Services Value Chain

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The Services are supplied at various processes of the value chain of the main Industry. The following process is given in one of the WTO Report:

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Application of Arms Length Principle in National Legal System

#ArmsLengthetc #TransferPricing #NotatArmslength #ContractLaw  #ComparativeLaw #IEFbygirindra

The Arms Length is an interesting phrase in contract law. I dont understand that why there is a discrimination with Leg or Finger or Thumb. Then comes the length of Arm or Arm Span. The boxing is interesting game where longer the arms higher the chance of winning. Similar case is for swimming or kabaddi or basket ball or discuss throw. However, the Arms Length is a well established principle in contract law. The wikipedia Article (https://en.wikipedia.org/wiki/Arm%27s_length_principle) defines it as "The arm's length principle (ALP) is the condition or the fact that the parties to a transaction are independent and on an equal footing. Such a transaction is known as an "arm's-length transaction". It is used specifically in contract law to arrange an equitable agreement that will stand up to legal scrutiny, even though the parties may have shared interests (e.g., employer-employee) or are too closely related to be seen as completely independent (e.g., the parties have familial ties)"  . And the investopedia (http://www.investopedia.com/terms/a/armslength.asp) defines it as "A transaction in which the buyers and sellers of a product act independently and have no relationship to each other. The concept of an arm's length transaction is to ensure that both parties in the deal are acting in their own self interest and are not subject to any pressure or duress from the other party."

The most interesting Area of ALP is the Transfer Pricing. The Arms Length Principles gets introduced in National Law by Transfer Pricing Regulations and Advance Pricing Regulations. Afterwards, I compiled the year of introduction of Arm Length Principle in country from internet in National Law. The list of countries is given as below as sorted by Column 4:

Country Name	GDP          2013	GDP             2014	YEAR of Introduction of Transfer Pricing Regulation	YEAR OF Introduction of Advance  Pricing Regulation
[1]	[2]	[3]	[4]	[5]
Norway	522349106383	499817138323	1911
United Kingdom	2712296271990	2988893283565	1915	2010
Sweden	578742001488	571090480171	1928	2010
United States	16768053000000	17419000000000	1935	1991
Switzerland	684919206141	701037135966	1940
Belgium	521402393365	531546586179	1962	2004
Portugal	226073492966	230116912514	1964	2014
Finland	269190106005	272216575502	1965
Luxembourg	61794506556	64873963098	1969	2015
Austria	428698577647	436887543467	1972	2011
Germany	3745317149399	3868291231824	1972	2006
Spain	1369261671179	1381342101736	1978	2007
Australia	1563950959270	1454675479666	1982	2011
Italy	2133539300230	2141161325367	1986	2004
Japan	4919563108373	4601461206885	1986	2001
Hungary	134401774738	138346669915	1992	2007
Czech Republic	208328435109	205269709743	1993	2006
Poland	524059039423	544966555714	1993
Slovak Republic	98033841689	100248607784	1993
Korea, Rep.	1305604981272	1410382988616	1995	2015
South Africa	366243783486	350085020840	1995
Chile	276673695234	258061522887	1997	2013
Mexico	1258773797056	1294689733233	1997	2012
New Zealand			1997	1994
Argentina	614383517370	537659972702	1998
Canada	1838964175409	1785386649602	1998	1993
Denmark	335877548364	342362478768	1998	2002
Estonia	25246787742	26485161116	1998
Colombia	380063456193	377739622866	2002	2004
India	1861801615478	2048517438874	2002	2012
Netherlands	864169242953	879319321495	2002	2014
Egypt, Arab Rep.	271972822883	286538047766	2005	2011
Slovenia	47675804618	49491440620	2005
Israel	292408330564	305674837195	2006
Turkey	823242587404	798429233036	2007	2007
China	9490602600148	10354831729340	2008	2009
Malaysia	323342854423	338103822298	2009
Singapore	302245904260	307859758504	2009	2015
El Salvador	24350900000	25163700000	2010	2012
France	2810249215589	2829192039172	2010	2005
Indonesia	910478729099	888538201025	2010	2010
Ireland	238259956627	250813607686	2010
Russian Federation	2079024782973	1860597922763	2012	2012
Costa Rica	49236710394	49552580683	2013	2013

