Import Quotas

Import Quotas

Import Quotas are a “non-tariff trade barrier”
used to limit imports of particular products.

By limiting imports these quotas
can be used to stabilize the US price above the world price for the protected
products.

US suppliers benefit from the higher prices. Supporters of import
quota policies note that the policy gives protection to domestic industry with
no cost to the American taxpayer.

Those who receive the import quotas get the right to buy a product at the lower world price and sell the product in the US for a higher price,so the quotas are valuable rights allocated by the US government to foreign governments it wishes to support. The costs of an import quota program are born largely by consumers of the product subject to import quotas.

US Sugar
Import Quota Program
.
Note the chart below of world US prices for raw sugar (not yet refined).
The US inititated the import quota system for sugar in the early 1980s.
Since then the world price of sugar has ranged from less than 5 cents to 13 cents per pound.
Recently the world price has been below 10 cents.
Within the US the price has mostly ranged bewtween 20 and 24 cents.

Products Under US Import Quotas

  • Sugar and products with more than 65% sugar content
  • Tobaccco
  • Peanuts and peanut butter
  • Many specific dairy products (e.g. powdered milk, baby formula)
  • Cotton
  • Beef
  • Animal feed
  • Anchovies
  • Wire rod
  • Ethyl alcohol
  • Olives
  • Mandarin oranges
  • Tuna
  • Brooms and others. For more information see the US Customs Department: www.customs.gov

 

Sugar Cane

 

Sugar Beets

 

The Rule of One Price: Economists argue that markets, if allowed to function freely, will generate one price for traded products. What they have in mind is that if, for example, the price of sugar was higher in the US than in Mexico, then someone could make a profit through arbitrage (buying low and selling high). If traders bought sugar in Mexico to sell in the US, then the extra demand in Mexico would raise the price of sugar in Mexico, and the extra sugar supplied by traders to the US would operate to lower the price of sugar in the US, and this would continue until the price of sugar was the same on each side of the border. Of course, even if markets were free to operate like this, prices differences which reflect transport, storage, and risk costs will persist. The price data charted below show that when world prices are very high (mid 1970s and around 1980) the rule of one price seems to hold for sugar. Otherwise, US sugar policy has operated to prevent the US price of sugar from falling to world price levels.    Quotas on US Sugar Imports: Under the sugar import quota system (which started in 1983?) imports of raw sugar are limited to about 3 billion pounds (about 15% of US consumption). Since 1995 the world price of sugar has shown a downward trend. Normally, if the world price falls relative to the US price, we would expect imports to increase. However, under the quota system, the quotas allocated to sugar importers decreased during this time. From the data, it seems as if imports are restricted to a level which keeps the US price above 20 cents per pound. 

Using the Trade Model for Import Quotas: We can construct our model of the US sugar market to fit data which appoximate current conditions in the market:US Price: 20 cents per poundWorld Price: 10 cents per pound

US Production: 17 billion pounds

US Imports: 3 billion pounds

US Consumption 20 billion pounds

US Average cost of production: 12 cents per pound

Step One: We know that when the price in the US is 20 cents per pound US producers supply about 17 billion pounds, so the US supply curve goes through the point P=.20 and Q=17. Secondly, production costs per pound of sugar are about 12 cents. So we draw our US supply curve so that if price fell to 10 cents, the US quantity supplied would be zero. This is done in the diagram to the right.      Step Two The sugar import quota system has operated to limit US imports of sugar to 3 billion pounds. So the total supply of sugar in the US market is the Supply(US) plus the 3 that can be imported. This is shown as “Supply(US) + 3” in the diagram to the right..     Step Three: We know that when the price in the US is 20 cents per pound US consumers buy about 20 billion pounds, so the US demand curve goes through the point P=.20 and Q=20. This is done in the diagram to the right.   Step Four: Putting the supply and demand together we can see how the import quota is set at 3 so that 20 cents is the market equilibrium price in the US .     Calculating the magnitude of the efficiency loss caused by the sugar import program:Economists argue that trade is benficial to both buyers and sellers. From this it follows that restricitions on trade, like the sugar import program, will cause some loss in efficiency. Now it may be that, as a country, we are willing to incur some efficiency loss in order to pursue some other objective like preserving agricultural lifestyles. Many developed countries restrict trade in agricultural products to protect their domestic farmers. The Japanese restrict rice imports and the Norwegians restrict dairy product imports. The US restricts sugar imports. One job for economists is to calculate the costs of such programs so that more informed decisions can be made about whether it is too costly to have programs like the sugar import quota program. If the cost to the US is only $1 million per year, maybe the program is a cheap way to protect farmers and maintain a vibrant ag community. But if the cost is $100 billion, maybe not. These calculations are provided here.

Questions1. Suppose that due to increases in income, the demand for sugar in the US increased {shift to the right of Demand(US)};a. What is the effect on the price in the US?

b. What is the effect on the quantity supplied by US producers?

c. What is the effect on the quantity of sugar imported?

2. Suppose that the world price of sugar fell from 10 cents per pound to 5 cents per pound. What are the effects on the US sugar market?

3. High fructose corn syrup (HFCS) is a sweetener made from corn. HFCS is a close substitute for sugar. About 50% of food sweeteners come from HFCS in the US. Noting the the sugar import quota raise the price of sugar in the US, analyze the effect of this program on (a) the market for HFCS, and (b) the price of corn.Would corn farmers support the sugar import quota system?

4. Suppose that pressure from the World Trade Organization (WTO) force the US to stop using the sugar import quota system and instead have free trade in sugar. Analyze the effects on the US market if the US were to have free trade in sugar.

5. Refer to Bastiat’s petition for the candlemakers, but rewrite it using US and foreign produced sugar as the example.

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Sugar Quota

Using Consumer and Producer Surplus to Calculate the Cost of the Sugar Import Quota System

From our description of the US sugar market, we learned that the sugar import quota system operated to raise the price of sugar in the US to be about two times higher than the world price. US sugar producers gain from this program while US consumers of sugar (i.e.Coca Cola, Hersheys) are made worse off by the program. But additionally, the restriction on trade introduces some inefficiency to the market. Economists argue that trade is benficial to both buyers and sellers. From this it follows that restricitions on trade, like the sugar import program, will cause some loss in efficiency. Now it may be that, as a country, we are willing to incur some efficiency loss in order to pursue some other objective like preserving agricultural lifestyles. Many developed countries restrict trade in agricultural products to protect their domestic farmers. The Japanese restrict rice imports and the Norwegians restrict dairy product imports. The US restricts sugar imports. One job for economists is to calculate the costs of such programs so that more informed decisions can be made about whether it is too costly to have programs like the sugar import quota program. If the cost to the US is only $1 million per year, maybe the program is a cheap way to protect farmers and maintain a vibrant ag community. But if the cost is $100 billion, maybe not.

