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- Date submitted: 1 Nov 2011
- Stakeholder type: Major Group
- Name: New Vision International
- Submission Document: Download
Focusing on Entrepreneurship for Job Creation and Agri-Business for Enhancing Sustainable Development and Poverty Eradication. Topic suggested and submitted by Bernard Nyembo
New Vision International ? http://www.nvint.org
?An Ant on Move Accomplish More Than a Dozing Ox.? Lao Tsu.
The purpose of this paper is to provide a significant contribution to the pillars of sustainable development that could be launched and endorsed at Rio+20. The objective is to share our insights on the final document about this important event. Our endeavor implements the gaps and proposes some guidelines to Government, the Civil Society and the UN organizations, as well as Transnational Corporations.
Our expectations for the outcome of Rio+20 is to see a new era of Actions in the field, rather than scientific, scholars and technocrats in air-conditioned offices in New York, Paris, or London, focusing on theories about development and world problems. In order to achieve it, we tape into our thirty years of international experience in Banks, Trading, and Humanitarian for providing achievable framework for action in order to revamp sustainable development plans, with a focus on Entrepreneurship, Agri-Business, Global Trading and Partnership. Specifically we integrate Finance, Energy and Green economy in the context of sustainable development and poverty eradication.
The world economy is still struggling to recover from the worst recession since the Great Depression. Therefore in this paper, we insist that the G-20 and policymakers cannot afford to waste the opportunity for a more fundamental reorientation of policies and institutions. Strict regulation of the financial sector; orienting it more towards investment in fixed capital, agri-business and transfer of technologies is key to greater stability of the global economy and to its return to a sustainable growth path. This requires increased coherence between the multilateral trading system and the international monetary system, a reorientation of fiscal policy at the national and regional levels, rather than focusing exclusively on balancing budgets or on achieving public deficit target. However, unless there is a reversal of the current trend of diminished income expectation of the average household and a return to policies that emphasize the importance of mass income growth as the basis for sustainable and balanced development in rich and poor countries alike, all other attempts to regain growth will be in vain.
Poverty reduction is a central feature of the international development agenda and contemporary poverty reduction strategies increasingly focus on ?targeting the poor?, yet poverty and inequality remain intractable foes. Combating Poverty and Inequality argues that this is because many current approaches to reducing poverty and inequality fail to consider key institutional, political and political dimensions that may be both causes of poverty and inequality, and obstacles to their reduction. Economic integration and interdependence in the world today have reached an unprecedented level. As a result, the globalized economy cannot function for the benefit of all without international solidarity and cooperation. This was highlighted by the global financial and economic crisis that
followed the collapse of big financial institutions, and it has underlined the need for developing approaches to new forms of global collaboration.
The G-20, which has become a leading forum for international economic cooperation, successfully coordinated an immediate policy response to the crisis, or ?Great Recession?
as it is now called. Coordinated monetary policy easing by leading central banks marked the first step, with most members of the G-20 launching large fiscal stimulus packages as
well as emergency support programs to restore financial stability. The aggregate impact of these measures stopped the economic free fall and won policymakers an important first
round in battling the crisis.
But, despite intense discussions, little progress, if any, has been achieved in major areas that were also concern to the G-20. These include financial regulation, inter alia for tackling problems related to the ?financialization? of markets for many primary commodities, and, even more importantly, reform of the international monetary systems for curbing volatile short-term capital flows that are driven mainly by currency speculation. Meanwhile, global economic recovery has entered a renewed phase of fragility because a process of self-sustaining growth through private spending and employment is not assured, especially in developed countries. Many of these countries have shifted their fiscal policy stance from stimulus to retrenchment, which risks leading to prolonged stagnation, or even to a contraction of their economies.
Given the lack of growth in employment and wages in Europe, Japan and the United States, their policies should aim at continued stimulation of their economies instead of trying to ?regain government spending. The main global risk is that wages and mass incomes might not increase sufficiently to feed a sustainable and globally balanced process of growth based on domestic demand. This indicates that the risk of higher inflation resulting from rising commodity price is very small. Only few countries that have strong growth and overshooting wage dynamics face inflation risks.
Therefore, we propose the G-20 to: (i) Encourage and support entrepreneurs for job creation in order to fight poverty; (ii) Launch an international Task Force for facilitating and monitoring the Diaspora from poor countries relocate in their homeland for making positive changes; (iii) Facilitate credit access for enhancing investments in Agribusiness and Food quality; (iv.) Encourage our plan for the creation of an Ethical Bank for Development.
In this paper we argue that the main issue is Job Creation and Equal Opportunities. Based on our own experience as Entrepreneurs we will focus on three main issues that constitute the critical elements of a sustainable and inclusive development strategy: (i) patterns of growth and structural change (whether in the agricultural, industrial or service sectors) that generate and sustain jobs that are adequately remunerated and accessible to all, regardless of income or class status, gender, ethnicity or location; (ii) comprehensive social policies that are ground in universal rights and that are supportive of structural change, social cohesion and democratic politics; (iii) protection of civic rights, activism and political arrangements that ensure states are responsive to the needs of citizens and the poor have influence in how policies are made.
Therefore, without investigating theories, we explore through our experience of Entrepreneur, the causes, dynamics and persistence of poverty; we examines what works, and what has gone wrong (and why) in international policy thinking and practice; and lay out a range of policies and institutional measure that countries can adopt to alleviate poverty by job creation.
We approach the topic with the spirit of re-visiting and implementing specific cooperation mechanisms, partnership arrangements or other development schemes pertained to the Millennium Development Goals (MDGs) for sustainable development.
Through our experience, we illustrate and we assess the progress to date and remaining gaps in the implementation of the outcomes of the major summits on sustainable development while addressing new and emerging challenges. We describe how Green economy can be a means to achieve sustainable development, and how to add value by transforming agriculture into business. And we describe our own experience to date, including what has worked and how to build upon success, what are the challenges and opportunities and how to address the challenges and seize opportunities, and possible elements of an agreement in outcome document on a Green economy in the context of sustainable development and poverty eradication.
To make the paper looks more practical, we provide a limited number of quotes and references. A small bibliography is available at the end. We rather explore our expertise in order to present ?A Case? based on our experience of Entrepreneurs and Businessmen. Therefore, we organized the paper in seven parts: (i) The Need of a New Direction, and a New Vision of World Affairs. (This part is certainly the most important); (ii) Food Security and Sustainable Agriculture (Agri-Business); (iii) Revisiting Aid, and Technology Transfer; (iv) Energy (oil); (v) Job Creation; (vi) Our Own Experience as Entrepreneurs and Businessmen; (vii) The Role of International Organizations and the Transnational Corporations in world affairs.
The world?s richest 20% now get 86% of the world?s GDP, while the poorest 20% get
1%. The income of the world?s two hundred richest people doubled between 1994 and
1996 to over a trillion dollars. The world?s three richest people have assets greater than the combined output of the 48 poorest countries. The result is not only acute social and political tensions but a rise in armed conflicts and foreign military aggression against sovereign states, bringing the world to the brink of a third world war. As a result, many puzzles are in conflicts: Shall we use the puzzle of criminal laws as price? How about the puzzle of prison? How about the puzzle of criminal intent? How about the puzzle of the tort/crime distinction? Etc.
Such dilemmas should force us to think about the fundamental, ?is criminal law mistaken about economics and finance? Even law and economics guru Richard Posner conceded that economic explanations for criminal behavior are ?not? entirely satisfactory?. Economist George Stigler goes further. He said, ?the fault lies not in economics, but tin the law itself.? If we do not learn the lessons from the Oil crises and the financial crunch, some specialists will introduce the idea of ?de-regulation?, and financial/economical ?re- habilitation?. But homo economicus is incapable of being rehabilitated. He is, and always will be, happy to follow any course of action, legal or illegal, that maximizes his own material welfare. This principle is killing the Oil price, and may create other tsunamis.
It is critical that the young generation of African Leaders working in international institutions should be aware of the Jekyll/Hyde Syndrome and many others criminal attitudes and behaviors from the deciders towards world affairs. In world affairs, especially in international institutions, it is critical to understand why some people have the tendency to shift between selfish and unselfish behavior - and vice versa - in response to social context. Acting like Mr. Hyde implies there is no difference between the motives and attitudes of criminals, and the motives and attitudes of law-abiding citizens. As Gary Becker has explained it, ?the approach? assumes that a person commits an offense if the expected utility to him exceeds the utility he could get by using his time and other resources at other activities. Some persons become ?criminals?, therefore, not because their basic motivation differs from that of other persons, but because their benefits and costs differ?.
In Stevenson?s novella, however, Dr. Jekyll?s basic motivations differed greatly from Mr. Hyde?s. Hyde was a psychopath of ?wonderful selfishness? who was ?wholly evil?. Today we are expected to follow the rules even when self-interest tempts otherwise. An
individual who steals, rapes, and murders whenever it suits him is acting like Hyde in a social context where he should act like Dr. Jekyll. Something has gone seriously wrong and is still going wrong with the global economy. The criminal?s Hyde persona dominates in situations where his Jekyll persona should be in charge. Modern societies are not set up to endure such individuals, especially in big institutions commanding world affairs. We must take a new vision, a new direction.
Hyde not only succumbs to temptation, he does not to try to resist it. A person who always acts Hydish poses a danger to the rest us, just as Hyde posed a danger to the inhabitants of nineteenth-century London.
The above observations should lead to question whether the policymakers who create financial crunches are dangerous silent killers. Why?
To lawyers, murder is ?malice?, defined as the mental state of indifference or hostility toward the welfare of others. Indifference toward others is, of course, the very definition of homo economicus. A person who shows ?malicious? indifference toward others in situations where the social signals say he should show concern is a serious threat. The difference between the criminal and the law-abiding citizen may only be a matter of degree. Tort law deals with otherwise-pro social individuals who miscalculate a risk or fail to recognize a danger. We should target purely selfish individuals who just don?t care. Such persons pose a danger not only to his immediate victim, but to everyone else around him.
We need a new vision, new paradigms in order to transform homo economicus to homo sociologicus. This implies among other things, revisiting the laws and regulations in order to fight the global economic injustice. According to Frans de Waal, even chimpanzee tribes select a dominant male (a ?Big Chimp?) to keep order and settle fights: ?Dominant chimps generally break up fights either by supporting the weak against the strong or through impartial intervention. Broken windows theory got its name from the title of an influential article by James Q. Wilson and George L. Kelling published in 1982 in the Atlantic Monthly, ?if a window in a building is broken and left unrepaired, all the rest of the windows will soon be broken? One unrepaired broken window is a signal that no one cares, and so breaking more windows costs nothing.? One remembers how in June 2008 a young golden boy, Bradley Birkenfeld, banker said at the U.S. District Court in Fort Lauderdale, Florida. He and other UBS bankers had advised their U.S. clients to cheat by creating offshore accounts; to stash watches, jewelry, to use Swiss credit cards to prevent the IRS from tracking their purchases, etc. When Judge Zloch asked him why he nevertheless participated in the scheme, Birkenfeld replied softly, ?I was employed by UBS? I was incentivized to do this business?
The above examples show that we are not blind; we know how it works and who are hiding behind the curtains in the matter of ?fixing commodities prices, including oil?. It works exactly like the ?future?, the speculation, or the ?casino? banking, and other (virtual) structured products. We recommend the section at page 12, ?The Invisible Hand: The incidence of Maladjusted Persons in Business and in World Affairs.? This section is the most important since it illustrates how if well used, social sciences (non-
quantitative) can control quantitative data in order to correct the grave distortions and deviations of commodities prices in the Global Market.
We herewith provide a synopsis of issues to be addressed in order to comply with the
1. The Banking System
As the problem of mispricing a systemic feature of financial markets, regulation should
focus on the system, rather than on behavior inside the system, with a view to enduring that the system as whole better serves real productive investment and growth in the real economy. A clear separation of deposit-taking institutions from those that are engaged in investment banking activities could help prevent gambling and casino "banking" by commercial banks. This would also reduce the size and increase the diversity of banking institutions. Publicly owned banks could play a more important role, not only for development finance purposes, but also as an element of diversity and stability. These kinds of banks have turned out to be more resilient during crises, and they have partly compensated for the credit crunch in the private system caused by the recent crisis. They may also help promote competition in situations of oligopolistic private banking
The International Aid. (Details are provided at p. 15, Section, ?Technology Transfer?.)
Aid of Official Development Assistance (ODA) refers to resources made available by governments on concessional terms primarily to promote development and the welfare of developing countries2. This can take the form of grant funds, grants in kind, services or concessional loans that have at least 25% grant component. It can come from a single donor country or from many donor countries that course aide through multilateral institutions such as the World Bank, the European Commission or United Nations (UN) agencies. The former is referred to as bilateral aid while the latter is known as multilateral aid.
What is wrong with Aid?
1 Trade and Development Report, 2011 Unctad, p. 19.
2 According to the DAGOECD, ODA refers to "Grants or loans to countries and territories on the DAC List of ODA Recipients
(developing countries) and to multilateral agencies) which are: (a) undertaken by the official sector: (b) with promotion of economic development and welfare as the main objective; (c) at concessional financial terms (a loan, having a grant element of at least 25 per cent). In addition to financial flows. technical co-operation is included in aid. Grants, loans and credits for military purposes are excluded. Transfer payments to private individuals (e.g. pensions, reparations or insurance payouts) are in general not counted. (DAGOECD)
1. Aid is given to countries according to the economic, political and security interest of donor states.
2. Aid is given with policy conditionalities to favor the commercial interests of donors.
3. Aid comes with strings attached and aid has been so broadly defined that much of the
money counted as aid never event enters the recipient country.
4. Aid finances a huge and expensive aid industry.
5. Aid is owned and managed by donors.
6. Aid benefits are captured by domestic elites at the expense of the poor and
3. South-South Cooperation
In his Report 2010 about South-South Cooperation: Africa and the New Forms of Development Partnership, the Unctad indicates that International trade has and will continue to play a vital role in the economic development of Africa. It provides employment, contributes to technology transfer and is an important source of foreign exchange needed for imports of intermediate and capital goods used in domestic production. In recent years, African countries have intensified efforts to exploit this potential of trade for strong economic growth performance observed in the region between the second half of the 1990s and the onset of the financial crisis in 2008 was accompanied by a spectacular increase in trade. Africa's total merchandise trade also increased from $217 billion in 1995 to $986 billion in 2008. Its share of global trade also increased from 2.2 per cent in 2000 to 3.3 in 2008. This means that Africa currently has a share of world trade that is higher than its share of world gross domestic product (GDP) (2.5 per cent) but much less than its share of world population (14.6 per cent.)