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ORGANIZE ET IMPERA

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This post was previously published in earlier blog of this Investment Economics Foundation:

The survival is the basic motive in this world. In this blog, the organization word comes from organ-iza-tion or Organism or Organic etc etc.. It implies the biological organism like amoeba or microbacteria or plants or animals or humans. Any living body on this own motion & energy source is organized. The living body do not need any organization on its own. Its sufficiently organize to take care of itself. 

The issue comes in case of survival of non-natural organized bodies. The most prominent and most popular is family. The marriage is organization of two person who are living together in cooperative or competitive manner. The household activities need organization. Then the families grows. The larger the household then larger is the need of organization. The largest family in the world is of Mr. Ziona (https://en.wikipedia.org/wiki/Ziona). The family photo is at Image-1. Such family would need lot of organization to survive. 

Then comes the artificial bodies like companies or artificial entities. The USA Department of Defense has 32 Lakhs employees. The People Liberation Army of China has 23 lakh employees. The Walmart has 21 Lakh employees. The McDonalds has 19 lakh employees. The list goes on. The organization of such bodies run on the rules for its survival. And the basic analysis unit which shall be taken in this blog in each post is acronym of RAFT i.e. R for Rules & Risks, A for Assets, F for Functions and T for Transactions. The RAFT is quite an appropriate word as it has the RAFT has to survive on the water having so many varieties.. So lets begin..

Rent Seeking - Good or Bad ?

#corruptionlaw  #CorruptionEconomics #IEFbygirindra

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Many government policies, such as import licenses in developing nations, create rents for some market participants. While the presence of such rents and the distortions that they create have long been noted, this paper recognized the importance of “rent-seeking behavior” and explored its welfare implications. The paper’s central finding is that competitive rent-seeking increases the welfare costs of policies such as trade restrictions. In the context of import restrictions, this result strengthens the case for the use of tariffs rather than import quotas, since quotas create the possibility of rent-seeking behavior. By identifying the importance of rent-seeking activities and providing a framework for analyzing their welfare costs, this paper expanded the economic analysis of the government’s choice of policy instrument to achieve particular goals. It also helped to launch a voluminous literature on the role of corruption and governance in the process of economic development.  

Taken from : http://pubs.aeaweb.org/doi/pdfplus/10.1257/aer.101.1.1

Krueger, Anne O. 1974. “The Political Economy of the Rent-Seeking Society.” American Economic Review, 64(3): 291–303. (http://www.aeaweb.org/aer/top20/64.3.291-303.pdf)

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Rent Seeking - ADAM SMITH

#corruptionlaw  #CorruptionEconomics #IEFbygirindra

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Adam Smith divided income into three types: profits, wages, and rents. The essential feature of profit is risk: capital is ventured in the hope of a return, and there may be a very great return, or little, or none. There is no guarantee of a profit in any enterprise, which is why businesses, both large and small, go bankrupt all the time -- unless, like Chrysler, they have enough political influence to get bailed out by the government. Profits ultimately represent the real growth of wealth in an economy, for the profits of one enterprise do not always come out of the profits for another. Say's Law is that supply creates demand, that a successful business adds to the productive capital of society, which increases the goods, and the profits, available for everyone. If the "profit motive" is rejected by governments because it is selfish or evil, and enterprises are conducted without concern for profitability, then what actually happens is that they will need to be subsidized, and the subsidies will have to come, if not out of profitable enterprises, then out of the stock of capital itself. This means that the economy will gradually consume itself, just as a starving person lives off their own tissues, until there is too little left to sustain life. That is what happened to the economies of the Soviet Union and Eastern Europe, and to countless, ill-advised Third World countries.