From our previous description of the US Sugar Import Quota and the US sugar market we gleaned these (appoximate) facts:US Price: 20 cents per poundWorld Price: 10 cents per pound

US Production: 17 billion pounds

US Imports: 3 billion pounds

US Consumption 20 billion pounds

US Average cost of production: 12 cents per pound

The diagram to the right is drawn to be consistent with these “facts”.

 If there were free trade in sugar: First we look at what the US market would look like if there were free trade for sugar. Given our facts, if there was free trade, the price of sugar would fall to about $ .10 per pound in the US. Given the US supply curve, if the price was $ .10 per pound the quantity supplied by US sugar beet and sugar cane growers would be ZERO…that is, the US would import all of its sugar, and consumers would expand consumption from 20 to 25 billion pounds per year. The graph to the right shows what the US market would look like if we allowed sugar to be freely imported. The price in the US would fall to $ .10, the quantity demanded would increase to 25 (probably a shift from HFCS to sugar by some food processors), quantity supplied by US producers would fall to zero, and imports would be 25. With free trade and a price of $ .10 per pound consumer surplus would be equal to the area shaded green in the diagram to the right.  

Costs of the Sugar Import Quota System: As noted above the sugar import quota system causes the price in the US to be $ .20 per pound instead of the world price of $ .10 per pound. This cost is borne by sugar consumers and is quantified as a loss in consumer surplus. We can calculate the magnitude of the loss in consumer surplus geometrically as the area of the trapzoidal area shaded light green in the diagram to the right. Benefits of the sugar import program. There are two groups of benificiaries of this program. First is the US sugar producers. If there were free trade in sugar with a price of $ .10, the quantity supplied would have been zero, but with the program, the price of sugar is $ .20, US producers supply 17 billion pounds of sugar, and earn a producer surplus shown in the diagram to the right. The magnitude of the producer surplus is calculated as the area of the shaded producer surplus triangle which is $ .10 tall, and 17 billion wide and thus the producer surplus is equal to ($ .10)(17billion)(1/2)=$.85billion.The second beneficiary of the program are those that are allocated import quotas. These importers get the chance to buy sugar at the world price and then sell it in the US. They earn a profit of ($ .20 – $ .10)= ten cents per pound and get to import 3 billion pounds and so earn a total profit of $ .3 billion per year. This is shown as the area of the shaded rectangle in the diagram to the right. Cost minus Benefits = Efficiciency Loss: Above we noted that the cost of the sugar import quota was the loss in consumer surplus. Then we noted some of the lost consumer surplus was captured as a benefit for US sugar producers (shown as the producer surplus) and a benefit for owners of the import quotas (shown as “Profit for Quota Owners”). But the costs of the program are greater than the benefits and the magnitude of the loss in efficiency is calculated as the size of the two shaded triangles shown in the diagram to the right.The magnitude of the two shaded deadweight loss triangles represent that portion of the loss in consumer surplus not showing up as benefits for either US sugar producers or sugar importers. They are triangles, and we know the dimensions of the triangles, and so we can calculate their size. This is done in the diagram to the right. The results of the sugar import program can be summarized as:  

Loss in Consumer SurplusGain in Producer SurplusProfits for Importers

Deadweight Loss

$2.25 billion$ .85 billion$ .30 billion

$1.10 billion

 

Sugar Import Quota and US EmploymentAudio file from NPR on closure of Lifesavers factory in MichiganPolitics of Sugar Import Quota

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Switzerland tops global tax haven ranking

A new study on financial secrecy has found Switzerland to have the world’s most opaque bank system, despite recent fiscal agreements with Germany, the UK and the US.

A major report by the Tax Justice Network — an independent non-profit group supported by academics, NGOs and political activists — keeps the country in the eye of the storm when it comes to bank secrecy and its status as a tax haven. Switzerland tops the list ahead of the Cayman Islands and Luxembourg.

However, many in Switzerland expect the country to shed its financial pariah status in the coming years. Fiscal expert Jean-Christian Lambelet told The Local that “the battle for bank secrecy is lost,” predicting that Switzerland’s banks would cease to be tax havens in 2004.

Lambelet, head of the macroeconomics institute at the University of Lausanne, said his opinion was based on recent bilateral agreements, particularly with the US. That deal would open the door for the automatic exchange of data between the Swiss government and its counterparts around the world, he said.

But the demise of bank secrecy need not be a cause for major concern, he added.

“The country’s economy does not depend on the arrival of foreign money,” Lambelet told The Local.

Bank secrecy in Switzerland dates back to 1934. The country recently signed agreements with Germany and the UK and agreed, for the first time in history, to give the US the personal data of more than 4,000 bank clients. Yet, these efforts are considered “ineffective” by the Tax Justice Network.

The organisation is deeply critical too of members of the G-20. Meeting in London in April 2009, the group published a “blacklist” of the jurisdictions that were not cooperating enough with fiscal and judiciary authorities. The list was compiled by the Organization for Economic Co-operation and Development (OECD).

A few months later, after the signing of several bilateral agreements, no countries remained on the list. A few nations were consigned to a so-called “grey” list” but Switzerland manage to get itself off the roster.

In its report, the Tax Justice Network rejects as “inadequate and inefficient” the criteria used by the OECD to put together its lists of tax havens.

Switzerland’s “widespread involvement in the administration and use of trusts, foundations and offshore companies remains a major barrier to tackling tax evasion and illicit financial flows,” the report says.

The Helvetian Confederation administers 40 percent of the world’s private fortunes. According to the Swiss Bankers Association, the country’s banks currently hold €3.6 trillion, of which 2.3 billion belongs to foreign clients, most of them European.

Experts estimate that about one third of these assets are resting in opaque accounts, meaning they have not been declared to the tax authorities of their homes countries.