4. About Oil
What a difference a decade makes. By 2010, a new understanding about the natural limits
of oil production had sunk in at the EIA and its experts were predicting a disappointingly modest petroleum future. In that year, world oil output had reached just 82 million barrels per day, a stunning 15 million less than expected. Moreover, in the 2010 edition of its International Energy Outlook, the EIA was now projecting 2020 output at 85 million barrels per day, hardly more than the 2010 level and 30 million barrels below its projections of just a decade earlier, which were relegated to the dustbin of history. (Such projections, by the way, are for conventional, liquid petroleum and exclude ?tough? and ?dirty? sources that imply energy desperation -- like Canadian tar sands, shale oil, and other ?unconventional? fuels.)
The most recent EIA projections also show oil?s share of the world total energy supply -- far from remaining constant at 38% -- had already dropped to 35% in 2010 and was projected to continue declining to 32% in 2020 and 30% in 2035. In its place, natural gas and renewable sources of energy are expected to assume ever more prominent roles. So here?s the question all of us should consider, in part because until now no one has: Are the decline of the United States and the decline of oil connected? Careful analysis suggests that there are good reasons to believe they are.
Our Recommendations:
1. G20 should take the ownership for encouraging the Diaspora to relocate back home in order to bring their expertise and to make positive changes. I will recommend the name of ?G20-Support Team of Diaspora from Poor Countries? (G20-STDPC). Such dynamism will create jobs and will reduce poverty.
2. Remembering Some Lessons from the Financial Meltdown and the Bailout.
In 2007 ? 2008 we have since seen the bailout of Bear Stearns and serious concerns about Lehman and ? the GSE?s, as well as the continuing bother of the classic too-big-to-fail doctrine.
The supply of capital worldwide is faltering as sovereign wealth funds pulled back to the sidelines and policymakers are discussing allowing non-bank private equity funds to aid the recapitalization. As a result of the continuing need for capital, press and policymakers are once again discussing direct government and government-sponsored bailouts. In doing so, however, I want to remind readers that there are (at least) three lessons that legislators and regulators ? and investors ? should be aware of before assembling any systemic bailout. Those lessons are knowledge accumulated through the history of successful and unsuccessful bailouts.
We probably won?t get it right the first time, but that would not be surprising, even in the global and historical context. The first binding principal is that if the target institutions like the terms, the bailout isn?t going to work. Second, adding leverage to insolvent institutions doesn?t help them achieve less insolvency. Third, recapitalizations work but only if properly structured.
11. Some Measures
Although the challenge is tough, it doesn?t mean that it can?t be achieved. We must avoid restrictions by adapting our business culture to new environment. For example, we could begin interest in the wider world, building a culture of adventure, a thirst for challenge and a healthy curiosity about alien culture, religion, food, etc. It will help if the local people in the firm are multilingual, multiracial or multi-cultural.
The world is changing very fast. No one can cope with such a trend while dealing with old ideas, and conservative attitudes. We must rethink the role of a bank in our economy.
Among the series of solutions:
1. Review the fundamental mission of a bank: securing and lending money. Banks and financial institutions must seek maximum protection of funds. The motto must be: prudence, manage risks.
2. The Concept of Homo Economicus has proven its limits.
Let?s take another (empirical) metaphor distilled from Prof. Stanley Milgram of Yale
University. In 1961-1963 Prof. Milgram conducted a weird experiment about obedience
to authorities.3 Today some gurus of Economics and Finance are making the same experiment under our noses.
The law must play an important role, however conscience is key. In 1958 political economist Edward Banfield concluded that poverty in Southern Italy was directly attributable to what he dubbed ?amoral familism?. Take away one leg of a three-legged stool, and the stool no longer stays upright. Take away conscience, and law and reputation, by themselves, may no longer suffice to ensure a civil society. As said Robert Putnam, ?our increasing reliance on television and other forms of electronic entertainment contribute to declining pro social behavior. Electronic entertainment keeps people indoors and isolated, away from public places and from each other. It encourages narcissism, materialism, and envy?.?
The assumption that people are selfish has been embedded in economics from the beginning. From at least Hobbes?s day, economic thinkers have emphasized self-interest in explaining human behavior. This seems appropriate in a well regulated marketplace, where selfish behavior is common and contributes to social welfare. The homo economicus approach is a wonderful tool for analyzing problems like monopoly, surplus, and shortage.
But, outside this arena, especially in the Oil Price Market, the assumption of rational selfishness may be of questionable value in helping us address social problems like failing schools, rising crime, poor medical care, political corruption, financial frauds and manipulations, or CEO malfeasance. Slogans like, ?Accountability?, ?Transparency?, ?Incentives? are often used by cynical crooks in order to delude. The most obvious example may be Steven Levitt and Stephen Dubner?s 2005 blockbuster, Freakonomics: A rogue Economist Explores the Hidden Side of Everything (2005). According to the authors, ?incentives are the cornerstone of modern life. Morality? represents the way that people would like the world to work ? whereas economics represents how it actually does work.?
There many things to say about Ethics in order to prevent the same mistakes that put us into this current financial mess. It is time to stop watching them play the yoyo game, and the ?Milgram Experiment? on the oil prices and the global economy. If we do not take responsibility to act now, the consequences will be devastating on poor countries. Emphasizing the power of material incentives and ignoring conscience not only hampers our ability to address certain social problems, it can make those problems worse. We
3 The Wikipedia: In this experiment, 37 out of 40 participants administered the full range of shocks up to 450 volts, the highest obedience rate Milgram found in his whole series. Thus, according to Milgram, the subject shifts responsibility to another person and does not blame himself for what happens. This resembles real-life incidents in which people see themselves as merely cogs in a machine, just "doing their job," allowing them to avoid responsibility for the consequences of their actions. The shocks themselves were fake, the participant who took the place as the 'learner' in the experiment was in fact a paid actor who would simulate the effects of the shock depending on the voltage. Milgram became very notorious for this tactic, and his experiment was soon classed as highly unethical as it caused stress to the participants in the study. The study soon became one of the most talked about psychological experiments in recent history, invading headlines across the world, and resulted in Milgram finding himself in the centre of public attention. There was a huge divide in the psychological community as many [who?] believe that his deception was necessary in
proving fault with the human condition and helping to explain the actions of the Nazis in the Holocaust, which was the main reasoning
behind the creation of the study.
must continue cultivating conscience and go beyond Homo Economicus, it already proved its limits.
3. Restore the credibility of the International Monetary Fund (IMF) and change its mission to a global central bank for overseeing the rudderless global financial system, monitor risk of big players like Citigroup, Deutsche Bank, HSBC, and large insurance groups.
4. New Banking Paradigms:
? Stability first, then transience, entrepreneurship, advisory before taking risks.
? Technocracy versus adhocracy, rationalism, intuition logic based on ?how and knowledge? rather than hierarchyzation and a rigid chart for the decision making.
? Job openings fitting the candidate capable of adaptability; vision and go beyond.
Rather than job description predetermined and conformity.
5. We can limit the impact of this financial crisis by lowering interest rate. It will induce consumers to buy and to regain confidence.
6. We should review the Doha Agreement on the international trade in order to segregate and or to avoid the international recession.
7. Suppress toxic debts as well as other financial instruments related to credit.
8. Encourage and innovate instruments of collaterals including the letter of credit, bid and performance bonds.
9. The G20 should insure that the World Trade Organization (WTO) is fairly monitoring subsidies to companies involved in international trading. Again the Doha Cycle must be re-dynamized.
10. Bagehot?s Dictum: Bail out Illiquidity, not Insolvency and Make Sure it Hurts. Despite the paucity of the FDIC?s problem bank list ? and indeed because the FDIC is staffing up their resolutions division to historic levels ? there are lot of banks in trouble today. The typical starting place for systemic assistance is Bagehot?s dictum. Bagehot?s dictum is the classic rule of bank policy (as opposed to monetary policy): lend to illiquid, but not insolvent, institutions at a penalty rate.
Bagehot therefore necessitates answering the question: which ones are insolvent and which just illiquid? Hence, the problem with applying Bagehot?s dictum to bailout policy is that it is difficult to distinguish illiquid from insolvent institutions during a financial crisis. Following the crisis, therefore, institutions that are clearly insolvent must be allowed to fail. Institutions at the margin may be candidates for targeted recapitalizations, but only in tightly supervised conditions.
11. No institution should want a bailout ? hence Bagehot?s stipulation of a penalty rate. Even in the depths of the Great Depression thousands of banks were so deeply troubled
that they could not be rescued. Those that received Federal recapitalization did so through preferred stock investment with full voting rights, which the Reconstruction Finance Corporation used to replace officers and directors and forcibly restore institutions to solvency. No bank wanted the funds and the Federal control that came with them. Today, while many banks are in trouble the FDIC does not seem to want to reveal the true extent of the difficulties. Those difficulties need to be revealed for Bagehot?s rule to be applied.
12. Loans Don?t Help
Because of the aversion to the harsh realities of Bagehot?s rule, nearly every bailout program begins by trying to lend money to the affected institutions in order to mask wide spread insolvencies.
The Great Depression?s Reconstruction Finance Corporation attempted loans initially, but Mason4 showed that loans to weak institutions actually increased the chance of failure. The Discount Window was opened to weak banks in the Thrift Crisis, but, showed that discount window lending was a similar waste of money and effort. For Japan, Calomiris and Mason document the efforts to lend to banks in the early 1990s, and how authorities quickly concluded the effort was a failure and moved to recapitalizations. In each case the effort was based on the allegation of the effectiveness of Great Depression programs
administered by the Reconstruction Finance Corporation. The problem is, showed that those programs didn?t work. The short reason is that giving additional leverage to a bank already in trouble will only make the situation worse.
13. Recapitalizations Help, but Change Management and Close the Back Door.
In each of those cases, recapitalizations were the next logical step. In the Great Depression, the Reconstruction Finance Corporation took a three-step approach: close the weakest banks, recapitalize the sounder institutions, and exert iron-fist control over the banking industry after the Federal Government owned voting stock in nearly every commercial bank (and many nonfinancial corporations) in the US. The Reconstruction Finance Corporation replaced officers and directors of banks and corporations and prohibited dividend payments for as long as they owned stock in the institution. The Reconstruction Finance Corporation then used that same control to direct credit to strategic industries for the ensuing war effort and post-war recovery. Notably, the Reconstruction Finance Corporation was the only government agency to be shut down after its policies were alleged to part of widespread pattern of greed and corruption in the
US officials wanted to reinstate the Reconstruction Finance Corporation recapitalization program in the 1980s Thrift Crisis, but found they did not have adequate authority to do so. Hence, regulators resorted to regulatory goodwill capitalization (forbearance) to fund
4https://exmail.smarsh.com/exchweb/bin/redir.asp?URL=http://research.stlouisfed.org/publications/review/92/09/ Misuse_Sep_Oct1992.pdf"Schwartz (FRB St. Louis Review 1992).
bank capital, which was ultimately withdrawn by Congress. That withdrawal led to a Supreme Court breach of contract ruling against Congress and in decades of lawsuits (that are still being worked out). Congress? withdrawal of regulatory goodwill was the only time Congress has been successfully sued. But Japan used direct recapitalization to rescue its banking system in the 1990s. As a result, much of the capital injected by the Japanese government was immediately tunneled out of the banks in the form of excess shareholder dividends. A second recapitalization program was necessary to make an impact.
The Invisible Hand: The incidence of Maladjusted Persons in the Conduct of
Business and in World Affairs.
Today the most notorious criminals are on the street, and/or are hiding themselves inside powerful institutions. People evidencing Antisocial Personality Disorder (ADP) are everywhere. The most characteristic of these ?silent killers? can be summarized as follows: (1) Failure to conform to social norms with respect to lawful behaviors as indicated by repeatedly performing acts that are grounds for arrests; (2) Deceitfulness, as indicated by repeatedly lying, us of alias, or conning other for personal profit or pleasure; (3) Impulsivity or failure to plan ahead; (4) Irritability and aggressiveness as indicated by repeated physical fights or assaults; (5) Reckless disregard for safety of self or others; (6) Consistent irresponsibility as indicated by repeated failure to sustain steady work or honor financial obligations; (7) Lack of remorse as indicated by being indifferent to or
rationalizing having hurt, mistreated, or stolen from another.5
The most dangerous are Psychopaths and Schizophrenics. These maladjusted persons who should be in hospitals and/or in high security prisons are spreading dangerous viruses among us. Psychopaths are people evidencing a condition characterized by lack of empathy or conscience, and poor impulse control or manipulative behaviors. At work place psychopaths use manipulative skills of some of the others are valued for providing audacious leadership. Some have argued that psychopathic is adaptive in a highly competitive environment, because it gets results for both the individual and the corporations they represent. But Psychopaths are interspecies predators who use charm, manipulation, intimidation, and violence to control others and to satisfy their own selfish needs. Lacking in conscience and in feelings for others, they take what they want and do as they please, violating social violence to control others and to satisfy their own selfish needs. Lacking in conscience and in feelings for others, they take what they want and do as they please, violating social norms and expectations without guilt or remorse. Psychopaths miss the very qualities that allow a human being to live in social harmony. Psychopathy can be a product of genes, trauma, or disease.
5 P.46, Cultivating Conscience, By Lynn Stout.
Eventually the most popular dangerous attitude is ?the schizophrenic?s behavior.? Schizophrenics constitute a social menace because schizophrenia seems to be the most important disintegrative forces within our cultures. It is a lack of emotional tone, the
� dead-pan � expression, and the verbal irresponsibility. And a general lack of any
consciousness of abstracting, a schism within the personality, with extreme ravage around the patient. Or a split between � the intellect � and � the emotions.� The patient exhibits an almost chronic poker face, a � dead-pan � or � dead-fish � expression. He seems usually to show no affective reactions, to experience little or none of the grief, affection, joy, etc., which are felt and expressed by normal people. These ignored patients are spreading thousands of ?viruses? (stress), ranging from verbal bacteria to cancers, and ending to wrong decisions, and conflicts around them. Most of these patients are designed to manage uncertainties and to take very crucial decisions for the rest of the world, including? commodities and oil prices?
