Gulf loses $1 trillion in illicit outflows, says US agency

Region pays heavy price in last decade over trade mispricing and corporate fraud
Gulf loses $1 trillion in illicit outflows, says US agency
The Gulf was one of the biggest sources of illicit outflows in the last decade, the agency said
By Ed Attwood
Thu 20 Jan 2011 12:05 PM

The Gulf was one of the biggest sources of illicit outflows over the last decade, with four GCC members losing just under $1 trillion, according to recent data.

Global Financial Integrity (GFI)’s research into the issue showed that illegal outflows from developing countries in general increased from $1.06 trillion in 2006 to $1.26 trillion in 2008.

The US agency’s methodology allows it to capture trade mispricing – where multinational corporations manipulate figures on commerce and earnings to minimise tax liabilities – as well as the proceeds of bribery, theft, kickbacks and other forms of tax evasion.

In the Gulf, Saudi Arabia led the way with a loss of $302bn, which put it fourth on the list of developing countries. On average, the kingdom lost $33.5bn annually over the last decade. 

The UAE ranked sixth ($276bn), with Kuwait seventh ($242bn) and Qatar ninth ($138bn).

However, the Gulf nations were far behind the top-ranked nation, China, which lost a staggering $2.18 trillion during the decade.

“China’s role diminished considerably with its share of all-developing-world outflows falling from 46 percent in 2000 to 27 percent in 2008,” the report said.

“In contrast, Russia, the United Arab Emirates, Kuwait, and Nigeria - all oil exporters - are now becoming more important as sources of illicit capital.”

Trade mispricing accounted for more than half of cumulative illicit flows from developing countries during the review period.

However, while mispricing is most common in China, the report said that unrecorded capital leakages through the balance of payments – such as bribery, theft and so on - were the prevalent form of illicit transfer in all of the Gulf countries.

The agency also said that it expected a slowdown in the growth of this phenomenon during 2009, to 2.9 percent year-on-year globally, compared to an average 18 percent rate of growth during the review period.

 

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