 

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International investment strategies for a crumbling world

International investment strategies for a crumbling world – Help rejuvenate the economy

 

With the present market conditions, almost all financial experts are of the opinion that the Fed has no more bullets left. The curve is running flat, near zero, the mortgage rates are low and still the economy is weak. The Euro is also not working, at least not for all kinds of investors and this is voting Greece, Italy, and Spain out of the Euro. What can we do when there are increasing debts, budget deficits and soaring unemployment level in the most important economies of the world?  Is there only the option to buy gold when everything else is not working? The governments are not paying much heed and this is generating a huge turmoil throughout the globe. The burning question is whether or not there are patches in the global economy. The whole world has seen almost seven years of plenty and now it’s time to pay back literally.
Learning some international investment strategies to stay on top of your finances
They say that investments, whether active or passive, entails determined decisions and firm responsibilities. While on one hand you dedicate your time in determining the safe assets, on the other hand you delegate the entire responsibility to an international investment strategy planning company to do the task on your behalf. There are many such companies that specialize in stock investment strategy, retirement investment strategy or property investment strategies but how about getting yourself educated and taking the decisions on your own?
What is international investment and how does it help in reducing the debt of a nation?
The total act of in vesting your money in assets that are located outside the United States of America or the country where you reside is known as international investment. This particular branch of investment has excited a hoard of investors as they get the opportunity to invest in locations that are beyond their imagination and also boost their returns positively. As the American market for the determined goods are already over-exploited, investing in the international assets provide a route of escape for the investors. With better investment and better revenue in the hands of the people, there will be lot of income with which people could repay their debt obligations and emerge debt free. The lesser are the budget deficits within a nation, the lesser will be the chance of defaulting on the government debts and crashing the economy.
Valuable tips to follow for international investment strategy
Once you leave behind the domestic market and intrude in the other continents, you need to determine your objectives and also follow some tips that can help you achieve your goal. Here are some of them.
  • Diversity is the essence: The most important strategy that you need to follow is to diversify your portfolio. Though this is almost the quintessential strategy for all investors, this holds more importance when it comes to international investment as it is always risky to put all your money in a single asset. Even though you’re completely sure about it, this will always be a mistake.
  • Don’t think ahead of time: Remember that it is always impossible to think ahead of time. Even though you’re sure about the performance of an asset, your plan can go down the chute if there is a sudden adverse financial event, like the one that happened in Thailand.  Think about the present and work accordingly so that you do not face any loss.
  • Research of the socio-political condition: Wouldn’t investing your money in a territory that is unstable be the last thing that you would want? Do a research of the socio-political background of the country to avoid being a threat to terrorism, natural calamities and other sabotage attacks.
Staying updated with what has happened in the world years ago and whether or not those events could boomerang the economy is another step that you must take in order to stay in tune with the investments. Don’t forget to check the status of debts in the country if you also want to stay sure about the decisions taken.
Jenny Roberts
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Monaco Tax Status

That Monaco is crowded with celebrities is no piece of news. Since 1869, when the politics of personal income tax became favorable, Monaco attracted many individuals with high net income, such as movie stars, sporting stars etc.. who became residents of the principality to benefit from the exemption from personal income tax.

Take, for instance, Roger Moore, Shirley Bassey, Ringo Starr, Karen Mulder, Eva Herzigova, drivers Jacques Villeneuve, David Coulthard, Button Jenson’s race.

But the number of celebrities is far outnumbered by the number of business people who enjoy the country’s tax facilities: the green retail tycoon Philip and the Barclay brothers are Monegasque residents.

Being a resident of Monaco implies prove you have somewhere to live and be rich enough to produce a very high standard way of life. And I mean really rich, as a place to live in apartment blocks jammed into two square kilometers, rented or purchased, I am extremely high.

Save the implementation involves live show in Monaco at least 6 months and one day per year. If you are rich, the advantage of being a Monaco resident is that, besides enjoying a sunny climate, friendly, you can live in the same time in another country. The Principality is very close to major airports and is also easily accessible by sea, by car or train. So, being a Monaco resident and working in another country is not only possible but it is especially easy discourse UK citizens: laws in UK permit a maximum stay of 90 days (without counting the day of departure and that of Check!) to passersby. Many UK business people reside in Monaco and works in the UK without exceeding the limit of 90 days so that it conforms to lawas of Monaco for tax purposes.

The attraction of so many rich resulted in a conflict of interests: many countries disapprove of this taxation policy, looking at her tax evasion in their national area. And not entirely wrong! In fact, Monaco has been tax-cheating “a little close to attracting capital from high tax countries.

Looking at the issue from the perspective of the Principality, seems to me only right to try and have successfully developed with limited means and resources a state so small has. Monaco became from one of the world’s poorest countries (in the 1860s) in a state with one of the world’s highest per capita income (around EUR22, 000). And it was made possible by a strategic direction of a resourceless country. It is after the territory was drastically reduced that this policy of personal income tax came into being. Attracting foreign capital do one of the main targets for development. That’s how the Casino became grand and famous and emphasis was put on tourism, is rising in the levels of luxury.

After the individual taxation regulations, in 1963 the Principality came with another financial artifice: no tax on profits or dividends from the company premises. So the target was to enhance local business flourishing. This provision combined with an almost hermetic data privacy did nothing to increase even more foreign investments in Monaco.

Thus, from the point of view of big economic powers, Monaco should be punished, and so deserves any country daring to offer a better alternative to taxes, putting at a disadvantage their high-tax based economy. The OECD has a project on “harmful tax practices” stipulating a set of punitive measures for non-cooperacio’n jurisdictions.

Relying on money laundering and international terrorism tracking, many OECD governments promote a policy of free information exchange that has as main purpose limiting the tax competition, beyond the intention to limit tax evasion and combating serious crime.

Estimated negative results of OECD policy:

* Eliminating tax competition would result in uniformizing taxes to the amount dictated by some governments. Without the ability to choose a better alternative, there is no reason for governments to reduce taxes and make the tax system more efficient.

* This policy would change the current status of emigrants that pay taxes only to their new country and promote the premise that the state still has a right to benefit from previous work nationally. This sounds like a violation of fundamental human rights.

Although in 2004 still on the OECD blacklist of jurisdictions cooperacio’n non-tax policy, Monaco has changed its policy regarding the high confidentiality of financial data in the light have been expected, recent admission council Europe (Monaco joined the Council of Europe on October 5, 2004). Amendments to legislation

* October 2001: French citizens living in Monaco since 1989 must pay a wealth tax beginning with 2002.

* Information on French nationals must unconditionally be provided to the Bank of France when required. Information can be passed on to the authorities of France or a third country if necessary.

* 2004: Under the tax savings eU directory, Monaco will impose a witholding tax to the returns on savings such as bank interests earned by EU citizens. The tax quantum will be like in Austria, Belgium and Luxembourg (initially 15%). 75% of such revenues will be delivered to the respective Member State resident in the EU. This will be implemented beginning 2005.