PART II: Green economy, AGRI-BUSINESS AND FOOD.
Since 2008, about 60 countries from all continents have faced social disturbances brought forth by the dramatic increase in the prices of the most important foodstuffs. In Bangladesh, Egypt, the RD Congo, the Philippines, Angola, and a major part of West Africa, just to name a few, social tensions and violent demonstrations were initiated by multitudes that vehemently claimed their right to a more dignified and faire life. Because of rise in the price of the basket of essential foodstuffs, it is estimated that an additional
100 million people will face hunger in the world. It is an indescribable tragedy. It
generates anguish, anxiety and helplessness in people and nations, threatening social peace and political stability.
From 2006 to 2008 the price of rice increased by 127%; wheat, by 136%; corn, by 125%; soy, by 107% and milk, by 80%. Likewise, the price of beef increased by over 60%; of chicken by over 50%, just like for eggs and edible oils. And prices this year have exceeded 2008 levels for all these products. (Source: Mr. Leonel Fernandez, President of the Dominican Republic, at the Unctad 58th Session in Geneva, 12-23 September 2011.)
This inflationary behavior has been explained by the off-season droughts faced wheat producing countries; by the increase in oil prices and its impact on fertilizers, pesticides and transport; by the use of food crops to produce biofuels, as has been the case of ethanol produced out of corn; by the increasing standards of living in Asia and the subsequent higher demand for meat; by decrease in food reserves; by the effects of climate change; or by the variations in the composition of demographic groups in several parts of the world.
Without attempting to dispute the truth inherent to all these explanations, little attention has been paid to the role played by speculation in the rise of international prices. According to academic experts, speculation has been one of the main factors in the economic and financial crisis that began in 2007. They attribute between 20 and 40% of the rise in international commodity prices to speculation. Futures markets have allowed the anticipated negotiation of prices between commodity producers and theirs wholesale clients. In this fashion, the participants have been able to distance themselves from the effects of any unforeseen fluctuations in final prices or in their financial or productive
costs. They involve producers and buyers around transaction of tangible products acquired by the latter and sold by the former by an agreed date?
In this traditional way, futures markets have given security and certainty to producers and consumers when facing volatility. As a consequence the volatile and uncontrolled rise of commodity prices causes trade deficits, inflationary pressures, interest rate hikes and currency devaluations, with their accompanying social costs and political pressures to fight fluctuations by means of prices subsidies to commodity products; subsidies which are almost impossible to provide in the absence of fiscal surpluses and international financing. In the same manner, commodity ? producing countries are also affected eventually, due to the decline in the long ? term demand for their products, resulting from the inability of end ? users to accommodate their budget to the high cost of speculation.
Commodity ? exporting countries should have the greatest interest in preventing the immense suffering of citizens in importing countries, whose income is weakened by market volatility, eroding their purchasing power, their quality of life and their hopes for a better future.
The topic to be raised should be the Corporate Social Responsibility (CSR) in raising awareness that firms have responsibilities other than to their owners and the bottom line. Yet despite all the talk about the importance of stakeholders, transparency, corporate citizenship and sustainability, the developmental and regulatory impacts of CSR remain highly questionable. With regards to the above, we propose that G20 should examine why the experience of CSR pales in comparison with the promise, what needs to be done to address the intellectual crisis of CSR, and forms of corporate accountability and regulation more conducive to inclusive patterns of development by exploring new avenues for job creation.
Despite progress in Europe and in Asia, the world is still affected by major development challenges: Poverty, Education, Gender Inequality, Health, Environment and Sustainable development. Yet, the Nansen Principles to responds to climate and environmentally- related displacement need to me informed by adequate knowledge and guided by the fundamental principles of humanity, human dignity, human rights, and international cooperation. In Africa particularly faces a number of post-transition challenges: weak governance and fragile institutions, frozen conflicts, inequality, expansion of the informal economy, demographic dynamics (uncontrolled), Migration flows, etc. Agriculture, by its inherent multifunctionality, has the potential to both influence and address the factors that contribute to food insecurity. Organic agriculture relies on five capital assets for success (natural, social, human, physical and financial) and so contributes to and builds ups stocks of these natural, social and economic resources over time thus often reducing many of the factors that less to food insecurity.
Benefits of such policy:
1. Increase in food availability especially in developing countries,
2. Benefits to the natural environment,
3. Benefits to the natural environment,
4. Benefit to community, cooperation and partnerships,
5. Increase in education, skills and health,
6. Improvements to infrastructure and markets,
7. Increase in farmer and household incomes.
Factors contributing to food insecurity in Africa:
1. Lack of consistent access o food,
2. Degraded natural resources, practice of mono-cropping,
3. Community and group issues,
4. Lack of education and knowledge. Health and disease, gender issues,
5. Poor infrastr4ucrue, lack of access to appropriate technologies,
6. Poverty, lack of access to markets,
7. Land-tenure issues, political issues (External factors.)
Other priority areas for investment in the transition towards a Green economy are:
1. Small holder food agriculture, where farmers should be assisted and credited for
investing in sustainable livelihoods,
2. Sustainable agriculture, which must be de-industrialized, given that a present time
is largely hydrocarbon-based,
3. Clean, decentralized rural energy systems,
4. Less polluting public transportation systems.
The Impact and Consequences of Global Warming for Agriculture:
Generally, the impact and consequences of global warming for agriculture tend to be
more sever for countries with higher initial temperatures, greater climate change exposure, and lower levels of development. Particularly hard hit will be areas with marginal or already degraded lands and the poorest part of the rural population with little adaptation capacity.
As a summary:
1. Higher temperatures affect plant, animal and farmers? health, enhance pests and reduce water supply increasing the risk of growing aridity and land degradation.
2. Modified precipitation patterns will enhance water scarcity and associated
drought stress for crops and alter irrigation water supplies. They also reduce the predictability for famers? planning.
3. The enhanced frequency of weather extremes may significantly influence both crop and livestock production. It may also considerably impact or destroy
physical infra-structure for agriculture.
4. Enhanced atmospheric concentrations of CO2 may, for a limited period of time,
lead to ?natural? carbon fertilization and thus a stimulus to crop productivity.
5. Sea level rise is likely to influence trade infra-structure for agriculture, may
inundate producing areas and alter aquaculture production conditions.
6. The impact of global warming has significant consequences for agricultural
production and trade of developing countries as well as an increase risk of hunger.
Our Recommendations
Price stability is an indispensable prerequisite for food security. It is also imperative for
the smooth transition to new patterns of energy generation. And it is an urgent need for developed and developing countries that are seeking to prevent further economic crises and social unrest.
Even though there has been a slow and fragile recovery from the 2007-2008 financial crisis, at the end of 2010 and beginning of 2011, a new wave of financial speculation has once again, increased oil and food prices. This can continue in the future in the absence of regulatory mechanisms. These mechanisms should be implemented without exclusions that would ensure the existence of transparent futures markets, where all transactions are properly cleared and accounted for, such that the participation of institutional investors could not have speculative effects.
That is why a new consensus is needed among all members of the United Nations with regards to the stability of commodity prices. A consensus that must rely on appropriate oversight and regulatory mechanisms at both national and multilateral levels, in order to preserve the positive role of the commodity futures markets, which should reduce price fluctuations by allowing farmers to protect themselves through hedging and thus ensuring market integrity, mitigating manipulation and allowing the market?s price discovery function.
There is also an urgent need for the international sharing of the best practices for regulating the futures market, to promote the growth of commodity production, to provide reliable trade flows and thus mitigate price volatility, so that more people can buy these products and more producers can sell their products on world markets.
A new consensus in these terms is possible. Because it will benefit all members of the United Nations. Because only in the United Nations can such a consensus be legitimated. And because legitimacy is the foundation of good governance, which is a precondition for the stability we need to ensure food security for all.
Poverty of poor nations is a permanent danger to rich countries.
In this section we explain why ?Aid? must be replaced by ?partnership and technology transfer. Our position is corroborated by Dambisa Moyo in her bestseller, ?Aid, Why Aid is Not Working and How There is a Better Way For Africa.6
I. The Dilemma about ?International Aid.?
Every unhappy country is unhappy in its own way, but all are alike in their inability to produce equitable growth. The roots causes are often also the main reasons why disbursing foreign assistance in these places is fraught with difficulty: weak state institutions or overbearing bureaucracies, few accountability mechanisms, pervasive corruption; lack of human capital, and so on. The countries that most need development assistance are often also those that are least able to cope with it. In decades past; the standard response by donors was to implement aid programs directly, with little active involvement from recipient countries. This approach often achieved the immediate objectives of individual projects ? but it did nothing to address the underlying problem of institutional weakness.
Since the 1980?s many programs were launched to help poor countries end their growing misery. But these programs generated many ill effects resulting in immigration and other dramas when people try to escape misery in their homelands. Despite international conferences and plans about poverty, the world is still confronted with an unprecedented growth in inequalities and a spectacular increase in the gap between rich and poor, aggravated by the current financial crunch. It raises concerns and questions about the
6 Dr. Dambisa Moyo is an international economist and New York Times best-selling author of both Dead Aid: Why Aid is Not Working and How There is a Better Way For Africa,[2] published in 2009, and How the West Was Lost: Fifty Years of Economic Folly - And the Stark Choices that Lie Ahead, published in early 2011.
result of colonialism, especially in Africa. The case of the Democratic Republic of Congo is very critical.
Eventually, if by democracy is meant discussion and debate among equal human beings making a free choice of a project for a collective future. Then, the unilateral imposition of market rules on individuals and peoples is the antithesis of democracy. The market, as defined by contemporary neoliberals, where "free and equal partners" act in a deregulated space, is pure fiction, as is the belief that the free market is a condition for the existence of other liberties. In fact, market function inevitably leads to battles of wills and power struggles, which the strongest usually win. The crux of the matter, then, is by whom and for whose benefit the market is regulated
Solutions are possible.
For example, instead of pursuing the traditional policy that attaches little importance to how dictatorship is devastating people in poor countries, the New Administration could change drastically attitude, considering and treating dictatorship governments as terrorists groups.
Eventually, entice cooperation with talented members of the Diaspora in order to make positive changes in their homelands. As a consequence, the G-20 will leaven the correlation between social investment for economic development and democratization through different schemes.
Among them: new vision on Africa, working with the Diaspora as new G-20 partners for developing poor countries, reviewing financial programs, creating a New Development Fund, encouraging trading with poor countries.
Eventually, if by democracy is meant discussion and debate among equal human beings making a free choice of a project for a collective future. Then the unilateral imposition of market rules on individuals and peoples is the antithesis of democracy. The market, as defined by contemporary neoliberals, where "free and equal partners" act in a deregulated space, is pure fiction, as is the belief that the free market is a condition for the existence of other liberties. In fact, market function inevitably leads to battles of wills and power struggles, which the strongest usually win. The crux of the matter, then, is by whom and for whose benefit the market is regulated.
1. Changing Vision on Africa
Poor countries need commitment of international and national strategists. However, Africans must be the architects of their own development. The role of the G-20 should be supporting such an effort. It is critical that the Diaspora must bring its expertise back home for improving the living conditions.
? Africa is a potential market and there will be no future without Africa. A study published by the IRIN in Johannesburg in 2005 reveals that the new field in 2055 will be Africa.
? The continent is the second lung of the world. With 30 million square kilometers of landmass, Africa is three times the size of China, more than three times the size of the US and six times bigger than Europe.
? Africa has huge water resources, and abounds in agricultural and mineral resources.
? In 2025, one in four of the world's population will be African - an estimated 1.9 billion people. In 2055, Africa will be the second demographic power of the world - more than Europe, North America, and Latin American countries combined.
? Africa has 830 million people and millions of immigrants (Diaspora) scattered around the world.
2. Working with the Diaspora as new partner for developing poor countries.
The cost of hiring international project managers and of buying goods and services on the international market prompted questions as to whether the aid money was being well- spent.
Therefore, instead of encouraging charities to stimulate social development in poor countries, we strongly recommend integrating the Diaspora and transform it to a ?G-20
Partners for Development? in poor countries.
? Select and recruit well educated, trustworthy and capable people in the Diaspora in each specific field.
? Grant them a special status and protection so that the can return and work safely in their homelands.
? Sign a clear agreement with the government of their homelands and protect this Work Force by the mean of a special status as International Civil Servants for Development.
? Instead of financing corrupted and or incompetent governments in poor countries, the New Administration should pay these civil servants and give them a clear mission in their respective areas of expertise. The past decade has seen a shift away from direct execution towards national ownership of development efforts ? i.e., ownership by the national administrations of the recipient countries.
? A special division at the G-20 should evaluate the performance and the achievement of the Diaspora operating in homeland.
? The G-20 should avoid large paper work that recipient governments have to provide in order to qualify for development assistance because they are not only
expensive to draft and lengthy; but also tend to be a major distraction from more basic tasks in the building of effective states.
? Also, too great a focus on ownership actually discourages frank discussion between donor and partner, because many issues are deemed to be matters for the partner country alone.
3. Financial Programs
It is a mistake for donors to continue generously pledging so-called grants and loans to governments of poor countries.
? We have seen billions of dollars ?given? to poor countries, however, money have been misused, diverted or stolen by the head of poor countries, especially African governments.
? Vast and urgent needs have emerged since then, which makes it yet even more
imperative to convert the pledges into cash quickly and give them to private investors.
? Bearing in mind the growing challenges faced by populations in poor countries in all regions, donors will have to be prepared to mobilize additional resources for
urgent as well as long-term needs.
? Micro credit should be limited because it creates dependence and it reduces the
market share.
? Business in poor countries are facing many other problems going from unjustified suspicions from the officials, passing to the market barriers erected for political reasons rather than business and free trade, and the unfairness of international financial institutions like the IMF.
? If supported by the financial institutions, entrepreneurs in poor countries will enhance operations and diversify activities in other market places. The effective financial products and instruments would be multiple, ranging from international transferable commercial guarantees and collaterals to credit lines facilities to entrepreneurs.