Wages, on the other hand, represent no risk, except that their source might (illegally) default or (legally) go bankrupt. Wages are a fee for a service, naturally discounted by the market mechanism for the absence of the kind of risk germane to profits. Market wages are otherwise proportional to productivity, and productivity is proportional to the capital investment in the person (education, honesty, diligence, etc.) and in the job (machinery, computers, etc.). Capital value in the person ("human capital") comes from natural endowments (talent, intelligence), upbringing (honesty, conscientiousness, reliability, etc.), and education (training and knowledge). Most of this belongs to people before they ever go to work, but employers may invest in workers further through on the job training or additional education. Labor intensive work means low skills, low productivity, low wages, and so a larger, less wealthy work force to produce a given amount of goods. Capital intensive work means higher skills, higher productivity, higher wages, and so a smaller, wealthier work force to produce a given amount of goods. People fear and hate being thrown out of work by mechanization and automation, but that is the only way that life gets better for most people. The labor that is not needed after productivity increases is then available to produce new kinds of products, further enriching life for everyone. The best example of this kind of shift is that for most of human history over 90% of the work force was necessary just to produce food (still 85% in Tanzania). By 1840, the United States for the first time had less than 90% of the population living in rural communities (of less than 2500 inhabitants). By 1880, the United States for the first time had less than 50% of the work force in agriculture. Now only about 1.6% of the work force is engaged in agriculture full time. No one thinks that the solution for unemployment is for people to go back into agriculture. The only real solution is for new products and new industries to arise. For this to happen, however, someone must risk some capital, with the hope of profit, in order to attempt to increase productivity or attempt to produce something new. Those attempts often fail, which is why profit involves risk. Also, some of them must fail, or many useless and uneconomic activities will continue to burden the economy (as in the Soviet Union, the U.S. Federal Government, etc.).

Rents are the easiest kind of income. A rent is money paid for the use of a capital asset, whether land, a building, an office, a car, a bicycle, or whatever someone might want but cannot or does not want to own. The owner who rents out his assets need only worry about (illegal) damage like vandalism, theft, etc. and about (inevitable) depreciation, where the capital value of the asset declines in time through ordinary use. Loaning money is a kind of renting, where the asset may depreciate through inflation and where there is considerable risk that the borrower may default or go bankrupt. The element of risk introduces an element of profit, but a careful lender can see to it that borrowers have the assents to cover any defaults: and the legal right to recover capital distinguishes renting from a straight investment for profit (where the whole capital can be lost without legal, moral, or any other recourse). Like banks in that respect, most renting enterprises mix rents with profits: they invest for profit by running a business where they collect rents.

Because rents are the easiest and most secure kind of income, it is natural for people to want income from rents rather than principally from profits or wages, and to want rents that involve the least risk and labor as enterprises. This motive is called "rent-seeking," and there is nothing wrong with it. Indeed, those who collect rents in an economy serve the valuable function of seeking to maintain and preserve capital assets [note]. It becomes wrong when rent-seeking means trying to collect rents off of capital that is not the rightful possession of the rent-seeker. This can be legally accomplished through the means that secure the rights of property in the first place: politics and the law. Through political influence people can be given ownership of things that are not their property, or should not be anyone's property. The theory of rent-seeking began with the economist Gordon Tullock.

A government that grants a monopoly in a certain enterprise cannot determine a market-clearing price and so is either going to victimize a company by not allowing a high enough price or is going to victimize the public by mandating or engineering prices that are too high: those prices then include "monopoly rents," the amount of money the company makes over the profits of a competitive market. The rent comes from the "ownership" of the monopoly market. Similarly, on the other side of the coin is labor law, which tends to vest workers with property rights in their own jobs. Since that is how feudalism worked ("livings," like property, were bestowed on people, and these consisted in collecting feudal rents), and it does contain the attraction of job security, there is a powerful historical and emotional pull to such rent-seeking, although it is contrary to the flexibility (albeit insecurity) for growth that the free market provides. The seduction is the thought that workers are better off with their monopoly rents and security, when in fact workers in general are far better off that the free market allowed the growth of wealth and erased the kind of peasant life (with security, apart from plagues, invasions, the droit de seigneur, etc.) that most people had under feudalism.