* December 2000: Monaco signs the United Nations convention against transnational organized crime. The treaty stipulates that its members do not permit anonymous accounts requiring identification of customers. Banks must keep accurate records of accounts and report any suspicious transaction. Moreover, officials from domestic law enforcement are permitted inspection of accounts.

With all these measures, it seems that Monaco’s attraction as a haven of personal income tax will decrease. The haven that will be how all these measures will affect Monaco financial and banking system after becoming operative.

By: Kareleo Business Centre

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Investing in Dubai

It is Worthwhile to Invest in Dubai

Dubai is one of the 7 Emirates of the United Arab Emirates. It is the largest by population and second largest in surface area. UAE is bordered with Saudi Arabia and Oman on the Arab Peninsula and has the largest population with the second-largest land territory by area of all the emirates, after Abu Dhabi Dubai and Abu Dhabi are the only two emirates to have veto power over critical matters of national importance in the country’s legislature.

Historically Dubai used to be a port for the past 200 years and gained further importance in the 70’s and 80’s. However after that period Dubai has reduced its importance in international trade and created industry specific “free zones” including Dubai International Finance Centre and Dubai Internet City.

Dubai International Financial Centre

THE Gateway for Capital and Investment, DIFC is an onshore financial center strategically located between the east and west, which provides a secure and efficient platform for business and financial institutions to reach into and out of the emerging markets of the region.

The DIFC is the Middle East’s’ regional financial center. Although in its developing stage it already has established a presence with major investment banks and financial centers. It initially was created to benefit the economic development of Dubai as well as the rest of the UAE. DFIC established in 2004. Types of firms in the DIFC include banking, asset management, brokerage, reinsurance and financial operational services. Typical benefits of starting a business in the center are 100% foreign ownership on all parts of the established business, 0% tax on profits, no restrictions on capital and foreign exchange repatriation and transparent and a highly developed operating environment. Compared to the majority of tax havens, which are offshore, the DFIC is onshore. In terms of the physical structure of the center, the DFIC has developed modern day offices and technology to attract the best companies as well as smaller financial startups.

The main objective of developing the center was because of the large amounts of money that was invested and spent abroad. In terms of high net worth individuals in the Middle East, the size of the asset pools which are invested abroad amounted to over 1.5 trillion USD. The lack of available liquidity and political risk as well as bad banking practices of the region have caused investors to send their funds in foreign institutions. This has been especially true in the past 30 years when oil prices rose rapidly. The development of the center allows for the efficient process of transferring the funds in a local region as well as allowing potential profits to be locked in the emirates, rather than abroad. The increased liquidity, which the center will create, will also reduce the investment risk in the region and create better credit ratings for local banks as they have more efficient funds available.

Many companies in the Middle East are seeking to make themselves public as a means of raising capital. This has been especially true with the growth in privatization, the fact that Dubai is the 3rd biggest re-export center in the world and the increasing amounts of foreign direct investment in the region by foreign multinationals. The IPO market for Middle Eastern countries are flourishing and DFIC is going to attract a lot of IPO’s and PO’s as well as fixed income and money market originations. DFIC will be the Wall Street of the Middle East. It has also established the Dubai International Finance Exchange (DFIX), which will be the regions main exchange where, equities, fixed income, index products; derivatives and Islamic funds will be traded.

 

Dubai Internet City (DIC)

DIC  is an information technology park created by the government of Dubai in 2004 as a free economic zone and a strategic base for companies targeting regional emerging markets. DIC is a member of TECOM Investments.  The economic rules of DIC allow companies to avail themselves of a number of ownership, taxation and custom related benefits, which are guaranteed by law for a period of 50 years. One model of operation includes 100% foreign ownership; similar to those prevailing in other designated economic zones in the United Arab Emirates. These freedoms have led many global information technology firms, such as Microsoft, IBM, Oracle Corporation, Infor Global Solutions, Sun Microsystems, Cisco, HP, Nokia, Cognizant and Siemens, as well as UAE based companies such as i-mate, Acette, to move their regional base to the DIC. DIC is located adjacent to other industrial clusters such as Dubai Media City and Dubai Knowledge Village.

Dubai Media City (DMC)

Dubai Media City is part of Dubi Holding; it has the same tax-free structure that DIC has to offer. It has been built to boost the UAE’s media capabilities and recognitions as the next “Hollywood” of the Middle East. It has been developed as a conventional market where different businesses work together to form a unit. Dubai Media City has many different business segments not limited to broadcasting; media support services filmed entertainment/production and publishing.

Other Benefits that the Dubai Media City has to offer are fully furnished business units; flexible leasing terms, flexible visa and work permit structures to benefit foreign entrepreneurs. Other similar districts include Dubiotech, which target biotech companies with the aim of growing the regions medical and pharmaceutical research capabilities.

Dubai Media City is the hub for the media industry in the GCC and Middle East, with more than 1,300 companies registered under the Free Zone, from where they serve the entire region.

 

Real Estate Developments.

Dubai is a lucrative destination for investment. Its world-class infrastructure along with a safe living and facilitated business environments make it an ideal place to live and work. Dubai’s population is set to double in the next decade making the demand for Dubai real estate even more viable.

Real estate prices have rapidly risen in the past decade after the government shifted its main revenue sources from oil and trade to services and tourism. There was a major property boom in 2004 to 2006.

Property development in the region is Inland and Offshore. Inland projects include many of the very modern skyscrapers and the world’s tallest buildings. Burj Dubai is the worlds tallest building built by Emaar properties. Dubai Mall next to Burj Dubai is the world’s largest shopping mall. Dubai also has a number of buildings, which are replicates of famous buildings around the globe including the Eiffel Towers. Other original type structures include an underwater hotel and an indoor ski resort.

Offshore developments include Palm Island, which is the world’s largest artificial Island and includes over 30 of the world’s top hotels and 75 kilometers of beaches. Other offshore developments include “The World” which is a group of islands, which form the shape of the globe when looking at it from the sky.

Dubai Metro City

Dubai already has a fully running bus system but to create further accessibility of the above centers and is investing under 4bn USD to develop a high tech transportation system called the “Metro”, which is supposed to be fully operational by 2012.

By: Adma Dababneh

 

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Starting a Business in Jordan

Listed below is a detailed summary of the bureaucratic and legal hurdles an entrepreneur must overcome in order to incorporate and register a new firm, along with their associated time and set-up costs.  It examines the procedures, time and cost involved in launching a commercial or industrial firm with up to 50 employees and start-up capital of 10 times the economy’s per-capita gross national income (GNI).