The result will be: creation of jobs, with a significant impact on reducing poverty and its ill effects.
The G-20 should be involved in facilitating access to finance to poor countries exporters. The direct consequences of such a global strategy would be multiple and nurturing. We will see the resurgence of a new economic era in poor countries. The informal economy would be eroded and businesses will export, get strong currencies from their transactions with rich countries, acquire and develop new technologies, inflow of tax in poor countries resulting from international trade, job creations, including the development of the
banking industry and related sectors. The global impact would be the reduction unemployment and the amelioration of social and economic life in poor countries.
This is why the next G-20 Conference should encourage institutions and private investors to rethink credit programs and business incentives to poor/lesser developed countries.
We should insist on the commitment of the international and national strategists in order to ensure that adequate and fair financial facilities are available to the poor for them to export their products and services into the international market. It will be a significant way to share the economic resources of our global world. As a direct consequence, it will generate jobs; reduce poverty and its ill effects in poor countries.
4. Create a New Development Fund.
In addition to existing programs, the G-20 should give a special budget to the Diaspora. The purpose should be the rehabilitation and construction of the core infrastructures in homeland. However, the G-20 should create an entity designed to insure good governance in the recipient countries.
In order to achieve this, we must work together to create flexible mechanisms that bring funds and expertise more rapidly to where they are needed, particularly for creating jobs, exploring and setting up new technologies in poor countries, and helping businesses from these countries to export their goods and services.
5. Encouraging trading with poor countries.
There is nothing more false and misleading than equating democracy with free markets. If democracy means discussion and debate among equal human beings making a free choice of a project for a collective future, then the unilateral imposition of market rules on individuals and peoples is the antithesis of democracy. The market, as defined by contemporary neoliberals, where "free and equal partners" act in a deregulated space, is pure fiction, as is the belief that the free market is a condition for the existence of other liberties. In fact, market function inevitably leads to battles of wills and power struggles, which the strongest usually win. The crux of the matter, then, is by whom and for whose benefit the market is regulated. The G-20 can play this role too.
Actions to be taken by the G-20 in order to make it happen:
? G-20 should advocate for rich countries not seal up its borders, but look harder at the terms of engagement. Business insists that trading nations respect its property rights.
? The G-20 should use its power to influence the UN and its affiliated organizations should interfere in facilitating poor countries to access credits, for exporting their products and services, and then to face foreign competition. As a result, there
would be tremendous economic benefits of opening services markets such as helping exporters and producers capitalize on their competitive strength; enhancing consumer savings; fostering innovation and technology transfer.
? The G-20 should change stereotypes built on investments from poor countries, access to affordable financial supports, suppressing marketing barriers, suppressing protectionism, and facilitating the visas to poor investors. It will lead to a platform where we will have unconditional allies around the world.
In order to achieve such challenges, many steps can be taken:
? Suppressing market barriers and protectionism.
Poor countries businesses are stunned how rich countries protect their market by means of restrictions and drastic regulations going from visas and immigration, to business authorizations to entrepreneurs from poor countries. There are huge administrative and market barriers as well as dark protectionist mutterings on both sides of the Atlantic. Resistance has grown to unfettered changes in ownership through mergers and acquisitions.
? Immigration issues.
Qualified workers from around the world with proven experience need facilitation to immigrate to the US. However access to visas and employment permits is very difficult to obtain. In business for example, investors are facing difficulties in negotiating and or trading face to face with their clients, and other partners in America. So they may chose, although very risky, was to rely on their supplier and their technology, for sub-contracting.
? Integrating immigrant financial force
We must spur the market dynamism into our hubs, and explore the impact of the immigrants in the global. In Third world countries, the transfers done by the Diaspora are superior to the public budget. The economies of poor countries will continue being financed by the Diaspora. The success will depend on how this financial force will be integrated in the local, regional and global economies.
As a result, the G-20 will become the ?Enabler?.
Technology transfer is one of the important engines for development. It also provides corporations the tools they need for competing in the local and in the global market,
especially export of products and services.
There are a variety of ways to export professional services. Today most businesses tend to think to professionals traveling to a foreign country and selling their services as a consultant. But businesses sell many such services at home to non-residents. Some legal and medical services fail into this category. Some services require an on-to-ground presence. Banking and advertising services, for example, generally require offices close to the clients. It illustrates the importance of measuring and having Consultants.
1. Trading Services Across Borders.
Business services can also be traded across borders, as with the sale of franchises or the delivery of software across borders. And some architects can organize their work so that much of it is delivered over the Internet and they can stay at home and still work with their clients via the Internet.
One way of getting around the problem of scale is for individuals to join together. The large international legal and the large international accounting firms have tried and tested this technique of partnerships over a long period and managed to make it work extremely effective.
2. Word of Mouth and Trade Promotion Organizations (TPOs.)
Word-of-mouth marketing international is the first principle. It is just to be very good at
what you are doing. The second is to get exposure ? via international conferences, publications, formal and informal networking, and to network effectively, following up correspondence, staying in touch.
Then when an opportunity does arise, they think of you. Sometimes it means taking on unprofitable work for a period to establish a reputation. Or doing something for free. (Somewhat like the samples that merchandise exporters can provide.)
3. Trust and Experience Make a Good Service Partner.
You should build and/or to enhance these assets.
? Build personal relations, aim for best in class.
? A strong local base from our experience, firms with international ambitions need to already be one of the ?best in their class? in their local environment in some important or niche area. They need to have a strong financial base.
? Interest in the wider world. They also need to possess a culture of adventure, a
thirst for challenge and a healthy curiosity about alien culture, religion, food, etc. It helps if the local people in the firm are multilingual, multiracial or multi- cultural. Today being fluent in English is very important.
? Excellent grasp of technology. Easy and effective access to Internet is a great tool.
An impressive website, high bandwidth access, good internal communication infrastructure, mobile capability and preferably a File Transfer Protocol (FTP)
service are the minimum requirements nowadays.
? Meeting international standards. And it is also important to develop capability in a
set of standards in compliance with either British and/or American standards. And work with the ISO.
? Respect creativity. Respect the creative output of your service sector professionals. Give them due credit for their intellectual innovations, which are
the intangible, yet most valuable asset they have to trade.
? Opening the community and the government?s eyes.
Small firms can:
? Find sustainable service niches. Devise an exit strategy if the demand in their niche dries up.
? Target opportunities requiring a high skill set and not only offer ?cut and trim?
? Move to favorable locations, such as high-tech business parks, to reduce costs
(office space, telecom, etc.)
? Use their size as strength: decisions can be made quickly and staff can be kept motivated.
? Look at opportunities for niche markets that the bigger players will not compete for. At a time when the market for providing business process services continues
to grow quickly, new opportunities are appearing all the time.
? Try to partner with a foreign firm, either one that is already established in the
country and can offer world-class facilities, or one that markets its services overseas.
Strategies can:
? Make available effective infrastructure so that suppliers can compete on costs.
They must also help create the legal structure and provide a secure environment.
? Form effective partnerships with business to attract investors and promote an attractive national offering.
? Treat information technology as a priority sector.
? Give incentives to brokers, who play a crucial role in ensuring that services get to
the market, so that they become active participants in making deals.
4. Think it Through.
? Think strategically about communications.
? Build support with target groups.
? Integrate communications in your business plan.
? Plug into your National Brand: Build a global image.
? Put your stamp on trade.
? Reaching out with the Web. Simply building a web site won?t bring visitors. It takes careful strategy and targeted marketing to lure visitors to the site once, and even more work to bring them back.
? Links bring new readers.
? Trade forum (also use them online.)
? Evolve as a portal
? Learn more about your reader.
? Build a global image.
In the Energy Industry, Oil remains the most popular source. However, its prices do not necessarily follow the Demand and the Offer trend. In an article published in September
2011, Edouard Nsimba, PhD in Economics, and Expert of the UN, Ed described and questioned ?Do Higher Prices Indicate a Tight Market?? He brought the following
analysis about Oil price variations.
After averaging $116.5 per barrel (pb) in July 2011, Brent oil price decrease a bit to an average of 109.7 pb in mid-August 2011 (we refer here to spot prices as opposed to future prices). Contrary to expectations, oil price will strengthen further during the last quarter of 2011; a quarter of which, for seasonal reasons, global oil demand always increases, which in turn often lead to a rise in oil price. The US light crude (WTI) rose to
$115.0 pb in mid-August 2011; the highest in 22 years and exceeded ?by far- the
psychological threshold of $40.0 pb. In March 2011, oil prices as measured by the OPEC?s reference basket averaged $110.5 pb and remained unchanged so far. The surge in oil prices is led by market fundamentals, a great deal of speculation and lately a ?fear premium?. The former reflects stronger-than-expected global oil demand and lower than normal world oil inventories, particularly private inventories.
Oil demand increased in the United States in view of a colder than usual winter and an increasingly fuel-inefficient automobile fleet. Other sources of oil demand strengthen have been China, which has become the world?s second largest oil consumer, Japan due to its nuclear power plants disaster (especially Fukushima), the inability of the plant return to full capacity any times soon and the German government?s decision to gradually abandon nuclear power as source of alternative energy. Furthermore, government stocks have increased, thus contributing to higher demand and keeping the pressure on prices, whereas private inventories dropped to levels that kept refineries, particularly in the United States, dependent on fresh supplies therefore also maintaining the pressure on prices. Worldwide, global oil demand is expected to average 89.5 million barrel per day (mbd) in 2011 and slightly increase to an average of 91.1 mbd in 2012.
Meanwhile, market sentiment has remained volatile. At the beginning of this year, market sentiment remained strong as the global economy entered a more definitive recovery phase. Additionally, market participants started to anticipate fuel shortages and other potential supply disruptions particularly since the deterioration of the security situation in Iraq and repetitive attacks on oil infrastructure in Yemen. Market sentiments radically changed in mid-2011 responding to world economic downswing, fiscal consolidation and
its pro-cyclical policies. World oil supply, however, did not increase as abrupt disruption is taking place in Libya and Syria. Saudi Arabia and other OPEC producers are not willing to step in and calm the markets. Global oil supply is expected to average 87.7 mbd in 2011 and 89.4 mbd in 2012. The global oil market will remain tight with world oil demand slightly exceeding global oil supply, suggesting that oil price will remain high. Downside risks associated with higher oil prices are a big concerned for both developed and developing countries. The relatively optimistic outlook for the world economy is based on the assumption that the petroleum prices will retreat to below $70 pb by the end of 2011.
If, however, geopolitical events push upward further the petroleum prices, which in the
middle of 2011 are already extremely high, the global economic growth could be substantially curbed, and in a worst scenario, if a disruption of oil supply were to happen at large scale, the world economy would be sent into a recession, as witnessed in the two previous major oil shocks (1973-1974, 1979-1980). As stated, higher petroleum prices will act as an increase in international tax, reallocating wealth from a large number of oil- importing economies to a relatively small number of oil-exporting countries, from consumers to oil-producers. As a result, there will be a net welfare loss for the world economy as a whole.
However, there are two significantly different cases in terms of the impact of higher oil prices on the world economy. In the first case, the higher prices are mainly caused by a temporary disequilibrium between global demand and supply, and they will act as a brake to slowdown otherwise an overheated world economic growth, a normal market mechanism (although the distortion in the global oil market is notably more pervasive than in other markets). In the second case, however, the higher oil prices are primarily pushed up by a substantial supply shock, and if the disruption persists for a considerable period, an oil crisis will lead to a global recession. While the world economy will suffer notable welfare losses in both cases?for example, as shown by our world oil model, an increase of $10 pb in petroleum prices will lead to a loss of about 0.5 per cent in the world gross product; in the latter case, the world economy will be aggravated by an indirect but even more severe whammy of shocks in confidence. A review of the past two oil crises suggests that the negative indirect consequences are likely to be larger than the direct effects.
The indirect effects stem from a sharp collapse of consumer and business confidence brought about by the higher prices. In both 1973 and 1979, the index of consumer confidence in the United States dropped by more than 50 per cent when oil prices stayed at their peak levels for about 6 to 12 months. In both instances, this loss of confidence resulted in a recession in the United States, to the detriment of growth in the world economy as a whole. For some net fuel-importing developing countries, higher oil prices might also trigger financial instability, severely damaging short-term prospects. Please, note that most quantitative studies based ?static comparative analysis? can only catch the linear relationship between the oil prices and the welfare loss through income and substitution effects, but cannot reflect the non-linear impact from the shock on confidence.
There will certainly be a difference in the impact of an oil price shock on various country groups. The direct welfare loss from the income effects of increased oil prices for net fuel-importing countries differs from country to country and depends on the share of oil in total consumption. Most developed economies, the United States in particularly, are still the largest per capita consumer of oil; however, per capita consumption in Asian developing economies has increased significantly, making them more vulnerable than previously to increases in prices and, in several cases, more affected than other countries in relative terms. Meanwhile, changes in the structure of production, towards service sectors, have made output in most developed economies less energy-intensive and will correspondingly reduce the adverse direct impact of any oil shock.
In contrast, more industrialization in many developing countries, such as China, during the past decade has been energy-intensive. For instance, oil consumption per unit of GDP in China, and many other developing countries is more than twice of that in most developed economies. As a result, for any given oil-price shock, these countries will experience a larger adverse effect than during earlier episodes.
The price spike is a matter of deep concerns for oil consumer countries, especially developing countries. If export revenues remain unchanged, oil-importing countries have four main ways of responding to these higher prices:
? Reducing the quantity of oil imports: this will slow their rate of economic growth;
? Reducing expenditures on other imports: since a large part of developing country
imports are capital goods and other inputs for production, this will also slow their rate of economic growth;
? Using foreign exchange reserves to meet the increased costs: the reserves of many developing countries are less than the unofficial prudential benchmark of three
months? import expenditures, limiting on their ability to exploit this option;
? Obtaining additional financial resources from abroad, either from official sources
or by borrowing on international capital markets. High levels of existing debt, reinforced by the present general reticence of international capital markets to lend to developing countries, limit the scope for additional international private borrowing in most cases.
