Cyclopedia Of Economics 3rd edition

Cabinda is 2,800 sq. m.. (7,300 sq. km.) of sweaty tropical forest and less than 200,000 inhabitants strong (counting more than 20,000 refugees in Congo). Nominally, it is an Angolan province separated from Angola by a Congolese corridor leading to the Congo river and thence to the sea. It is inordinately rich in natural resources: hardwood, cassava, bananas, coffee, cocoa (cacao), crude rubber, palm products, phosphate, manganese. quartz, gold, potassium, and, above all, oil (about 500,000 barrels per day). Huge rigs have been producing most of Angola's GDP off Cabinda's luscious shores since 1968. Cabinda has the second richest variety of forest trees after the Amazon. Unending strips of invaluable species such as black wood, ebony, and African sandal wood still harbor (protected) mountain gorillas. Wood of Cabinda origin is avidly sought by connoisseurs in Portugal, Germany, Italy, and the Netherlands.

Had Cabinda been an independent state and had all 400,000 Cabindese repatriated - GDP per capita would have still amounted to $7000, making it the richest territory in Africa. Small wonder that many of the bloodiest battles in Angola's protracted war of independence from the Portuguese (1961-1975) took place here.

Yet, even after the coveted independence was achieved, very little of the oil bonanza trickled back to the disgruntled Cabindese. They still depend on subsistence agriculture for a living. Infant mortality is among the highest in the world and only 3 in 10 people have access even to rudimentary health services. The average life expectancy is 47 years and the literacy rate is 42%.

Cabinda mostly has dust roads, deforestation, desertification, soil erosion, and oil spills to show for its gifts of nature. The Cabindese blame foreign oil firms (Chevron, Elf) for importing goods and services duty free - rather than purchase them locally or invest in local infrastructure and industry. Hence the Cabindese rebelliousness, constant strife, and low intensity warfare. The peace agreements in Congo mean that Angola may have a shot at taking over the Congolese strips that separate it from Cabinda and at attacking rebel UNITA camps on Congolese soil. In short, Cabinda is running out of friends and out of its insular geography.

"Today, the Angolese colonialiste (sic) and their agents are occupying the Cabindese territory and become the enemies of the Cabindese people. We are Cabindese in our heart and our soul and we are sadly witnessing the destruction and the ransacking our country." - says the "government". It is open to an economic federation with Angola but wishes to "develop agriculture by supporting and stimulating the creation of farmers' cooperatives in the free zones and refugees' camps". And what would be its economic philosophy after Cabinda's yearned for independence? "Promote an economic policy of free exchange and humanitarian vocation." More specifically, the government has plans to develop Cabinda's largely untapped diamond, cobalt, and uranium veins. But it all sounds desperate and self-delusional. Abandoned by the international community (Cabinda was once a member of the Organization of African Unity as an independent state), bereft of its strategic importance, economically raped by east and west alike - Cabinda is fast dwindling and literally dying.

This by no means is the universal fate of all exclaves.

KALININGRAD

Kaliningrad port is ice-free. It is so unusual in the Baltic Sea that this serendipity led to prosperity throughout the illustrious history (Kant lived and taught here) of this region and its eponymous capital (formerly known as Konigsburg). It attracted a navy base (home to the Russian Baltic fleet), fishermen, logging companies, and derivative industries (shipping, processed food, machinery). Kaliningrad has the makings of a "Hong Kong on the Baltic Sea" as Chernomyrdin predicted when Russia established it as a "pilot" Europe-orientated Special Economic Zone (really a hybrid customs and offshore investment zone) in 1996. Yet, in 1998 it attracted only $11 million (and a year later, only $18 million) in investments, both foreign and inward. This reluctance was a penalty for its political affiliation, being a part of Russian and its (until recently) impossible tax code, capricious and venal legal system, prying intelligence services (on the lookout for separatist tendencies), lack of funding from the centre, the regional administration's blatant protectionism and interventionism, and discrepancies between the legal systems (e.g. VAT rates).

Things, though, have improved recently.

To quell secessionist stirrings, the Pravoslav Church has come out unequivocally in favor of a Russian Kaliningrad, as have all the governments of the region. The investment climate in Russia itself has improved dramatically since 1998 with a new tax code and other pro-business bits of legislation enacted by a Putin-awed Duma. Both Poland and Lithuania - which sandwich Kaliningrad between them - are slated to join the EU. Kaliningrad's workforce is highly qualified and polyglot. The city is bristling with more than 50,000 small and medium enterprises (mostly trading companies). Its transport infrastructure (inherited partly from the military) and banks (some Polish and German) outshine most other provinces in Russia. It is rich in certain mineral resources: amber, (high grade) oil, peat, rock salt, brown coal (merely 50 million tons), timber, and construction materials. Of course, there is an impressive variety of high value fish (eel and salmon being the most lucrative).