The information appearing on this page was collected as part of the Doing Business project, which measures and compares regulations relevant to the life cycle of a small- to medium-sized domestic business in 183 economies. The most recent round of data collection for the project was completed in June 2010.

No. Procedure Time to Complete Associated Costs
1 1 day JOD 800
2 Open b

compaExecute the company’s formation contract and the memorandum and articles of association.The ny’s formation contract and its memorandum and the articles of association may be executed either before an officer at the Companies Control Directorate (CCD), located at the Ministry of Industry and Trade (MIT), or before a notary public or a licensed Jordanian lawyer. If the documents are executed before the notary public, an additional fee of JOD 15 will apply. The additional fee may range from JOD 500 to JOD 1,500 if done before a licensed Jordanian lawyer.

Bank account; deposit 50% of the capital

1 day no charge
3 Register the company; obtain registration certificate, and file general assembly first meeting and board of directors’ minutes of meeting at the Ministry of Industry and Trade The promoter can complete the following formalities at the one-stop shop at the Company Registry/ Ministry of TRade and INdustry (albeit at different counters): company registration, tax registration (including obtaining a company tax number for VAT and income tax), registration with the Chamber of Commerce or Chamber of Industry. In addition, the municipality of Amman maintains a counter for license renewal (though the initial license must still be obtained at the municipality).Upon payment of relevant fees, filing for company registration and obtaining the registration certificate is done at the one the company registration at the newly established reception desk. 1 day JOD 10 (Filing Fee), + JOD 10 (Registration Certificate Fee), + 0.02% of Share Capital (Registration Fee), + JOD 15 (Fee For Publication in the Official Gazette)+ JOD 40 File general assembly first meeting and board of directors’ minutes of meeting
* 4 Register for corporate tax, salary withholding tax, and VAT The promoter can register for taxes at the one-stop shop counter at the Company Registry. The company receives a unique tax number. 1 day (simultaneous with previous procedure) no charge
* 5 Register with the chamber of industry or chamber of commerceThe company documents and the respective authorized signatories required to register with the Chamber of Industry or the Chamber of Commerce are:
– Rental contract.
– Formation contract.
– Registration certificate.
– Certificate of authorized signatories.
– Memorandum and articles of incorporation.Annual registration fees levied by the Chamber of Industry or the Chamber of Commerce depend on company capital.
1 day (simultaneous with previous procedure) JOD 164
6 Obtain a vocational license from the municipalityFirst, an application is filed with the following documents to obtain a vocational license from the municipality:
– planning location map (issued by greater Amman municipality, GAM).
– Occupancy permit (issued by GAM and usually obtained immediately by the landlord upon completing construction).
– A copy of the property deed (usually obtained from the landlord).Second, the GAM officer verifies that the location is situated in the right zoning area and ensures that no property taxes or fees are due. These procedures are performed in the same building. Third, a municipal officer sets up an appointment to inspect the premises for conformance with set requirements. The time before the inspection may vary. Fourth, the property inspection is conducted.Fifth, if the premises are deemed in conformity with the requirements, the file is referred to the competent vocational licenses division. At that point, the following documents are required: (a) the company’s certificate of registration; (b) a certificate of the company’s authorized signatories; (c) the memorandum and articles association; (d) a certificate of registration with either the chamber of commerce or industry; (e) a lease contract (stamped by the GAM); (f) a planning location map (issued by the GAM); and (g) an occupation permit (issued by the GAM).Sixth, for certain occupations, a representative of the Ministry of Health may conduct a health inspection at the company headquarters.Seventh, if the company’s premises is 150 sq. m. or more, or in certain professions requiring civil defense measures, the GAM sends a letter by fax to the Civil Defense Directorate. If all relevant details required to conduct an inspection are included, and if the Directorate does not respond or conduct an inspection within 4 days, the GAM grants the applicant the required vocational license with a caveat: the applicant must agree, in writing, that if the Civil Defense Department approval is not granted, the vocational license renewal may be declined in a subsequent year.
8 days JOD 200
* 7 Inspection by municipality on safety and health 1 day (simultaneously with previous procedure) no charge
* 8 Register for social security Every business must register with the social security authorities and submit, on a monthly basis, the social security contributions for its employees.Related StoriesMake Money the Easy Way
Start a Business in Dubai
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Start a Business in Dubai

What do you Need to Start a Business in Dubai?

Obtaining a trade license

A trade license is obtained through the Department of Economic Development. Regardless of what business structure you’ve decided on, you will need a local service agent, also called local partner or a sponsor.

Local Partner or a Sponsor

The law requires that you have a local partner who holds the majority interest and can therefore control the business. The local partner, a company or an individual, doesn’t need to contribute to the start-up investment or participate financially.

Money to Invest

When the business is registered, you must show the Ministry of Commerce that you have a substantial sum of money to invest. The required sum varies and is regarded as a guarantee against liabilities; you may withdraw the money shortly afterwards!

Local knowledge is important, you must also consult a good lawyer. An experienced lawyer will guide you through the registration and to protect your interests. This applies whether you’re opening a modest shop or a major enterprise.

Shared Ownership

Local Partner Since non-GCC nationals are not permitted to be majority share holders outside of free zones in the UAE, a system of shared ownership has been developed in which UAE nationals formally own 51% of the company and the foreign proprietor owns the remaining 49%; details of profit and loss distribution are then agreed upon in a separate contract. Local sponsors can be individuals or locally owned businesses. For the most part, a local sponsor will not have any responsibility towards the business but is obliged to assist with all government related procedures such as obtaining permits, trade license, visas and labor cards. The local agent or sponsor’s signature will be required on most official forms.
• Depending on the legal structure of the business, the Department of Economic Development has certain capital requirements for obtaining a trade license. Those requirements are detailed in the DED’s official explanation of legal business structures on its website.
• Remember that certain businesses require separate approvals from varying government ministries before the trade application can be completed. When applying for a trade name, be sure to enquire about any external approvals that will be needed for the proposed business activity. Do note that ‘Virtual offices’ are not allowed by DED which has advised potential investors that any commercial enterprise in Dubai must have a physical address and an actual office.