Even before the world economic recession (2007-2008), rising oil prices had already dampened growth in many oil-importing developing countries through the adverse impacts on their trade balances. Fiscal positions had also deteriorated, constraining government expenditure and/or raising the level of domestic public debt. The overall effect is a loss of economic welfare for oil-importing developing countries. From the point of view of the balance of payments, the countries most affected by higher oil costs are those with a high proportion of oil in their imports and in their GNP or with limited foreign exchange reserves to absorb the ?shock? of higher prices.
Market volatility and differing assumptions about the future of the world economy are reflected in the range of price projections for both the short term and the long term; however, most projections show prices rising over the entire course of the projection period although slowing after 2025. The other projections range from $78 per barrel to
$95 per barrel in 2015, a span of $17 per barrel; and from $78 per barrel to $135 per barrel in 2035, a span of $57 per barrel. The only series that do not report projections in WTI terms are IEA's World Energy Outlook 20107, where prices are expressed as the IEA crude oil import price, and INFORUM, where prices are expressed as the average U.S. refiner acquisition cost of imported crude oil.
How America's Decline Is Linked to Oil.
In his ironical article published on September 15, 2011, Michael T. Klare describes,
America's rise to supremacy was fuelled by control over the world's oil suppl. Now, the decline of the U.S. coincides with the decline of oil as a major energy source. According to Michael T. Klare, America and Oil is like bacon and eggs, Batman and Robin. As the old song lyric went, you can't have one without the other. Once upon a time, it was also a surefire formula for national greatness and global preeminence. Now it's a guarantee of a trip to hell in a hand basket. The Chinese know it. Does Washington? America's rise to economic and military supremacy was fueled in no small measure by its control over the world's supply of oil. Oil powered the country's first giant corporations, ensured success in World War II, and underlay the great economic boom of the post-war period. Even in an era of nuclear weapons, it was the global deployment of oil-powered ships, helicopters planes, tanks, and missiles that sustained America's superpower status during and after the Cold War. It should come as no surprise, then, that the country's current economic and military decline coincides with the relative decline of oil as a major source of energy.
If American power is in decline, so is the relative status of oil in the global energy equation.
In the 2000 edition of its International Energy Outlook, the Energy Information Administration (EIA) of the U.S. Department of Energy confidently foresaw ever- expanding oil production in Africa, Alaska, the Persian Gulf area, and the Gulf of Mexico, among other areas. It predicted, in fact, that world oil output would reach 97 million barrels per day in 2010 and a staggering 115 million barrels in 2020. EIA number-crunchers concluded as well that oil would long retain its position as the world?s leading source of energy. Its 38% share of the global energy supply, they said, would remain unchanged.
?When Deeds Speak Words Mean Nothing? (South Africa?)
At our former position at the Italian state energy company, ENI (Ente Nazionale Idrocarburi), among other things our role was to check the historical reference prices, price formation, taxes and other prices of oil derivatives, scrutinize the physical market,
7 The EIA carries out interesting researches on oil prices. Information can be found at http://www.eia.doe.gov. (Energy
Price Volatility and Forecast Uncertainty, Source: EIA).
In April 2009 I attended the EIA Annual Conference at the Washington Convention Center. Many Experts participated in this event, including Dr. Steven Chu, the US Secretary of State.
etc. We realized that prices follow a cyclical trend, based on the market risks rather than the systemic risks.
It became clear to us that Crude Oil Prices increase when such events occur:
- Wars and armed conflicts (Angola, Iran-Irak, Irak-Koweit, etc.),
- Change of political regimes, or instability in some countries, terrorism, etc.
- Prices tend to increase especially in summer because of holiday season (people use more cars, airlines, ships, etc.)
- Oil prices are stable in winter.
But the question remains, ?what will be consequences of high prices of oil on very poor
countries when the current financial will spread worldwide? ?
Summary of Recommendations:
Because of increase of the population, cars production, heavy industry and transformation industry demand of oil, etc., my feeling is that Oil prices will continue to rise high and can reach a pick of $160 in 2012.
We are pretty much convinced that if this scenario happens, the following would happen:
1. The GDP and the private consumption would be severely hit because incomes and revenues would be eroded by higher living costs.
2. This could drag many advanced economies back into recession.
The yoyo game (you start with economic recession followed by economic recovery and
again economic recession) will never last. The homo economicus philosophy is the trigger of our current international financial crisis.
3. At the same time, inflation would rise, increasing pressures in already heated poor countries, especially those who do not produce and export oil. However, the policymakers will come again with ?appropriate? counter measures in order to fix the yoyo. We should expect the emerging economies represented by the BRIC countries (Brazil, Russia, India and China) to play a big role in order to reach an acceptable break- even-point about oil prices. And I strongly recommend that the BRIC should work closely with the Opec countries.
From my experience at ENI, I also realized that the Oil industry is linked with the transportation demand. Both industries are in turmoil. If we do not take the necessary realistic measures to accommodate transport with the oil prices, we will pay the high price in five-ten years. For example, how many cars, trains, aircraft, ships, do we have in the world? How about in 2050? Are we dreaming about the Hybrids and Electric cars? How will we monitor and catch the CO2?
Why do we experience bankruptcies, layoffs, and growing unemployment? How can we reverse the trend by creating jobs? In today?s developing and transitional economies, can we expect organized business interests to support social and other public policies conducive to inclusive development? Does the rise of big business facilitate or undermine this objective?
Based on our own experience of Entrepreneur, here are 13 actions to be taken for job creation:
1- Support Start ups and Small Business Companies.
Startup companies suffer in securing a loan from banks and financial institutions. On one
hand, banks offering unacceptable conditions and terms for loans and credits, and on the other hand, finance being used as a political weapon. The largest difficulty to obtain the needed initial investment is the unacceptable conditions and terms for loans and credits from banks and lenders. Such difficulties can force some vulnerable startup to take a high risk exposure for losing intellectual property by sub-contracting with other businesses already operating in the international market. The G20 should address such critical contradictions between theories and practice.
- Generate a policy encouraging innovation and creativity (I.e., new industries.)
- Review our Patents system for encouraging escrows accounts for start ups,
- A significant budget should be secured in order to cope with the effects of climate
- Sanctions shall be taken against abuses.
2. Prioritize Agri-Business and Technology Advance.
They are both one of the basic tools to measure the competitiveness and the economic growth of a country. They are the main barometers for integrating and improving productivity of goods and services in other fields. Special units should explore these fields through effective entrepreneurship schemes.
3. Encourage trading with emerging economies.
These countries are becoming dynamos of economic activity. In other words, the contribution of these countries reinvigorates the global economic activity. In particularly countries with a high economic rate growth, including Africa.
4. Energy, environment (ecology, climate changes), and development.
- Encourage Entrepreneurs, and Students attend international conferences and workshops
on climate changes.
- Develop new energy sources technologies and export it as well.
5. Promoting new industries we will generate significant revenues.
For instance, we should design our environmental agenda to be a stimulus plan for the
clean-energy industry. A carbon tax or a cap-and-auction system, along with eliminating tax cuts for oil companies, could raise revenue for investments in green power or to retrain workers in older industries.
6. Education; innovation, research and training
- Double the number of women in poor countries to attend colleges,
- Remunerate companies and or individuals, who innovate in their specific fields,
- Build an International Task Force for checking counterfeits.
7. No risks, no opportunities.
We should remind and encourage people to take risk because risk is an opportunity. Not taking a risk may become a risk too. Entrepreneurs must participate to changing programs by being more action oriented, and risk takers. This program should be taught at high school and reechoed by the media.
Today the business world is locked with buyouts and acquisitions, which force some investors to believe that the fight is over, already won, or lost. What if your biggest competitor today, launches a product that could very well sink your biggest line? Or, what if an unforeseen shift in politics causes currency prices suddenly open a new market. Or, close an old one? How will you adapt? The Japanese have invented products which are already performing in the market, especially in automobiles and robotics. Amongst other things they introduced comfort and miniaturization, ?the nano- technology.? Your size is not necessarily a guarantee for your success and/or your survival within a never-ending competitive environment. And, you do not have to be big in order to see big. Your vision, creativity and technology can play a significant role in how fast and how well you can deal with new markets. Quality of the products and good risk management are essential to success.
8. Government must be committed.
Governments should be a partner to business and should focus on innovation, motivation,
ethics, and new markets
9. Added value, products and services.
The G20 should restore the qualities of products and services. For example, producing
coffee and or/ingredients, packing and labeling them at the place of production. The G20 should support manufacturers of products and services made locally. Governments should reduce tax to local companies, and increase tax of those who manufacture their products and services abroad, then import them to the country (i.e., dumping.)
10. Ethics should be the motto.
Because Ethics is an intangible assets with more value than material and money. The new administration should strive for ethical investments and should integrate human values into its goals and objectives.
We should respect the creativity of our entrepreneurs and give them due credit for their
intellectual innovations, which are the intangible, yet the most valuable asset they have to trade. We should pledge an intangible asset that stands far beyond measurable figures, and go much further because we do not see only with our eyes. Together we can make the difference of the difference, and change the transformation.
11. Innovation.
We must continue improving the quality of our products and services. Businessmen and Businesswomen should carry out activities towards specific schemes, and continue to take measured risks. They should have a long term vision and an aggressive strategy because after India and China, Africa is the next potential market. They should scrutinize the market opportunities and adapt strategies to the function of revenue and the type of resources it represents. It requires being organized, and be prepared for mutations within different industries. Mostly, they should be aware and alert to changing circumstances, which can make some businesses vulnerable or provide opportunities. The focus should therefore be on the future.
Organizations must be trained to respond quickly to signs of change and they should be able to quickly move people and money where needed. We should launch a United Nation?s Pool of Innovativeness and Creativeness (UN PIC). It will operate as a melting pot where experts will distill ideas and experience and apply them in practice. However, they should are aware of imperfections; solutions should be monitored adequately for financial matters.
12. Export Products and Services.
Financial institutions are important in assisting businesses for exporting their goods and services. Exporting know-how is one of the engines for jobs creation, and the reduction of poverty in our blessed country. Such a conjunction of constructive ideas between entrepreneurs, investors and the government will be a terrific weapon to fight inequalities and to open a new era of an ethical global market.
13. Businessmen and businesswomen must be highly motivated.
We must believe in the power of networks for generating uncanny synergies that entrance
new paradigms in the financial and banking industry. If we preserve and if we improve access to international market, especially to emerging economies; competition will be enhanced; thereby inducing company to innovation; creativity and added value. As a consequence, job creation, as well as ending the current financial crisis.
Today?s international crisis appears to be an accumulation of various factors. In September 1999, while employed as a Risk and Operations Control Specialist at Barclays Bank in Geneva, Switzerland, I predicted this type of scenario. I have seen the risks inherent with credit derivatives and hedge funds in an industry left without control. I wrote papers for alerting about the ill effects and the need of governments to control such Damocles spears. Today, I realize that my previous analysis is being corroborated by many experts.
The following is based on my experience as Businessmen and Entrepreneurs in America, in Europe, and in Africa. In August 2005 I created a sole proprietorship in San Francisco, that we named, NVI Finance, Trading & Services, (NVI), designed to create a strategy of competiveness and of growth. We subcontract in the areas of Finance, Agri-Business, Energy, and Mining. We remind people that the size of an investment or of a corporation is not necessarily a guarantee for survival and/or success in an ever-ending competitive environment. Our objective is to set up an architecture engine of innovation and creativity in new technologies. Focus on added value, comfort, and quality. Export to other markets, including the emerging economies and transition economies. This process would require the commitment for the government to ensure that such instruments are fair and available to all.
We approached faculty and scholars for applying new technology to business. We shared responsibility and competences between businesses and government. We propose to ?solve immediate problems; set short-term agenda rather than thinking large policies and strategies.? In order words, entice new paradigms and support Start ups.
MILESTONES: Towards a Restructuring of the Banking System
In this section we share our experience in the linkages and implications between export development and poverty reduction for Export Strategy-Makers?. We will induce different topics to be debated by the audience, such as, Export Competitiveness and Poverty Reduction: Complementary or Competing Objectives? Pro-Poor Export
Strategies: What Works - A National, Regional, or Municipal Approach? Bringing the Poor into the Export Process: Is South-South Trade the Answer? Bringing the Poor into the Export Process: Is Linking Small Producers and Big Exporters a Solution? Bringing the Poor into the Export Process: A Question of Education or Entrepreneurship? Bringing the Poor into the Export Process: Is Access to Finance the Trigger? Gender and Export-Led Poverty Reduction: A Strategic Imperative? The Fair Trade Initiative: Sustainable Commercial Opportunity or Development Trap? Export and Poverty: Impact Measurement ? What are the Verifiers?
"Never doubt, that a small group of thoughtful, committed citizens can change the world. Indeed, it is the only thing that ever has." (Margaret Maed.)
Today the banking industry is locked with buyouts and acquisitions, and thereby forcing some investors to believe that the fight is over, already won, or lost. What if your biggest competitor, today, launches a product that could very well sink your biggest line? Or, what if an unforeseen shift in politics or in currency prices suddenly opens a new market? Or closes an old one? How will you adapt? The Japanese have invented products which are already performing in the market, especially in automobiles and robotics. Amongst other things they introduced comfort and miniaturization, ?the nano-technology.? Your size is not necessary a guarantee for your success and/or your survival within a never- ending competitive environment. And, you do not have to be big in order to see big. Your vision, creativity and technology can play a big role in how fast and how well you can deal with new markets.
Because we want to entice investments and entrepreneurship, we decided to launch an ethical bank designed to facilitate credit access. We will locate the bank in Geneva, Switzerland, for penetrating the international market. However, this strategy illustrated how it is difficult for businesses from poor countries to benefit the financial support in trying to sell their products and/or services worldwide. Despite difficulties, we use our size as an opportunity, and we are determined to achieve our objective.
We wrote the business plan, we completed the procedures, policies and strategies, we approached auditors and lawyers, and we discussed with the officials, for the banking license. Our main activity is granting credits. We will carry out also private banking activities for managing assets, and other facilities in the international arena. Our operations will be supervised by a Board of Directors and managed by an Executive Committee of experts, selected because of their outstanding experience and caliber in banking and world affairs. Client relationships will be carried out by qualified Private Bankers. Specialized departments will centralize operational support, while specific units
will run business quality control and compliance offices. We are ready to start operating. However, we need the required initial capital. And this is our major difficulty.
