draining development.pdf - Khazar University

342 Draining Development?Palan explores some of the difficulties of consistent definition in thiscase, as follows:In financial literature, . . . offshore is used . . . to describe unregulatedinternational finance. . . . Rather confusingly, however, the InternationalMonetary Fund and the Bank for International Settlements consider onlytax havens as Offshore Financial Centres, though the City of London,which does not qualify as a tax haven, is considered the hub of globaloffshore finance. (Palan 1998, 64)Palan goes on to distinguish between spontaneous OFCs, which havegrown up as entrepôts over time, such as the City of London and HongKong SAR, China, and international banking facilities that have beenmore recently created as part of a deliberate strategy, such as New Yorkand Singapore.An important IMF Working Paper by Ahmed Zoromé (2007) discussesthe definitional issues in some detail and proposes new criteria(discussed in the following subsection). After surveying most of the keyreferences, Zoromé concludes that “three distinctive and recurrent characteristicsof OFCs have emerged from these definitions: (i) the primaryorientation of business toward nonresidents; (ii) the favorable regulatoryenvironment (low supervisory requirements and minimal informationdisclosure); and (iii) the low- or zero-taxation schemes” (Zoromé2007, 4).This shifts the focus onto specific actions taken by jurisdictions,whereas other definitions tend to emphasize specific results. Zoromé’ssubsequent application of these criteria offers one solution to Palan’spoint about the City of London: Zoromé classifies the United Kingdomas an OFC.The third main term used—increasingly so since it was promoted byMurphy (2008)—is secrecy jurisdiction. The focus remains on specificactions taken, but is more explicit in emphasizing the legal steps. In this,it follows the logic of Palan (2002), who discusses the commercializationof sovereignty: the decision by certain jurisdictions to obtain economicadvantage by allowing selected political decisions (over, for example, thetaxation of nonresidents) to be dictated by likely users (for example,financial, legal, and accounting practitioners). The term jurisdiction istherefore used, rather than, for example, center or some other less spe-