Many people have developed successful, highly profitable businesses in Dubai. New operations are encouraged by the government and your local partner might be enthusiastically supportive. Export and manufacturing industries are especially strongly supported by government, particularly as regards the acquisition of land on which to construct a factory. If you set up such a business in a free trade zone, of which there are several in the region, it’s granted exemptions from import and export duties, commercial taxes, building and property license fees, land tax and restrictions on the transfer of capital invested in the zone.

An alternative to starting a new business is to buy a going concern, which is a more straightforward process, as it doesn’t involve lodging capital, obtaining sponsorship or registration; all you have to do is agree a price and transfer the ownership of the business.

Doing Business with Arabs

You will meet with hard but polite bargaining Business people and they are expert at bargaining. You need to be completely confident about the contents of your contractual agreement. Arabs are brilliant at finding and exploiting gaps in the content of your Business contract. Arab businessmen meet their obligations fully. The experience of doing business with Arabs is pleasant and friendly.

Remember that Arabs rarely say a direct ‘no’ to a proposition, if the response is ‘Leave it with me’ or ‘I’ll think about it’, there’s a good chance that the project will go nowhere.

Local Chambers of Commerce can advise about start-ups. Winning the confidence and support of a Chamber of Commerce will help your cause. Contact details are as follows:

Dubai Chamber of Commerce and Industry, PO Box 1457, UAE
(Tel. 971-4-221 181)

Federation of UAE Chambers of Commerce and Industry, PO Box 8886, Dubai, UAE (Tel. 971-4-212 977)

 

Dubai Department of Economic Development (DED)

You can contact Expats in Dubai by visiting this Website http://www.dubai.alloexpat.com

 

By adma Dababneh
More Information on Investing in Dubai

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Make Money

Make Money the Easy Way

Having a good selection of investments is good, but having too big a selection can intimidate investors, especially if you’re just starting out. If you’re looking for a simple way to invest for retirement, you don’t need any more new investments. You just need ones you can trust.

For many investors, that one-stop retirement investment was the target-date retirement fund. But during the market meltdown, target fund investors were betrayed by what turned out to be more aggressive investing than some expected. Now, the big question for those looking at target funds is whether they’ve fixed their inherent problems — and whether they’ll be safe the next time the market swoons.

Regal Assets Banner

Sounding the All-Clear

The good news for target fund investors is that after the long bull run in stocks, many target funds have finally recouped the losses they suffered in 2008 and early 2009. According to Morningstar, target funds aimed at those retiring in 2010 have risen by 5% between October 2007 and mid-February 2011.

For a long time, though, it looked like target funds would prove to be one of the colossal failures of the lost decade. The idea behind them was simple: tailor an asset allocation strategy based on a person’s age or expected retirement date, and adjust the allocations over the years to grow more conservative as the fund approached its target date.

Given that one of the fundamental tenets of financial planning is that you should invest less aggressively as you get older, many target fund shareholders made the mistake of assuming that with just two years left to go before their target date, 2010 target funds would have little or no exposure to the stock market. But as it turned out, many funds had relatively high percentages of their assets in stocks, and therefore the funds suffered big losses as the stock market collapsed.

Are They Safe?

In response to the controversy, many target fund companies, including Schwab (SCHW), took steps to reduce stock allocations in their target funds. Others, including Principal Financial (PFG) and (ING), expanded their funds to add alternative investments like commodities, real estate, and even hedge-fund-style investments.

Regal Assets Banner

In judging the quality of a target fund, low expenses are essential. That’s why Morningstar awarded top ratings to target funds from T. Rowe Price (TROW), American Funds, and Vanguard while hitting higher-cost providers AllianceBernstein (AB) and Oppenheimer Holdings’ (OPY) OppenheimerFunds unit with low rankings.

But in the end, the key component of whether a target fund is safe enough for you depends on its unique way of allocating your money over time. Some companies believe that even retirees need substantial stock allocations in order to make sure their money continues to grow throughout their golden years. Others take less aggressive stances on the assumption that if you need more growth, you can get it on your own.

The Best Way to Make Easy Money

In fact, given how easy it is to use exchange-traded funds to set up your own asset allocation strategy, coming up with a tailor-made allocation might be even better than relying on a target fund. With expenses on many ETFs from Vanguard, Schwab, and BlackRock (BLK) at rock-bottom levels, cost isn’t a big issue with asset allocation. And with many brokers offering their ETFs at no commission, you can adjust your allocation over time without worrying about paying an arm and a leg to do it.

With thousands of stocks and funds littering the investment landscape, it’s easy to understand how target funds would be attractive to novice investors. But with a little extra effort, you can get exactly the exposure to various types of investments that you want without worrying about what your fund manager might do wrong. That’s the best way to make sure you’ll hit your target for financial success.

By Dan Caplinger, The Motley Fool

Other Related Stories
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Starting a Business in Dubai
Make Money the Easy Way

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IRA TO GOLD ROLLOVER BENEFITS

Gold IRA Rollover Benefits

By: Goldirabestcompany.com

Safeguarding your retirement savings is more essential than ever before in these economic times. With the threat of the US dollar and hyperinflation individuals are currently seeing their retirement assets lose value in a pace that is historical. The great news is that those who’re investing in precious metals, like gold and sliver, aren’t only securing their assets, they are also seeing a positive Return on investment in a lot of cases especially those who invested in Bitcoin.

A physical advantage is something such as property, gold, or silver bullion while a monetary asset is something such as having money in a savings account, bonds, Bitcoins or stocks.

Like real estate, have suffered as well. Metals such as sliver and gold have retained their value, but have risen in value in cases although among. Silver has some advantages that you need to consider also while it’s true that gold is the investment choice of both and popular. About investing in silver, the best thing is its value per unit to other metals. Silver is accessible to investors than metals that are higher priced. Which implies that you could invest the same amount of cash into silver, but have many more options with regards to selling and buying because of its lower price per unit.

You make certain you’re always in the position to make the most of any increase in value of both by having a Silver and Gold Rollover IRA. The way to Avoid Tax Penalties by Rolling Over Existing IRAs to a Gold and Silver IRA. Among the biggest concerns, you can have about starting a Gold and Silver Rollover IRA is that the fact that you do not want to have your current IRA loses its tax-deferred status. The great news is that a qualified valuable metals custodian can assist you to Rollover your current resources into a Gold and Silver IRA without suffering any tax penalties. At that, the end, converting your existing assets and IRA into a Gold and Silver or Cryptocurrency like Bitcoin Rollover IRA is the safest and most secure method of safeguarding your retirement savings from various financial factors which may cause major financial losses. Doing a rollover incorrectly may cause you to eliminate your tax deferred status and result in heavy penalties that may harm your savings just as badly as any financial turmoil.