Therefore, we decided to explore another avenue for generating the funding ourselves. We decided to launch a bakery in San Francisco, with a Beta return. Profits generated will constitute a portfolio for financing the capital of our ethical investment bank. But, we soon find ourselves in the middle of contradictions between theories and practice. To one hand, banks offering unacceptable conditions and terms for loans and credits. To the other hand, finance being used as a political weapon. Basically we faced distrust, prejudices, disrespect and no recognition, just to impeach us to export our products and services. The market being locked by the giants, who decide who should be in the market or not.
We found some similarities between our approach and philosophy with Bank Raiffeisen created in 1902 by Reverend Pastor Johann Traber, at Bichelsee in the Canton (province, or state) of Turgovie. Today this bank has over 450 branches in Switzerland. Each shareholder is a co-operator, and part-owner of the bank. Until today, this bank is committed to the ethic preached by its founder. Like in 1862 Frederic Guillaume Raiffeisen we also decided to restitute the capital where it was produced, i.e. to the villagers in the form of saving and mutual petty cash for credits ? against best terms guaranties.
The following lines describe how we started, the problems we are facing, and why we believe that financial support is the trigger for poor countries businesses to export. We will also describe how we try to solve this problem. Let see why we believe that poor countries can compete and how this vision leaded (epitomized) our business proposal for the creation of an investment ethical bank. Then we will describe how we organized the job, difficulties faced, and how we tried to solve them.
Why should G20 supports our initiative for launching an Ethical Bank?
1. The Momentum.
Success is not an accident. Although mergers and acquisitions are still dumping the
market, limiting and discouraging new entrants in the banking industry, we sustain that the game is not over. Our global strategy will reinforce our position in the emerging countries, and adapt our penetration strategy. This strategy sounds like a new miracle medicament entering into the market. We will avoid frontal and lateral attacks, and we will not adopt the surrounding technique. We prefer to conquer a market segment, and take advantage of inestimable trump, ?the small entrant,? for becoming the enemy who did not know how, but learned, and went beyond results. For example, we will explore the International Migration schemes.
Each year, immigrants and expatriates invest about 55% more than foreign investors. The Immigrants from Asia, Latin America, Arabs and Africans send back home hundreds of billions of Dollars, for the needs of their respective families. We encountered this
network, as well as, the African Americans community. We can defeat Goliaths by innovating top products at higher prices but with a low cash flow. This strategy can work, on the condition that our innovation (credit) should be really a small marvel offering advantages for which customers are ready to accept the price.
2. Our Interpersonal Skills.
There are many factors and indicators that spur on to great efforts for the success of our endeavor. And we count on our interpersonal skills. We are encouraged, first by the new configuration of the emerging countries. In particularly those with a high economic rate growth ? are becoming dynamos of economic activity. In other words, the contribution of these countries reinvigorates the global economic activity. We want to explore this structural evolution. Second, we want to react against the inadequacies and perequations of different investment programs in the EC?s. For example, the New Partnership for Africa's Development (Nepad), led by South Africa is an excellent plan.
However, its "unfulfilled commitments" by nations pose one of the greatest threats to the global investments network. We want to change such a situation by granting loans facilities to entrepreneurs, with another perspective for credit and risk.
3. Risk Alertness.
Another indication of our chances for success is our notion of Risk. We interpret risk as
implying opportunity for greater returns. In our philosophy, risk is an investment, and also a stimulant that generates our excitement in any venture. We believe that when risk can be treated in a more discriminating manner, it becomes less threatening and more amenable to management, if not to elimination. Most important, we are aware that in evaluating risk, one dimension that is too often ignored is the risk of no action. In the real world, inaction involves risk - which a competitor may act, that customer preferences may change, that a new technology may appear from the shadows, and that factor costs may change.
4. We promote business with a focus on Africa - by facilitating credit access.
We focus on Africa because it represents a terrific potential. Africans are reshaping their continent and improving their living conditions. The world is changing very fast. No one can deal with such a trend while coping with old ideas, and conservative attitudes. Today the main priority of nations is the eradication of poverty by providing employment. Since the 1980?s many programs pretended to eradicate poverty, however, the ill effects of poverty caused immigration with dramas. We believe that African can do it themselves and enter in the international arena as competitors, not as subordinates or assisted. Like in sport, the new generation of African is multi qualified in the best school worldwide, and experienced. Especially, the Diaspora and its descendants. We want to explore these synergies.
5. We understand the role of the Diaspora in the economy.
We bank on an increase of transfer from the Diaspora for the economic rise of their
countries of origin. On November 2005 Sixtine L�on-Dufour, a World Bank expert quoted that the number of immigrants was 105 millions individuals in 1985. It counted
twice twenty years later. Immigrants from the South transfer 20% of their revenues in their homeland, the equivalent of 167 billions US in the first semester of 2005 (126 billions a year before). Despite the excessive transfers fees of organizations like Western Union. To the world scale, from now such flows of private capital represent two times the amount of the public assistance offered by the richest countries to the third world. They constitute the second source of direct investments. The World Bank suspects that these official figures could have been increased to 50% if we had computed the informal transfers, i.e. hidden money in the suitcases and funds sent back home by the means of non official network. Since 2001, the amount of transfers has soared to 73% and the trend does not show any sign of reversal.
The transfers done by the Diaspora represent an important part of the GDP of the recipient countries. In Tonga, for example, the amount of salaries equals 31% of the GDP, 16% in Salvador, almost 26% in Lesotho... �Besides, these amounts should be considered at the same degree than revenues from exports�, thinks Fran�ois Bourguignon.
The amount of transfers done by the American Latino immigrated in the United States, the "remesas", have reached the top in 2004, particularly in Mexico, Salvador or the Dominican Republic, countries dependent on such foreign exchange resource. Between
2003 and 2004, the total "remesas" in Latin America and in the Caribbean have shifted
from 38 to 45 billion dollars, as per the International Bank for Development (IBD)
Experts estimate that if the money transfer are stopped, poverty will increase at least of ten percent in Mexico, which represent approximately the third of "remesas", that is to say 16,6 billion dollars (12,7 billion of Euros) in 2004. To the world record of "remesas", Mexico is the second after India, and accumulates a third of the transfers to Latin America and the Caribbean. Twenty two percent of Mexican families receive such manna from their relatives. The Mexican government leans on the Remesas for building infrastructures (streets, schools, etc...). The program "one for two" or "one for three" allows the immigrant worker to transfer money into a Common Fund in his original county. Then the government multiplies twice or three times the balance of the Fund allocated to a specific plan. Today, Mexicans or Americans originally from Mexico represent 9% of the population of the United States, in other words, 26,6 millions persons. Besides Mexico, money from the Diaspora is the cornerstone of the economy for countries like the Dominican Republic, the Salvador, Guatemala, Columbia, Cuba, China, and African countries.
We still believe that the economies of emerging countries will be fuelled and controlled by the Diaspora. The success will depend on how this financial force will be integrated in the local, regional and global economy. We can help because we understood that since we are small, the best strategy is to be very smart.
EXPERIENCE# II: International Trading. Exporting is the Issue; However, Financing is the Key. The Case of ?Encore Bakery? in San Francisco, California
(July 2006.)
Poor countries are capable to compete in the global market.
Countries like India and Pakistan have seen exports of services such as software development, back-office support and services supplied by call-centres, expand in a significant way. Some descendants from immigrants from poor countries were educated in good schools, and some have good work experience in specific fields. However, when this elite try to create or reproduce the same business in their home land, they face difficulties for finding the initial investment from banks. How can a company operate internationally without good banking references?
We only tried exporting our services because local market is limited, and risk taking. Good information and best risk management are the keys to success. Moreover, there is a clear link between development and the benefits brought about by exporting products and/or services in the international market.
Proof of these benefits is that poor countries which businessmen have embraced and invested in the establishment of a services industry worldwide are clearly in the forefront of the battle against poverty and illiteracy. They have seen greater product and process innovation. However, they are penalized on access to foreign capital and world-class technology. The explosive growth of the Internet - and of Internet-related sectors - in countries like India is only one example, however breathtaking. It clearly shows how modern services can help to overcome the constraints of economic poverty, geographic periphery, and social exclusion.
We wanted to entice business from poor countries to export their goods and services. Because we have experience in the diet Bakery and we can produce a high quality of
product compared to our competitors. However, our specialists are located in Africa. So we decided to buy frozen products from an experienced bakery in Europe, and bake them in America for the resale. Later we will start building our brand, and bring our specialists from Africa to America. The cost of exporting frozen products to America was unbearable for a start up of our size. We suspended the project.
Let summarize the main difficulties we encountered in exporting our services and products from Africa to America.
1. Financial risks for banks.
We needed money for starting operations. Banks proposed hard conditions, like a standby letter of credit, or normal business credit application, collaterals, etc. Where to find them when you are a new entrant? And the same question, ?why should we deal with you, while other products are already in the market??
We found out that it is not easy to export business and professional services. This doesn?t
mean that it can?t be done. We partnered with those who are already into the market. We spent six months in building and enhancing this intangible asset.
-We realized that firms with international ambitions need to already be one of the ?best in their class? in their local environment in some important or niche area.
-Our European partner has already a strong financial base. So we began our interest in the wider world, building a culture of adventure, a thirst for challenge and a healthy curiosity
about alien culture, religion, food, etc. It helps if the local people in the firm are multilingual, multiracial or multi-cultural.
2. We became fragile vis a vis our competitors.
Because we cannot find banking supports, we decided to meet our competitors, establish personal relationships and work together as partners. We became dependent on them. In order to reduce such a big risk, we learned that ?trust and experience? is the main ingredient for becoming a good service partner.
3. Barriers.
We faced other barriers for exporting our products and our combined know how (acquired in Africa and in Europe) to rich countries, especially in the USA. My team and myself identified a number of issues that commonly act as barriers to services exporting.
Basically we faced distrust, prejudices, disrespect and no recognition, just to impeach us to export our products and services. The market being locked by the giants, who decide who should be in the market or not, and raising a cynical question, ?why should we deal with you, while other products are already in the market??
Difficulty #1: the initial capital.
The most difficulty was finding the initial capital for exporting our goods and services. To the one hand, banks offering unacceptable conditions and terms for loans and credits. To the other hand, finance being used as a political weapon. We realized the unfairness of international financial institutions like the IMF.
Difficulty #2: Prejudices form the authorities.
We experienced prejudices from the authorities: disrespect and non recognition. When we tried to build our own capital through baking for banking, we found out how rich countries protecting their market by means of restrictions and drastic regulations about visas and immigration. Administrative and market barriers as well as dark protectionist mutterings on both sides of the Atlantic. Resistance has grown to unfettered changes in ownership through mergers and acquisitions.
Difficulty#3: Higher Transportation Costs.
Higher transportation (freight) costs as a result of shifts in politics pertaining to terrorism
(the case of the US take over Dubai and foreign companies owning US ports). Most of
the business and professional service firms are bigger and seem to have closed the market. Hesitations from customers. Difficulty to establish our brand and to build our reputation.
Difficulty#4: Huge Marketing Budget, discrimination about qualifications than others.
Working under the under the umbrella of our suppliers and different partners, difficult for a trade promotion agency to keep finding new relevant opportunities.
Difficulty #5: The risk exposure for losing our intellectual property.
The situation is that poor countries and their businessmen are economically on the bondage of rich countries. So we decided to sub-contract with huge institutions.
Our misfortune at ?Encore Bakery? in July 2006 in San Francisco helped us identify a number of issues that commonly act as barriers to services exporting. Our experience is that it is not easy to export business and professional services. For us the interesting thing is that foreseeing companies should rethink their programs and strategies in order to export, or to bring new technology.
The core challenges are:
1. Scale - Most of the business and professional service firms are bigger and seem to have closed the market. In fact there are many niches, and most companies have poor management and strategy. Moreover, it was very difficult for a trade promotion agency to keep finding new relevant opportunities. So we decided to work with people who can help us to create a network.
2. Why do it over there when you can do it here? This comment summarizes he views of most of our professional service companies. If they make a comfortable living working in the domestic market, where is the incentive for them to seek work offshore in an unknown environment? Again, this is a big mistake, lack of vision. The giants are already into the market. Most of the business and professional service firms are bigger and seem to have closed the market. Our reaction was to explore further niches, because most companies have poor management and strategy.
3. You can?t ship samples - If you are exporting automobile accessories or coffee, you can send samples and these can be tested, assessed and compared by the potential buyers. But if you are exporting professional services, buyers don?t really know the quality of what they are getting until they have received them.
4. Reputation - People tend to buy professional services based on the reputation of the supplier. And reputations are very hard to establish and very fragile. People tend to buy professional services based on the reputation of the supplier. And reputations are very hard to establish and very fragile. So we decided to sub-contract with a multinational in Europe, already in the market for years.
5. Relying on Word of Mouth for Marketing - This applies both onshore and offshore. But it is probably more difficult to make the translation to an international domain than it is domestically. As a company from a poor country, operating in America, we discovered that we will be requested more qualifications than others. We decided to operate under the umbrella of our suppliers.
We changed our strategy and we adapted our marketing. We identified and we explored interesting niches. We also moved from San Francisco to Oakland, a favorable location, for costs reduction (office space, telecom, etc.) Eventually we started using our size as strength: decisions were made quickly and staff kept motivated.
Looking at opportunities for niche markets that the bigger players will not compete for. At a time when the market for providing business process services continues to grow quickly, new opportunities are appearing all the time. Partnership with a foreign firm, either one that is already established in the country and can offer world-class facilities, or one that markets its services overseas. As a result, we made available effective infrastructure so that our suppliers can compete on costs. They must also help create the legal structure and provide a secure environment. We are creating an effective partnerships network with business to attract investors and promote an attractive national offering.
We treat information technology as a priority sector. And we are giving incentives to brokers, who play a crucial role in ensuring that services get to the market, so that they become active participants in making deals.
6. Recognition of Qualifications - Professional qualifications that allow you to practice law, dentistry, medicine or accounting in your home country are very often not recognized by other countries unless you go through complex testing and admission procedures (and possibly not even then).
If you are exporting automobile accessories or coffee, you can send samples and these can be tested, assessed and compared by the potential buyers. But if you are exporting professional services, buyers don?t really know the quality of what they are getting until they have received them. So we decided to go on delivering loaves of bread to our customers and have them taste them first.