Various Swiss, Polish, Lithuanian, and German firms have started to shift their production facilities to the exclave. More than 1200 joint ventures with foreign partners from more than 50 countries have been registered. BMW and KIA cars are already produced there - as well as pulp and paper (Cepruss). Even the EU has chipped in and provided grants and credits of almost 10 million euro. The Autosan bus enterprise (part of the Zasada Group in Poland) decided to assemble there buses for sale in the Russian market. Vicuinai, a Lithuanian food concern will launch a $5 million fish processing plant in Kaliningrad in July this year. German firms are all over the place - from oil production equipment ("Baltkran") to a sewing factory ("Grammer AG"). German banks extended tens of millions of dollars in credits to the regional government. German Lander (such as Hamburg and Schleswig-Holstein) have their own representation.

Still, its cosmopolitan aspirations as a bridge between Russia, the EU, and the Baltic notwithstanding, Kaliningrad is a part of decrepit and drab Russia. Baltiyisk, a 50,000 strong town in the Kaliningrad region, went without water on New Year's day due to a ruptured pipe. Production, since 1990, declined precipitously in the important food, machinery, and fishing industries. The fate of exclaves is oft determined by their political affiliation rather than by their geographical realities or geopolitical aspirations.

Indigenous Moroccan Jews call them "Morocco Spaniol". These are the Jews who were expelled from Spain in 1492 and who chose to settle in self-imposed ghettoes on the shores of Morocco, a few kilometers from their abandoned homes. Their return is imminent, so they believed. They preserved their Ladino dialect (a mixture of Hebrew words and Castilian Spanish), their social hierarchy, and their institutions for centuries of forlorn yearning.

Today there are very few Jews in Morocco but native Moroccans (and an assortment of other Africans and Asians) cross the straits to Spain clandestinely. They do so mostly from two Spanish exclaves, together 31 sq. km. big, on the Moroccan shore (it is the shortest distance) - Ceuta (73,000 people) and Melilla (65,000). The smuggling of immigrants may be the single biggest economic activity in these two heavily subsidized territories. Until recently, C&M were flanked by huge camps of would be migrants who survived on the charity of the locals and on drug trading. Ever since Spain, at the EU's panicky behest, cordoned off the beach with barbed wire and fortifications, the camps have dwindled (though the Red Cross still feeds 1000 people daily in and around Ceuta alone).

Yet, not only people make use of the age old smuggling routes through C&M. The Riff area, Morocco's Wild West and major drug growing zone, smuggles its $3-4 billion a year in produce to Western Europe using very much the same infrastructure (a fleet of tiny and capsizing boats). Child prostitution rings have sprung up. Remittances from those who made it into the heartland amount to at least another $1 billion (many say double that). Money laundering is a thriving activity among both bitter rivals: the Moslem and Christian Spanish residents of the exclaves.

Not everything is crime and corruption in C&M. Ceuta sports a thriving food processing and handmade textile industries. It is an important refueling and fishing port and a trendy tourist destination. It used to be duty free until 1995 (Melilla's similar status was revoked in 1992), but its port facilities are still active. The city fathers are trying to develop aquaculture. Still, official unemployment is near 30%. The situation in Melilla is even worse.

The irony is that C&M (where the euro is legal tender) receive dollops of cash from the EU in "regional aid" and preferential fishing quotas (both territories are excluded from NATO, though). Spain has just increased by 55% (to 200 million euros) the subsidy it pays Endesa, the power utility, to light up C&M (and other Spanish territories the world over). This means that c. 2% of the electricity bills of every Spaniard go towards subsidizing the energy needs of these strategically meaningless locations. Spain also doles out cash (c. $10 million a year) to its national ferry companies to provide maritime links with C&M and other overseas territories. In a recent tender not one foreign or domestic private shipping company presented a bid. Spain expressed astonishment.

Morocco hotly contests Spanish sovereignty in Ceuta and Melilla, but hitherto to no avail. Spain holds local elections there (recently won in Ceuta by the ex-convict mayor of the Andalusian city of Marbella and his people). The tacit understanding is that Morocco will accept back Moroccan illegal immigrants caught by Spanish authorities. In return, Spain invests in Morocco (in labour intensive industries, to keep the human tide at bay). Morocco depends on remittances from expatriates and so promotes with the EU the idea of an immigration quota.