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Make Money the Easy Way

Regal Assets Banner

Make Money the Easy Way

 

Having a good selection of investments is good, but having too big a selection can intimidate investors, especially if you’re just starting out. If you’re looking for a simple way to invest for your retirement, you don’t need any more new investments. You just need ones you can trust.

Regal Assets Banner

For many investors, that one-stop retirement investment was the target-date retirement fund. But during the market meltdown, target fund investors were betrayed by what turned out to be more aggressive investing than some expected. Now, the big question for those looking at target funds is whether they’ve fixed their inherent problems — and whether they’ll be safe the next time the market swoons.

Sounding the All-Clear
The good news for target fund investors is that after the long bull run in stocks, many target funds have finally recouped the losses they suffered in 2008 and early 2009. According to Morningstar, target funds aimed at those retiring in 2010 have risen by 5% between October 2007 and mid-February 2011.

For a long time, though, it looked like target funds would prove to be one of the colossal failures of the lost decade. The idea behind them was simple: tailor an asset allocation strategy based on a person’s age or expected retirement date, and adjust the allocations over the years to grow more conservative as the fund approached its target date.

Given that one of the fundamental tenets of financial planning is that you should invest less aggressively as you get older, many target fund shareholders made the mistake of assuming that with just two years left to go before their target date, 2010 target funds would have little or no exposure to the stock market. But as it turned out, many funds had relatively high percentages of their assets in stocks, and therefore the funds suffered big losses as the stock market collapsed.

Are They Safe?
In response to the controversy, many target fund companies, including Schwab (SCHW), took steps to reduce stock allocations in their target funds. Others, including Principal Financial (PFG) and ING (ING), expanded their funds to add alternative investments like Gold, commodities, real estate, and even hedge-fund-style investments.

In judging the quality of a target fund, low expenses are essential. That’s why Morningstar awarded top ratings to target funds from T. Rowe Price (TROW), American Funds, and Vanguard, while hitting higher-cost providers AllianceBernstein (AB) and Oppenheimer Holdings’ (OPY) OppenheimerFunds unit with low rankings.

But in the end, the key component of whether a target fund is safe enough for you depends on its unique way of allocating your money over time. Some companies believe that even retirees need substantial stock allocations in order to make sure their money continues to grow throughout their golden years. Others take less aggressive stances on the assumption that if you need more growth, you can get it on your own.

 

The Best Way to Make Easy Money
In fact, given how easy it is to use exchange-traded funds to set up your own asset allocation strategy, coming up with a tailor-made allocation might be even better than relying on a target fund. With expenses on many ETFs from Vanguard, Schwab, and BlackRock (BLK) at rock-bottom levels, cost isn’t a big issue with asset allocation. And with many brokers offering their ETFs at no commission, you can adjust your allocation over time without worrying about paying an arm and a leg to do it.

With thousands of stocks and funds littering the investment landscape, it’s easy to understand how target funds would be attractive to novice investors. But with a little extra effort, you can get exactly the exposure to various types of investments that you want without worrying about what your fund manager might do wrong. That’s the best way to make sure you’ll hit your target for financial success.

By Dan Caplinger, The Motley Fool

Other Related Stories

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Best Gold IRA Company

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Gold IRA Rollover

Gold IRA Rollover

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How to Invest in the Global Shale Oil and Gas Boom

The North American shale oil and gas boom is fascinating Americans with its stunning potential, as it propels U.S. oil production to the highest level since May 1989.

It is also creating a formidable profit-making opportunity for those who know how to invest in this burgeoning industry.

Even better news for investors – as Money Morning Global Energy Strategist Dr. Kent Moors has said repeatedly – the shale revolution isn’t confined to the United States and Canada; it’s going global.

A recent study by the Energy Information Administration (EIA) found that – using currently available technology – global shale resources hold a whopping 32% of the world’s recoverable natural gas and 10% of the world’s recoverable oil.

The study, published on June 10, also found that the United States is only fourth in recoverable shale gas resources, with 665 trillion cubic feet (tcf). Leading the pack were China (1,115 tcf), Argentina (802 tcf), and Algeria (707 tcf).

Regarding recoverable shale oil resources, the United States ranked second, with 58 billion barrels. Russia came in first, with 75 billion barrels, and China and Argentina ranked third and fourth, with 32 billion and 27 billion barrels respectively.

These impressive figures mean only one thing: tremendous opportunity for those who know how to invest in the shale oil boom’s international debut.

IHS Global: Shale Oil Boom to Be Duplicated

The EIA study isn’t the only one pointing to a global shale revolution.

The latest report by IHS Global Insight states that the 23 most promising global shale formations hold about 175 billion barrels of extractable oil, with worldwide shale fields containing seven times the recoverable shale oil contained in North American basins.

The firm’s geological study found 148 shale plays globally that could have up to 300 billion barrels of recoverable oil. In comparison, IHS believes North American shale formations have roughly 43 billion barrels of commercially recoverable shale oil.

The report said that those reserves may potentially produce, by 2020, 5 million barrels of oil per day. That’s more than the current production of Canada or Iraq.

The study specifically pointed to three potentially vast shale oil fields: the Vaca Muerta formation in Argentina, the Bazhenov Shale in western Siberia, and the Silurian formations in North Africa.

Richard Anderson of Eurasia Drilling, the most active drilling contractor in Russia, spoke to the Financial Times. According to Anderson, the Russians can and will discover the methods to access the shale formations, and “then we’re off to the races. My guess is it will be like the Eagle Ford and the Bakken.”

By TONY DALTORIO, Contributing Writer, Money Morning
Posted in Energy, ENERGY INVESTING, Investment | Tagged , , , | Leave a comment

Nigeria fuel corruption

Motorcycle taxis queue to buy fuel at a Total filling station in Lagos on January 17, 2012. Many filling stations in Lagos and other parts of the country are short of supplies, with long lines for gasoline. Others are out of fuel entirely. (PIUS UTOMI EKPEI/AFP/Getty Images)

Nigeria finds $4 billion in fuel corruption

A Nigerian legislative committee has discovered at least some of the depth of the corruption surrounding its fuel industry.

Every day, fuel importers drop off 59 million liters of fuel. The country consumes 35 million liters daily. That leaves 24 million liters of oil available for smugglers to export, paid for by government fuel subsidies. This costs the Nigerian people roughly $4 billion yearly, according to Reuters.