7. Capacity to do Only a Part of the Whole Job - Typically companies have to find niche opportunities or they have to be subcontractors to the larger firms who can tender for the big projects.
8. Financial Risk - When you are working in a foreign country where the legal systems
are unfamiliar, where your partners may be untested, where the political regime may be unstable, where business practices are unfamiliar, etc., then the financial risk is magnified.
9. Language/Cultural Skills - Case studies that worked at home may not translate easily into a foreign business environment.
10. Very Short-Term Contracts - Professional service consultant may find a job that lasts a few weeks and then they have to find another one. This is very difficult for them. And it is very difficult for a trade promotion agency to keep finding new relevant opportunities.
11. Difficulty Getting Finance - Business and professional services generally do not require a lot of capital. This is one of the advantages. But it?s also a drawback when you need a line of credit so that you can undertake a lengthy service contract. The banks don?t want to know people who rely on their wits or what?s in their head as their main asset.
12. Difficulty Getting Paid - To resort to the legal system of the foreign country may be prohibitively expensive and legal systems are notoriously to the advantage of the locals.
13. Access and Visa Issues - Hand in had with the difficulty of having professional qualifications recognized comes the difficulty of getting a work permit and/or a visa to operate within a foreign country. We have qualified people from poor countries with proven experience in the baking in the industry but living in Africa. We immediately realized how access to visa and employment permits is very difficult to obtain from rich countries. So we decided to rely on our supplier and their technology, for sub-contracting in America. Rich countries protect their market by means of restrictions and drastic regulations about visas and immigration.
As a consequence, poor countries businesses are facing difficulties in negotiating and or trading face to face with their clients in the international market.
In July 2006 we were running after a contract valued at three millions dollars in Poland. But we were the direct victims of visas barriers.
When the agreement was pre-approved, we set up a meeting in Warsaw. However, we had only the Schengen visa in our passport, the Polish visa took five days. Due to the emergency, we decided to fly to Berlin, from where we would obtain the Polish visa at the border. Despite all the evidence and the commitment of our partner in Poland, the visa was scheduled in a week. We had no time to wait, we returned to California. Then we continued dealing with this case by phone and by email.
14. Loss of Intellectual Property - We have many examples of companies who have given copies of their training manuals, methodology and plans before signing any contracts. And have thus lost their intellectual property without any compensation. Even where there is copyright, trademark and patent protection, it can be difficult and
expensive to pursue the infringers. By doing so, we put our intellectual property and ideas in danger from competitors. We have given copies of their training manuals, methodology and plans before signing any contracts. And have thus an exposure for losing our intellectual property without any compensation. Even where there is copyright, trademark and patent protection, it can be difficult and expensive to pursue the infringers. We believe that this is a kind of narrow minded question, and lack of vision, being cut from the reality. It does not mean that because a product exists already in the market that the battle is over. Large groups could be vulnerable, not only with an offensive price policy, or only technological turmoil?s, but also by grinding its periphery. The Japanese have proven it, and keep on with such a usury war. We have found some weaknesses in the banking industry, especially in the credit sector for transactions pertaining to investors in the emerging countries.
15. Difficulty Finding the Opportunities - From the perspective of our overseas trade posts, it is easier for them to concentrate on the traditional areas or merchandise ? where import and distribution channels are easily identified.
16. Market Barriers. It was extremely difficult to export to America and to penetrate the market. Therefore we concentrated on the traditional areas or merchandise ? where import and distribution channels are easily identified. We identified the baking and we selected different types of products that we want to explore in California. Since 2001, the climate remains forbidding. There are dark protectionist mutterings on both sides of the Atlantic. Resistance has grown to unfettered changes in ownership through mergers and acquisitions. These could escalate into full-blown protectionism given a global macroeconomic dislocation, particularly of international trade in goods and services. My group has and is still experiencing such ill.
Even in the area of transportation (freight), we are facing problems. The recent Dubai case was a genuinely close question. On the one hand, non-US companies already own US port operations, with long proven experience in the field. And the US Coast Guard is responsible for port security, regardless of who owns the facilities. On the other had, because of shifts in politics the US took over Dubai and foreign companies owning US ports freight operations. And we know how affordable were the freight costs offered by these companies from poor countries. Now, because of suspicions on terrorism, many affordable freight companies from poor countries are discouraged to deal with US ports. We have to pay three times more than before.
The decision was taken by the political process, not by the marketplace or the economic impact on the free trade. As a consequence, it eroded other values. When rich countries trade with poor countries, they should not seal up their borders, but it means looking harder at the terms of engagement. Business insists that trading nations respect its property rights, What about human rights and social rights?
Our Recommendations:
We believe that it is a mistake for donors to continue generously pledging grants and loans to governments of poor countries. We have seen billions of dollars ?given? to poor countries, however, money have been misused or stolen by the head of many African governments. Vast and urgent needs have emerged since then, which makes it yet more imperative to convert the pledges into cash quickly and give them to private investors.
Bearing in mind the growing challenges faced by populations in poor countries in all regions, donors will have to be prepared to mobilize additional resources for urgent as well as long-term needs. And we must work together to create flexible mechanisms that bring funds and expertise more rapidly to where they are needed, particularly for creating jobs, exploring and setting up new technologies in poor countries, and helping businesses from these countries to export their services and goods too.
Our experience taught to us that the reality is obviously different from what is preached by governments and international organizations. Exporting services and goods from poor countries is a typical example. It is difficult to conceive social and economic development when, on one side, businesses from poor countries are relegated to the second class, and erecting barriers to impeach them to operate in the international market as partners. They simply do not have the financial capacity to put in place the infrastructure of exporting and distributing in all areas where it is needed. On the other side, the market is generally owned and operated by richest countries through their MNC?s.
Therefore, if the market is not open to poor countries, services and or products exports system will take much longer to be established, and delay productive investment in other areas.
Changing features in international trade in services are reflecting the needs of businesses from poor countries to export their products and services worldwide. These changes have brought about new concepts and problems. An array of challenges remains before us. My team and myself are a good source for organizations likes ITC, UNCTAD, WTO, FMI, and many others for creating a platform that will focus in this matter with new perspectives.
EXPERIENCE# III: Launching a Fund in Switzerland for the Diaspora
Our team is very concerned about the integration of the Diaspora in the development process. We have a solid educational background coupled with a thorough long experience, and high ethical values in international affairs. Prior to launching a bank in Switzerland designed to foster the efforts of the Diaspora in entrepreneurship, we decided to start a financial platform, called World Diaspora Fund (WDF).
WDF is an investment company for the international Diaspora, in respect to a cooperative model, similar to the Raiffeisen Bank in Switzerland. Essentially we will be offering Collaterals and Bonds to facilitate access to Credit Instruments and Bank Loans. We
prioritize ethical investments in agriculture, principally in Africa because we believe that agriculture is amongst the key indications of the economic goodwill of a country.
Following our field survey, we realized the major weaknesses of other financial institutions operating in the same areas; we went further ahead of them to innovate by providing opportunities to the community:
? We would create jobs both locally and in the Diaspora?s homeland.
? We would bring the money back where it is most needed for fighting poverty.
? Today there is no financial entity that consolidates the Diaspora savings in order to build a portfolio for development plans, and to answer to the specific financial needs of these communities.
In other words, there are no institutions serving the Diaspora with collaterals, bonds, other means of money transfers, savings, investments, equity, etc., encompassed in ethics criteria.
? The international Diaspora is an interesting human and financial resource for the
economic and social progress of the community. Its members are well equipped with good education, know how, entrepreneurship, and they are open to positive changes. WDF scrutinizes such resources in order to generate more revenues for the development process.
? We innovate the transfer?s niche by consolidating an Investment Fund because
today the international Diaspora contributes essentially to the immediate needs of their families in their homelands.
These aggregate remittances count in billions of US Dollars per year, but they respond essentially to emergency assistance in different social areas such as food,
health care, education, housing, etc. At the macroeconomic level, these transfers represent an important part of the GDP of the country of origin and they impact
the payments balance.
We sought good opportunities in Switzerland and in the Emerging Economies, and we want to explore them. Therefore, we decided to rely on new synergies for transforming a new vision of banking, by integrating human values in our goals and our objectives. We will enhance business in Africa by operating in Geneva, one of the best financial places of the world, situated in the center of Europe.
Now let see how International Organizations and Multinationals impact world?s affairs.
I. The World Trade Organization (WTO), the General Agreement on Tariffs and
Trade (GATT), and Transnational Corporations (TNC?s).
The financial crisis is being used as a political weapon to discourage investors from poor countries to export their goods and services. As we are involved in the baking industry (the primary sector), we should point out two concerns about international organizations like the World Trade Organization (WTO), and the International Monetary Fund (IMF) for problems related to agriculture and international financing.
We refer to the CETIM (Centre Europe Tiers Monde in Geneva) observation in 1999 on a special session on Agricultural Free Trade imposed on the South through WTO Agreements and its Consequences.? These organizations pretend to be only for technical assistance for organizing seminars in national capitals (some 20 to 25 per year), regional seminars, as well as workshops and symposia in Geneva. Tellingly, the most recent symposium dealt with the challenges and opportunities of cross-border trade in services. But what are the results so far? Business from poor countries trying to find finance for exporting, need to maintain a permanent office in export markets. The UN can interfere to ask countries members to alleviate restrictions.
As mentioned by the joint written statement by CETIM, and AAJ (American Association of Jurists) at the UN Human rights session in 2004: ?We would like to seize this opportunity to draw the attention of the 51st session of the Sub-commission on the consequences of free trade policies imposed on countries of the South by the WTO in
particular on agricultural issues. The WTO officially started its work in January 1995, succeeding to the (GATT) after the conclusion of the Uruguay Round negotiations. The agreements signed at that time include for the first time one on agriculture.
This is a source of concern for a growing number of peasant organizations, NGOs and some countries of the South. This agreement makes it compulsory for these countries to stop controlling importation of food and other agricultural goods. They are also required to reduce and eventually stop all subsidies to peasants, thereby exposing them to the competition of international agricultural markets. Four years later the disastrous consequences caused by the liberalization of the agricultural sector in certain countries of the South are becoming more and more obvious: the control of the world food system has fallen into powerful hands, to be more specific it has fallen into the hands of agribusiness. These changes concern the life style, revenue, and even the survival of small farmers worldwide and food security in many countries. International organizations policies should be reviewed and people should be re-educated on financing exports from poor countries to richest. The first set of problems and challenges has to do with the political sensitivities of market opening in different services sectors.
Several NGOs and civil society groups consider that opening services markets is a dangerous path to follow for less competitive economies. They claim that there is an intolerable level of intrusiveness by the WTO rules in areas of national policy competence such as education and health care.
My team and myself are pragmatic, action oriented. However, we wonder if there are active organizations to support initiatives like ours. We suggest that the UN and its affiliated organizations like the WTO should interfere for facilitating poor countries to access credits, for exporting their services and products, and then to face foreign competition. As a result, there would be tremendous economic benefits of opening services markets such as helping exporters and producers capitalize on their competitive strength; enhancing consumer savings; fostering innovation and technology transfer. Therefore, we came to the conclusion that organizations like the IMF and the WTO maintain a service as a public monopoly if they so wish.
The liberalization of international commerce cannot lead to the development of national agricultural economies. Indeed, the beneficiaries are neither the peasants nor the third world governments. The liberalization of commerce has mainly enriched agribusiness transnational companies (TNCs) such as Cargill and Continental. Giant food-processing companies already control three quarters of the world's cereal trade.
In short, world competition that the WTO aims to introduce is altogether unfair, inappropriate and disloyal.
Unfair because TNCs from the North have at their disposal highly developed technology and experience in agricultural industry that can only lead to the disappearance of traditional agriculture which has no means to defend itself. "In general (traditional agriculture) is not in a position to survive competition with powerful trans-nationals
which benefit from strong economy of scale, from large capital investment and technology, and which have good access to world markets. The technological and management skills brought by investors render then more competitive compared to local producers."
Inappropriate because free trade doesn't correspond to any real need but serves the profits of TNCs and the enrichment of elites.
Disloyal not only because agriculture is subsidized in countries of the North but also because "on the one hand foreign investors are strongly encouraged, and on the other hand small scale producers are subjected to significant constraints particularly an inequitable fiscal burden designed to discourage them." And finally TNCs are not subjected to any controls.
Outsourcing of services has become an important feature of international trade in
services. Developed countries have gained access to a new pool of talent abroad and have boosted productivity. Developing countries, on their side, have seen the establishment of high-tech industries and gained a substantive increase in income related to services jobs. Outsourcing is thus influencing policy decisions in both developed and developing countries, in ways which require complex examination of trade, economic and social factors.
Countries like India have seen exports of services such as software development, back- office support and services supplied by call-centres, expand in a significant way. Some African countries have also seen an increase in their exports of non-traditional services. The positive spin-off effects of liberalizing services have been felt in the form of increased Foreign Direct Investment and the creation of new businesses to support the new services providers. Matched with sound educational policies and investment in infrastructure, the services sector has proven a powerful engine for growth and development.
Not all of these changing features in international trade in services have been fully reflected in the negotiations. Also, these changes have brought about new concepts and problems. An array of challenges remain before us.
The first set of problems and challenges has to do with the political sensitivities of market opening in different services sectors. Several NGOs and civil society groups consider that opening services markets is a dangerous path to follow for less competitive economies. They claim that there is an intolerable level of intrusiveness by the WTO rules in areas of national policy competence such as education and health care.
The water distribution sector is a often cited as a good example of this debate. Water distribution is obviously a basic service in any country. It is difficult to conceive social and economic development without this service. On one side, this is a service of general public interest, and as such it is generally owned and operated by the government,
through public companies. On the other side, many governments simply do not have the financial capacity to put in place the infrastructure of water distribution in all areas where it is needed. Therefore, if the market is not open to private investment, a water distribution system will take much longer to be established, and delay productive investment in other areas.
What must be stressed in this debate is that the GATT does not require the opening, privatization or deregulation of any service. In respect of water distribution and all other public services, different policy options are perfectly legitimate and are open to all WTO Members. I wish to underline this point: neither the current rules in the GATS, nor the new round of negotiations will force WTO Members to open the totality of their services sectors to private or foreign competition. WTO Members are free to maintain a service as a public monopoly if they so wish.