Source: http://www.friesian.com/rent.htm

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What is Not Corruption ? And What is corruption ?

The following post was written on Legal Perceptions on 23.12.2015 #CorruptionLaw #IEFbygirindra

Many great people are running Wars against Corruption with full vigor & intensity. I just thought to study the definition of corruption. Honorable Parliament of India has passed An Act to consolidate and amend the law relating to the prevention of corruption and for matters connected therewith in the Thirty-ninth Year of the Republic of India as Prevention of Corruption Act 1988. It is having 9 offences under its jurisdiction as follows:

1. Section 7. Public servant taking gratification other than legal remuneration w.r.t an official act
2. Section 8. Taking gratification, in order, by corrupt or illegal means, to influence public servant
3. Section9. Taking gratification, for exercise of personal influence with public servant
4. Section10. Punishment for abetment by public servant of offences defined in section 8 or 9
5. Section 11. Public servant obtaining valuable thing, without consideration from person concerned in proceeding or business transacted
6. Section 12. Punishment for abetment of offences defined in section 7 or 11
7. Section 13. Criminal misconduct
8. Section14. Habitual committing of offence under sections 8, 9
9. Section15. Punishment for attempt

However The Act does not define the word "Corruption". Black’s Law Dictionary defines corruption as “ the act of doing something with an intent to give some advantage inconsistent with official duty and the rights of others, a fiduciary or official use of a station or office to procure some benefit either personally or for someone else, contrary to the rights of others...an impairment of integrity, virtue or moral principles; especially impairment of a public official’s duty by bribery”. The Transparency International definition of corruption as “the misuse of entrusted power for private gain” is a simpler but more encompassing definition which covers all the bases outlined by the Black’s Law Dictionary definition. 

Now a days google search gives proper dictionary search & its sophisticated linguistic mining systems so its output is as follows: CORRUPTION is a noun, plural noun: corruptions. Its 3 usage are as follows:

1.

dishonest or fraudulent conduct by those in power, typically involving bribery.

"the journalist who wants to expose corruption in high places"

synonyms: dishonesty, dishonest dealings, unscrupulousness, deceit, deception, duplicity, double-dealing, fraud, fraudulence, misconduct, lawbreaking, crime, criminality, delinquency, wrongdoing, villainy; More

antonyms: honesty

the action or effect of making someone or something morally depraved.

"the corruption of youth was a powerful motif"

synonyms: sin, sinfulness, ungodliness, unrighteousness, profanity, impiety, impurity; More

antonyms: morality, purity

2.

the process by which a word or expression is changed from its original state to one regarded as erroneous or debased.

"a record of a word's corruption"

synonyms: alteration, falsification, doctoring, manipulation, manipulating, fudging, adulteration, debasement, degradation, abuse, subversion, misrepresentation, misapplication; rarevitiation

"these figures have been subject to corruption"

the process by which a computer database or program becomes debased by alteration or the introduction of errors.

"this procedure creates a temporary file to prevent accidental corruption"

3. 

archaic

the process of decay; putrefaction.

"the potato turned black and rotten with corruption"

So can we begins to understand that what is Corruption ?

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First Post !!

Inquiry is our birthright and we must always do it from public data or purchasable data for constructive purposes by our sheer diligence in this world of open source assets. And the 1st step in such inquiry is avoid the bogus or frivolous inquiry by our imaginations, conjectures and whims. Inquiry is defined by the evidences of its facts and circumstances. So always remember the 1st line that "inquiry is our birthright" and always remain lawgical..

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