C&M are at the heart of the tension between established, wealthy, sated societies and hungry, deprived and bitter immigrants from developing countries. To the former it is a threat - to the latter a promise. In this bottleneck of festering corruption and crime, the future of Europe unfolds in slow motion: barbed wire, drug dealing, violence, aid dependency, and the inevitable opening of its gates to the manpower it so direly needs and so long exploited in its colonies.

Economies revolve around and are determined by "anchors": stores of value that assume pivotal roles and lend character to transactions and economic players alike. Well into the 19 century, tangible assets such as real estate and commodities constituted the bulk of the exchanges that occurred in marketplaces, both national and global. People bought and sold land, buildings, minerals, edibles, and capital goods. These were regarded not merely as means of production but also as forms of wealth.

Inevitably, human society organized itself to facilitate such exchanges. The legal and political systems sought to support, encourage, and catalyze transactions by enhancing and enforcing property rights, by providing public goods, and by rectifying market failures.

Later on and well into the 1980s, symbolic representations of ownership of real goods and property (e.g, shares, commercial paper, collateralized bonds, forward contracts) were all the rage. By the end of this period, these surpassed the size of markets in underlying assets. Thus, the daily turnover in stocks, bonds, and currencies dwarfed the annual value added in all industries combined.

Again, Mankind adapted to this new environment. Technology catered to the needs of traders and speculators, businessmen and middlemen. Advances in telecommunications and transportation followed inexorably. The concept of intellectual property rights was introduced. A financial infrastructure emerged, replete with highly specialized institutions (e.g., central banks) and businesses (for instance, investment banks, jobbers, and private equity funds).

We are in the throes of a third wave. Instead of buying and selling assets one way (as tangibles) or the other (as symbols) - we increasingly trade in expectations (in other words, we transfer risks). The markets in derivatives (options, futures, indices, swaps, collateralized instruments, and so on) are flourishing.

Society is never far behind. Even the most conservative economic structures and institutions now strive to manage expectations. Thus, for example, rather than tackle inflation directly, central banks currently seek to subdue it by issuing inflation targets (in other words, they aim to influence public expectations regarding future inflation).

The more abstract the item traded, the less cumbersome it is and the more frictionless the exchanges in which it is swapped. The smooth transmission of information gives rise to both positive and negative outcomes: more efficient markets, on the one hand - and contagion on the other hand; less volatility on the one hand - and swifter reactions to bad news on the other hand (hence the need for market breakers); the immediate incorporation of new data in prices on the one hand - and asset bubbles on the other hand.

Hitherto, even the most arcane and abstract contract traded was somehow attached to and derived from an underlying tangible asset, no matter how remotely. But this linkage may soon be dispensed with. The future may witness the bartering of agreements that have nothing to do with real world objects or values.

In days to come, traders and speculators will be able to generate on the fly their own, custom-made, one-time, investment vehicles for each and every specific transaction. They will do so by combining "off-the-shelf", publicly traded components. Gains and losses will be determined by arbitrary rules or by reference to extraneous events. Real estate, commodities, and capital goods will revert to their original forms and functions: bare necessities to be utilized and consumed, not speculated on.

In "Alice's Adventures in Wonderland", Lewis Carroll wrote: "Curtsy while you're thinking of something to say. It saves time."

What a missed career. He should have been an expat expert. To paraphrase a sentence originally written about women (no misogynism implied): "What else is a foreign consultant but a foe to friendship, an inescapable punishment, a necessary evil, a natural temptation, a desirable calamity, a domestic danger, a delectable detriment, an evil nature, painted with fair colours?" (Anne Baring and Jules Cashford, They Myth of the Goddess: Evolution of an Image (London: Penguin Books Inc., 1993).

Not unlike poor Mr. Prufrock in T.S. Eliot's "The Love Song of J. Alfred Prufrock," foreign advisors in the exotic countries of CEE, especially once moderately inebriated, are prone to dramatic monologues and musings, "measuring out their lives in coffee spoons" as they contemplate "the yellow smoke that slides along the street, rubbing its back upon the window-panes."

All foreign advisors belong to either of three categories: the hustlers, the bureaucrats and the corporates.