What also needs to be stressed are the economic benefits of opening services markets
such as helping exporters and producers capitalize on their competitive strength;
enhancing consumer savings; fostering innovation and technology transfer.
A second set of problems and challenges has to do with inexperience with the GATT. Participation in services negotiations is more demanding than government officials were used to in old-fashioned trade negotiations on goods.
The services economy is not only larger than agriculture and manufacturing in most countries in the world, it is also far more diversified. And the services agreement, the GATT, is far broader than conventional trade agreements for goods. It covers not only cross-border trade, but movements of consumers, of producers/investors, and of persons. Negotiations are thus more complicated ? and so are the country-internal processes of preparation, coordination and implementation. Services negotiations generally require Trade Ministers to work with their colleagues who have regulatory responsibility in different services sectors ? and the difficulties of such internal coordination should not be underestimated.
The complexities of services are also quite clear in the negotiations in the rule-making areas, that is on the disciplines for domestic regulation, the question of an emergency safeguard mechanism, as well as the need for and scope of rules on government procurement and on subsidies. Leaving aside the practical difficulties of some of these instruments, several Members argue that progress in rule-making would provide them with some degree of comfort to enable them to make further specific commitments. These Members point out that, if they knew they could count on a mechanism such as an emergency safeguard, more commitments could be made. In contrast, others are concerned that such a mechanism could unnecessarily undermine the predictability of the commitments sought in the Round.
For the moment, many governments continue to be more hesitant in their approach to services trade than they use to be in manufacturing. Although one can understand this situation, it is nonetheless unfortunate, since the benefits of services liberalization are key to any development strategy. Barriers are still far higher and less transparent in services
than in most goods markets (with some notable exceptions such as agriculture).
What can be done about this? On our side in the WTO, a key factor is technical assistance. Based on donor funds, the Secretariat has been conducting a broad range of technical assistance activities. These include seminars in national capitals (some 20 to 25 per year), regional seminars, as well as workshops and symposia in Geneva. Tellingly, the most recent symposium dealt with the challenges and opportunities of cross-border trade in services.
Two further points need to be added to my list of negotiating 'challenges' in services. One is the idea that one will only negotiate services once there has been movement in other areas of negotiations. Of course, bearing in mind a long and painful negotiating history in areas such as Agriculture, this is understandable. However, the quality of results of negotiations in services may be seriously affected by the delay in tabling requests and offers.
Services negotiations do not lend themselves to the same formula-based approaches as agriculture or goods. Rather, they are advanced mostly sector-by-sector in a host of bilateral meetings. There might not be sufficient time to successfully complete this time
? and resource-intensive process if it is not allowed to advance at its proper pace.
This would be problematic especially for an area of focal interest to many developing countries: Mode 4 ? the presence of natural persons. It is the most protected, most sensitive and, by the same token, most challenging area under discussion. I am fully aware of its particular importance for small and medium-sized companies that cannot maintain permanent offices in export markets, but need the flexibility to move staff as the opportunity arises. Any meaningful outcome, however, needs time ? time for negotiation in Geneva and time for preparation, coordination and persuasion in capitals. Given the tight schedule before us, we cannot afford to wait any longer.
Finally, there is an urgent need for political guidance and orientation to services negotiators. It has become increasingly relevant in recent months that political input is badly needed to advance services negotiations. The main concern is no longer the absence of a sufficient number of offers ? three-quarters of the Membership has participated in the process to date and submitted at least initial offers of new or improved commitments. But it is widely recognized that the quality is poor and, if implemented, would open hardly any new access opportunities for service providers.
We are at a crossroads. Should the bilateral request-and-offer process simply be
continued, or do we need to develop complementary mechanisms that would (re-) launch this process on a higher plain? If so, what would these mechanisms look like ? and how could they be translated into clear guidelines to be endorsed by Ministers in Hong Kong? Members need to focus further on these issues as a matter of priority ? and arrive in Geneva with fresh instructions from their political leaders.
Services are a core element of the Doha Development Agenda ? and a satisfactory result is a condition sine qua non for the whole project. Therefore, my message to you is: your support for the services negotiations is crucial to the whole Round.
Defenders of free trade admit that subsidies distort the market, but maintain that these distortions will disappear thanks to the new measures progressively introduced by GATT as from 1995. The result is a widely held but illusionary opinion that producers from all four corners of the world are placed on an "equal footing"!
This GATT agreement represents a real fraud. In reality developed countries have agreed to reduce their subsidies by between 20% and 36%. So, far from getting rid of industrialized countries' subsidy structures, GATT has left them largely intact, notably thanks to the bilateral agreement between the United States (US) and the European Union (EU) called the "Green Box". Through this agreement, the US and the EU have been able to maintain or even increase subsidies targeted at their agricultural exports! On the other hand, certain governments of the South have been encouraged to further liberalize their economies, reducing their taxes by 24% on imported foodstuffs and by increasing their minimum import from 1% to 4%.
We wonder about the increasingly significant role being played by the World Bank in Human Rights activities. In innumerable papers the real experts - not the World Bank scribes - describe the funereal role of the World Bank in matters such as the right to Development and Human Rights in general. All over the world, peoples are protesting at the policies of the Bretton Woods institutions. During the Social Summit held at Copenhagen over 600 NGOs said in a joint statement, later signed by thousands of NGOs the world over that "the policies of the LMT and the World Bank are among the main obstacles to real economic and social development", and declared that they were in favor of the democratization of these two institutions.
And another article in the San Francisco Chronicles of October 23, 1997 from Mr. Simon, calling to abolish the IMF. Mr. Simon, secretary of the Treasury from 1974 to
1977, and president of the John M. Olin Foundation: ?The Clinton administration is asking Congress to approve $3.5 billion in additional funding this year for the
International Monetary Fund. Congress should not only reject this proposal, but also take the long overdue step of ending all future funding for the IMF. As a practical matter the
institution cannot continue to exist without the participation of the most powerful nation in the world. By withdrawing its funding, then, the U.S. can take a leadership role in
putting this outdated organization out of business? And George Shultz, the esteemed former secretary of state and of the Treasury, has called for the elimination of the IMF. In
a 1995 lecture before the American Economic Association, Mr. Shultz observed that ?the
IMF has more money than mission.? As a consequence, he said, we should ?merge this
outmoded institution with the World Bank, and create a charter for the new organization that encourages emphasis on private contributions to economic development. This would make a great deal of practical sense. ?
Globally speaking it is difficult to overstate the difference between the spectrum of positions in services negotiations at the time of the Uruguay Round and the situation today. We have moved from a picture where most developing countries were reticent, if not outright opposed, to negotiating services, to a new set of positions, where some important developing countries have become strong negotiators. Availability of world- class services has enabled exporters in developing countries to capitalize on their competitive strength, whatever the goods and services they have to offer.
An increasing number of developing countries, building on foreign investment and expertise, have been able to make impressive inroads in international services markets. Services opening has become an indispensable element of development strategies. In turn, this has prompted many initially skeptical governments to change track. Having largely remained on the sidelines of the Uruguay Round, they now play an increasingly vocal role in the services negotiations.
The phenomena of outsourcing and cross-border supply of services, facilitated by IT and FDI, have introduced new strategic elements in the negotiations. Modes of supply of certain services, which were difficult to conceive in the past, have not only materialized in practice but in some instances have become commonplace.
IV. The Food and Agriculture Organization (FAO).
In November 1996 Heads of States and Heads of Government from 186 countries met in
Rome for the Food World Summit organized by the Food and Agriculture Organization (FAO). They proclaimed their national commitment and their political will to make constant efforts to eradicate hunger in the world. They have also decided to do all that is in their power to reduce the number of people suffering from chronic under-nourishment by the year 2015, this concerns over 800 million people.
The FAO adopting free trade theories pretends that withdrawing domestic commercial barriers will enable all countries to export their products which have a comparative advantage and eliminate less productive activities. The FAO concedes that this will lead to "adjustment costs" for producers but insists that these costs will in the long term be made profitable thanks to exportation opportunities and large profits reaped trough modernization. But free trade is an illusion, which serves the interests of the strongest, and worldwide liberalization would be harmful because of the unequal conditions of production and of the diversity of market players.
We would first like to talk about agricultural subsidies. Farmers from the South face enormous inequality when it comes to agricultural subsidies.
A small farmer from the South earns in a year hardly more than what his US "colleague" receives as subsidies per ton through the Export Enhancement Program (EEP), (i.e. 77$ per ton). The latter if suitably equipped will produce between 800 and 1000 tons per year
and will consequently receive, in subsidies alone, a 1000 times the revenue of his colleague from the South.
Because we want to see a new era of Actions in the field, we suggested a topic pertained to "Focusing on Entrepreneurship for Job Creation and Agri-Business for Enhancing Sustainable Development and Poverty Eradication." We described that the world is still confronted with an unprecedented growth in inequalities and a spectacular increase in the gap between the advanced countries and those of the Third World.
We approach the topic with the spirit of re-visiting and implementing specific cooperation mechanisms, partnership arrangements or other development schemes pertained to the Millennium Development Goals (MDGs) for sustainable development.
Among our core contribution, we propose that the G-20 should:
? Encourage and support entrepreneurs for job creation in order to fight poverty.
? Launch an international Task Force for facilitating and monitoring the Diaspora
from poor countries relocate in their homeland for making positive changes.
? Build a bridge for facilitating credit access for enhancing investments in
Agribusiness and Food quality.
? Encourage our plan for the creation of an Ethical Bank for Development.
Because we want to see it happen, we provided our contribution to the pillars of sustainable development that could be launched and endorsed at Rio+20. We tapped into our thirty years of international experience in Banks, Trading, and Humanitarian for
providing realistic solutions. We insisted on linked topics:
The need of a new direction and a new vision of world affairs. We indicated that we must pay attention about incidence of maladjusted persons; we described the most of these silent killers (psychopaths, schizophrenics, etc.). Most of them are on the streets and are involved in the decision making process and policymaking. We proposed the necessarily to review the ?Homo Economicus? and to replace it progressively by ?Homo Sociologicus?. We integrated Finance, Energy and Green economy in the context of sustainable development and poverty eradication. We proposed new paradigns in the banking industry in order to avoid setbacks and other financial meltdowns.
We evoked the contradictions about ?aid?, we proposed rather to work with the Diaspora by creating an international task force associated with the G-20 in order to integrate the Diaspora in the development process in poor countries. We focused on poverty reduction because it is a central feature of the international development agenda and, the main cause of inequalities.
About Agri Business and Food Security, we indicated how preventive solutions can be taken right away in order avoid the high cost of speculation in preventing the immense suffering of citizens in importing countries, whose income is weakened by market volatility, eroding their purchasing power, their quality of life and their hopes for a better future.
We encourage the Corporate Social Responsibility (CSR) in raising awareness that firms have responsibilities other than to their owners and the bottom line. We also described the necessity to review Energy with a priority on oil. Both, producers and importers of Oil must review the mechanisms of price fixing, and take Speculators out of business. The most focus was on Technology Transfer and we proposed plans for Job Creation. We insisted on the necessity of encouraging Entrepreneurs and Startups, especially those from poor countries. The G-20 should advocate and facilitate credit access to job creators.
Again we plead for supporting our plan for launching an Ethical Bank. Our staff is ready with Business Plan, and the Strategy. Barriers, protectionism, visas facilities, and other barriers must be alleviated.
Eventually we applied a feedback and we proposed some guidelines to Government, the Civil Society, the UN organizations, International Organizations, and Transnational Corporations in world affairs.
Both agriculture and technological advance is one of the basic tools to measure the competitiveness and the economic growth of a country. Our Team is exploring these sectors such fields through effective financing entrepreneurship schemes. Agriculture and technological are the main barometers for integrating and improving productivity of
goods and services in other fields. This trend is not an isolated factor; it includes the banking industry too.
Poverty in poor countries threatens the entire world. It knows no borders. It is our collective responsibility to ensure that all countries -- rich and poor ? change their minds, find new ways to shift and to enhance business with new perspectives. Such a conjunction of constructive ideas is a terrific weapon to fight inequalities and to open an new era of global ethical business. Private initiatives (like our plan for an ethical bank) are the engines for the reduction of poverty in poor countries. Such initiatives should be encouraged by governments, international institutions, and individuals.
The experience of the Task Force NVI illustrates how the financial support to business from poor countries are the main key for helping them to export their goods and services. Thereby, they can expand their operations and diversity their activities in other market places. The direct consequence will be the creation of jobs in their homeland, with a significant impact on reducing poverty and its ill effects. Digging into our endeavor to create an ethical investment bank located in an emerging country, we realized the cynical and the contradictions between how in theory rich nations try to help poor nations in the international market.
Our experience in our sole proprietorship, "NVI Finance, Trading & Services" evidences that poor countries can compete in the global market by exporting their services and products to rich countries too. We challenged ourselves because the size of an investment or of a corporation is not necessarily the guarantee for survival and/or success in an ever- ending competitive environment. Risks are opportunities (and dangers) to be taken. Success is not an accident.
We identified niches and we advocated for ethical investments in a tremendous and a potential market, Africa. We anticipated innovative solutions in order to prioritize actions for job creations in order to fight poverty and its devastating consequences for the individual, and the community.
Not taking a risk may become a big risk too.
Our team can make a difference, and change the transformation, because we pledge an intangible asset that stands far beyond measurable figures, and we go much further because do not see only with our eyes. We are changing something fundamental.
Poverty of poor countries is a permanent danger to rich countries. Thank you for supporting our endeavor.
Bernard Nyembo
Geneva ? October 29, 2011
1. How America's Decline Is Linked to OIl, By Michael T. Klare, Sept. 15, 2011.
2. Do Higher Prices Indicate a Tight Market? By Edward Nsimba, PhD in Econometry, Specialiast UN Mathematics Modeling.
3. Can AID Be a Key Contribution to Genuine Development? IBON Primer on ODA and
Development Effectiveness. Ibon Center, Philippines,
4. Economic Development in Africa, Report 2010 "South-South Cooperation: Africa and the New Forms of Development Partnership", Unctad, Geneva.
5. Cultivating Conscience. How Good Laws Make Good People, by Lynn Stout.
6. Trade and Development Report, 2011. Unctad, Geneva.