2001 11.5 4.8% 1,536 [+32%]
2002 15.3 4.2% 2,036 [+33%]
2003 19.8 2.5% 2,640 [+29%}
2004 23.8 8.2% 3,186 [+20%]
2005 25.3 6.0% 3,408 [+6.3%]
2006 29.7 5.6% 4,009 [+17%]
2007 39.9 7.1% 5,387 [+34%]
2008 50.0 5.6% 7,054 [+25%]
That is pretty creditable. I am assuming that the disparity between the official GDP growth rate, averaging 5.4% (6.5% from 2004) & the increase in per capita income is because of the ending of distortions caused by official & semi-official sanctions.
Compared to the German per capita GDP of $31,800 they clearly have some way to go (4.5 times more)(3 by PPP) on the other hand they have gone up 6 times between 2000 & 2008. If my assessment is right future growth will be more like the 6.5% recently in which case average Serb GDP will be passing Germany's today in 2026 by PPP (2030 by exchange rates)
Living well is the best revenge.
George Herbert
Of course it is likely Germany will be a bit better off by then too but not that much. An obvious reason the other EU powers supported Germany's "recognition" of the statelets of openly genocidal (ex-)Nazi German satellites was because, with the reunion of Germany it would become easily the dominant economic & therefore every other sort of, power in Europe. Instead their economy has pretty well sat there & at present growth rates the dominant power by 2030 will easily be Russia, with Turkey possibly in 2nd place.
Which brings up the question of what Serbia should do regarding EU membership. I am writing only in economic not cultural terms. On the one hand membership, if offered on proper terms, would mean a considerable amount of money flowing their way. On the other it would mean all the EU bureaucracy flowing their way too. The EU has been the slowest growing part of the world economy & their regulations, even according to their own commissioners cost £405 bn in 2006, probably £500bn now. Britain could easily ignore the EU because we are an offshore island with easy access to the world while Serbia has merely the same luck as Switzerland. Nonetheless I think they would, except for a short term bonus, prosper more by staying out of the EU & trading freely with everybody, like Switzerland, than by joining the EU's regulatory morass. Unlike Switzerland they do actually have access to the world's oceans via the Danube.
To get most of my hobbyhorses into 1 thread I would also suggest they start building nuclear reactors. I have previously pointed out how available off the shelf reactors can, in a sensible regulatory regime, provide the cheapest & most reliable electricity & probably the best value is from the Russian VVER 1200. Though the Non-Proliferation Treaty prevents countries getting nuclear weapons it specifically assures all countries of the right to commercial nuclear. Now that Russia is stronger & Germany weaker even the EU Nazis are likely to respect international law now. A Serbia, outside the EU, could build nukes & become the France of eastern Europe doing very nicely by keeping the lights on in neighbours hobbled by eco-fascist eurocrats. Serbia is capable of setting its own nuclear regulatory regime, unlike surrounding countries & I suspect in a free market foreign investors would be queuing up to build them knowing the likelihood of blackouts across the EU - so restricted is this industry. Along with economic freedom readily available inexpensive power are the reliable drivers of growth.
It has been pointed out that countries with a high degree of self respect (eg France) tend to be more successful than those who rely on international institutions. I think Serbia can & should set itself national goals, primarily to become as economically powerful, per capita, as Germany. The lesson is not only that free markets produce better growth than controlled ones but that countries which make growth their priority (Stalin's USSR) do better than those with a culture overly downgrades the importance of growth (late Victorian Britain, current USA & UK). I think a market orientated, pro-nuclear, Serbia outside the EU could achieve all that.
I have no idea what their housebuilding regulations are like but since we have forced refugees on them exceeding 10% of their population I assume they are pretty free. In Britain housing costs 4 times the construction costs because of regulation but I assume such silliness doesn't occur there.
They should also put some effort, very small in terms of national income, into suing every unfriendly foreign politician, involved in genocide, in their own countries - call it a contribution to peace.
OK to force the last hobbyhorse in they should negotiate a joint small X-Prize Foundation with Australia (it has possible equatorial launch sites & a sizable expatiate Yugoslav population.
Looking at the later statistics in the article is even better news. Government debt has halved in money terms & sixtht in GNP terms, while foreign exchange reserves are not merely healthy but larger than public debt. What that means is that the dinar is being artificially kept down to make industry more competitive. It is what China has also been doing by lending money to the USA. It sacrifices present wealth for growth & future wealth (we are doing the opposite) so the PPP figure for national wealth is certainly more accurate than the exchange rate version & even then probably understates intrinsic wealth. It is also an option that would not be available if Serbia joined the euro.
Labels: economics, Yugoslavia