The first sub-species peddle their specious wares aggressively, flamboyantly and relentlessly. They present a picturesque assortment of quaint British eccentricities and pronounced professional idiosyncrasies. They often are under a cloud - but never in the shade. Sometimes they even flaunt their chequered past and colourful adventures. It is the only form of entertainment in the drab cemetery that Eastern and Southeastern Europe is. In the hope of landing a fat consultancy contract with a confused minister or with a terror-stricken central banker, with a quadriplegic stock exchange or with a dying industry lobby, with sansculotte trade unions or with gullible Western NGOs - they gypsy around, living off tattered suitcases in shabby hotels, yearning to strike gold in the next station of their mendicant's journey. Necessarily abstemious - they are otherwise and when serendipity strikes, containers of greed and avarice and gluttony and hedonism. Unfulfilled, they often deteriorate to colluding in obscure dealings with corrupt officials. You can find these hangers-on in every pub and bar from the farthest Russian north to the warm waters of Bulgaria, the same dogged look, the same mane of yellowing hair, the old-cut suits and sole-worn shoes and the drooling eagerness to gossip and to profit.

Contrast these has beens to the bureaucratic breed. Ever the laptopped, they travel first class and reside in five star luxurious hotels strewn among the decrepitude of their surrounding. Unashamed, they flaunt shimmering utility vehicles and satellite cellular phones in the face of the unemployed and downtrodden they came ostensibly to help. Occupied mainly by scanning the daily paper and solving simple crossword puzzles, they disrupt their onerous routine only to wine and dine venal officials on mutually fattening expense accounts. They are the malignancy of Bretton Woods, a cancerous growth of well intended aid, the hideous face of altruism. Their organizations are the dumping grounds of the inept and the unwanted, the professional failures and the embarrassingly corrupt, the egregiously ignorant and the narcissistically immature. They tax the resources of their hosts as all parasites do and give very little in return. Their advice is often wrong and almost invariably leads to adversity and woe. They tend to overstep their mandate and supplant elected offices and their humiliated occupants. They dictate and intervene and threaten and determine with the callousness of those who lose no thing when their "advice" goes awry. In time, they move on from one political carcass to another, birds of prey with metal wings and the sated satisfaction of the well fed and the multi-salaried. Earning in a day what others earn in two months - they often hold their mission and its objects in contempt and scorn. They are content to climb the autistic ladder that is a multilateral institution. The rare are recruited by the private sector as third rate lobbyists.

The suborned politicians of this region have good use for these emissaries of defective micromanagement. They hide their thefts and their incompetence behind a fig leaf of "they told me to". They blame their failures, their patently erroneous decisions, their marked inabilities - on the negative externalities of the international community. An elaborate sign language of winks and nods develops in the execrable, fungal intimacy between native bureaucracy and foreign supervisors. The "advisors" and "country managers" and "resident officers" often come themselves from shrines of good governance and civil society, the likes of China and India and Saudi Arabia or worse. They understand the secret language of power and quid pro quo. What better than a fat and satiated cat to guard the skinny and famished ones? So, they collaborate in the most lamentable of manners, eyes closed, ears plugged, mouth stapled. The bureaucrats author delusional science fiction, delirious potpourris of wishful thinking and grotesque projections, the customary backslapping and mutual admiration. And the politicians pretend to listen, patiently ignoring the more arcane lingo and outlandish offers, waiting for the aliens to take off to their planet and allow them to proceed with plundering and loot.

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  Finding a market for the goods (market research)
  
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  Selecting the marketing channels
  
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  Negotiations
  
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  Pricing
  
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  Distribution channels
  
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  Order
  
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  Contract
  
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  Commercial Invoice
  

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  Payment Terms
  
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  Mode of Payment
  
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  Division of Costs
  
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  Details of Carrier
  
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  Details of Receiving Party
  
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  Details of Buyer
  
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  Other Details
  

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  Contents of the Packaging (=of the shipment)
  
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  If more than one package or outer and inner packing – all contents per each packing and per each package must be detailed separately
  
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  Permits and Licenses
  
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  Export licenses if needed
  
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  Standards certificates
  
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  Labeling
  
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  Quality control certificates (highest is ISO, such as ISO-9002 or ISO-9000)
  
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  Health and phytosanitary certificates
  
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  Veterinary certificates
  
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  Other permits, licenses and certificates
  
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  Service Providers
  
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  Marine Transport
  
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  Air Transport
  
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  Land Transport (lorry, train)
  
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  Insurance
  
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  Warehousing
  
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  Banking and other Financial Services (factoring, forfeiting, etc.)
  
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  Airway Bill of Lading (ABL)
  
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  (More details later – see appendices for samples)
  
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  Holder of ABL does not own goods
  
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  Air Transport Contract not effected – but ABL proof of existence of such contract, including weight, measurements, number of packages and invoice.
  
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  Marine Bill of Lading (MBL)
  
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  Proof of receipt of goods in a certain condition
  
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  Proof of existence of transport contract
  
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  MBL facilitates the transfer of ownership