Where's Plan B
    Category: Column By : James Kallman Read : 1085 Date : Saturday, September 13, 2014 - 09:53:42

    With all the will in the world, sometimes things just don’t go as planned. Nor is this restricted to personal matters, as the same can happen in business, or even in the formulation of government policy. With a new government coming into office, I’ve chosen three random examples that would roughly fall under the jurisdiction of each of Indonesia’s three coordinating ministers: People’s Welfare, Economics, and Political, Law and Security Affairs.

    Take smoking for instance. As a veteran business traveler I’ve seen the nonsmoking section expand from just two or three rows in economy class to the total abolition of inflight smoking. The official line has increasingly been that smoking is totally bad and billions of dollars can be saved due to fewer early deaths and medical costs associated with treatment of heart and lung diseases. However, a little section embedded in the U.S. federal government’s new tobacco regulations suggests that this might be an oversimplification of the facts.

    It is the happiness quotient, a little-known costbenefit calculation that has public health officials in an uproar. If the calculation is correct, then up to 70% of the benefits gained from reduced smoking will have to be offset by the loss in pleasure smokers undergo in kicking the habit. After all, alternative addictions, psychological stresses, weight control issues, etc. also have their treatment costs. Moreover, from a government standpoint, the greater the success in stamping out smoking the more it loses in tax revenues, not just from con- sumers but from what is a labor-intensive industry in countries like Indonesia.

    Tax revenues are what all governments seek in order to finance public spending. Yet the harder companies are pushed to pay their fair share the more they seek loopholes in the tax legislation. In fact, globalization has

    in many ways proven a greater boon to the business world than it has to national governments, for it has provided companies with wider opportunity to find optimal tax havens.

    Much of the recent spate of merger and acquisition activity, particularly in the U.S. has been rooted in corporate inversion, whereby a company moves its notional head office from its home jurisdiction to an overseas territory. While this has little impact on actual operations, together with cross-border transactions between companies in the same group it can shift corporate profits to low-tax jurisdictions. Such a tactic is favored by American firms with substantial profits generated beyond U.S. shores. Amazon and Apple, for example, have no intention of repatriating such profits for the U.S. taxman to get his hands on. Again, the intention has had an adverse effect in practice.

    Nowhere have results confounded expectations more than with the U.S. military operations in Iraq. While the immediate objective of toppling Saddam Hussein was achieved, this generated aftershocks that have continued to ripple through the whole region. Are Algeria, Tunisia, Egypt or Libya really better off for their Arab Spring? Certainly the Syrian people wish they could turn the clock back a decade, while the Iraqi quagmire has only spawned ISIS. So in welcoming Joko Widodo to his new role as president of Indonesia, we wish him well and trust he will always have a Plan B for when Plan A doesn’t turn out as expected.