“There is a gap of 24 million liters per day being funded by Nigerians as subsidy that was not utilized by them. This of course amounts to overpayment; or in other words, sharp practices,” Farouk Lawan, chairman of a House of Representatives committee probing subsidies, said on local television, according to Reuters.

Nigeria is Africa’s largest oil exporter, but it imports most of the fuel it uses at home. The nation’s four refineries are run-down, producing roughly 15 percent of their intended capacity, according to The Economist. For decades, the government has spent $8 billion a year subsidizing fuel imports, reducing prices for Nigerian people, almost all of whom live on less than $2 a day.

Critics say the subsidy also pays for and encourages corruption — the squandering of tax-payers’ money that could be spent on roads, schools, electricity and oil refineries. President Goodluck Jonathan says he plans to phase out the subsidy as a part of a move to clean up the Nigerian government.

But this may not be possible, given the mood of Africa’s most populous nation. After the subsidy was canceled on Jan. 1, fuel prices doubled and the price of food and transportation skyrocketed. Protests broke out across the country. Hundreds were wounded and 10 were killed in clashes with the police. Unions called general strikes, and businesses screached to a halt. The government finally caved when union leaders threatened to strike some oil companies, a move that could devastate the Nigerian economy and spike global oil prices.

On the streets, people called on the government to crack down on corruption — not the subsidy.  Protesters said no one believed the money the government saved by canceling the subsidy would go back to the people. The government reinstated the subsidy — or at least part of it — leaving the price of fuel 50 percent higher than it had been before Jan. 1, and leaders called off the demonstrations.

This leaves Nigeria in a conundrum. The subsidy appears to support institutionalized corruption, but the people of Nigeria will not support a government that cleans up its mess by taking money out of their pockets.
By: Globalpost.com

Posted in BLCO, BONNIE LIGHT CRUDE OIL, Energy, Nigeria | Tagged , , , , , | Leave a comment

Buy Rice Futures

Why you should Buy Rice Futures

February 10, 2011

By:fastcashforex

Global Food Prices: Five Reasons to Buy Rice Futures

The world is finally waking up to the fact that global grain prices are destined to head higher – much higher.

Nasty weather in key agricultural markets around the world has savaged the global grain crop, meaning worldwide supplies can’t help but be squeezed. Australia, for instance, is experiencing additional flooding in areas that were already battered by the torrential rains of November, December and January.

And as if the supply-related increase in agricultural commodities wasn’t enough, there’s also the U.S. dollar – and the so-called “race to the bottom” – to contend with. Make no mistake: The endless devaluations in the greenback are having a worldwide impact on agricultural commodity prices. Since commodities are priced in dollars, these devaluations translate into higher prices for grains and other food-related commodities.

Short supplies and rising prices are bad enough, but concerns about these first two realities are creating an additional catalyst that completes a trifecta for higher agricultural commodity prices.

And that third catalyst is panic buying – especially with rice, which is a basic table staple in Asian markets. For instance, The Saudi Gazette last week reported that Bangladesh recently tripled its rice-import target and Indonesia just purchased 820,000 tons of Thai rice, nearly five times the volume initially sought.

“This is only the start of the panic buying,” Ker Chung Yang, a commodities analyst at Singapore-based Phillip Futures, said in The Gazette report. “I expect we’ll have more countries coming in and buying grain.”

For global investors, there are five reasons why it’s definitely time to buy rice futures.

Five Keys to Higher Rice Prices
Global food prices set an all-time record in January – reaching their highest level since the United Nations’ Food and Agriculture Organization began to track them in 1990. They even topped the previous highs set during the global food prices scare of June 2008.

“The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come,” said Abdolreza Abbassian, an economist for FAO, which is based in Rome.

Food-price inflation has become a major issue in the world’s emerging economies – particularly those in Asia. Those inflationary pressures are now threatening to ignite a rally in rice prices – even though bumper crops in Thailand and Vietnam should mean there will be ample supplies. Instead, the following five reasons almost assure us of increased rice prices by the end of this year.

Rice prices will increase because:

* The aforementioned huge early Asian crop is allowing U.S. farmers to shift to planting higher-margin grains
* Panic buying by consuming nations trying to fight food inflation will escalate the price of existing supplies.
* The weather effects of La Nina are continuing to affect historical rain patterns.
* We expect an actual imbalance between world supply and demand by the end of this year.
* The United States is exporting inflation to the rest of the world, and will continue to do so for the rest of 2011.

Thailand’s benchmark 100% “B” Grade white rice was offered at $540 per ton last week. That price is unchanged so far in 2011 – after having fallen 13% last year. During the 2008 food crisis, rice prices exceeded $1,000 a ton – a spike in food prices so severe that the head of the United Nation’s World Food Program said it was causing a “silent tsunami” of hunger to sweep the globe.

While the Westernized nations continue to feel the effects of deflation and de-leveraging, emerging-market economies are having almost the exact opposite experience. And rice prices may be the ideal way to illustrate this economic disparity.

You see, rice is a staple food for half the world’s population – particularly in Asia. And though there’s a huge-and-growing middle class in Asia, there are still millions of households that exist at or near the poverty line. A big run-up in rice prices would squeeze their budgets and topple them into poverty – causing a wave of unrest that the governments of those countries would do almost anything to avoid.

Under normal circumstances, the inflationary effects we’re seeing would not be as damaging to the world food prices. But we are in a major global weather pattern shift that has changed the rain patterns around the world.
La Nina is causing heavy rains to locations that normally experience little to no rain. This has caused flooding in such global breadbasket economies as Australia and Brazil. It has affected the monsoons of India and weather conditions on the U.S. East Coast.

Rice analysts have labeled price inflation as a “near-term” event, stating that an expected surge in rice supplies provided by a strong harvest would halt – and ultimately reverse – the current run-up in prices.
But the supply increases won’t be as large as these analysts expect.

The U.S. Wild Card
The price increases in grains have led the United States to shift its historical growing averages. In terms of the global pecking order among rice exporters, the United States typically ranks as the No. 3 or No. 4 largest exporter.

But not this year.

In 2011, U.S. farmers are shifting to other crops, hoping to capitalize by boosting their output of soybeans over rice.

In fact, Bloomberg News has reported that U.S. farmers will plant the fewest acres of rice crop since 1989. And with good reason: other grains have better profit margins than rice, especially since Asia’s largest rice growers have a “bumper crop” coming to market this year.

“Why would you want to take that risk to plant rice, knowing that your income is going to be way down?” Terry Hatley, an Arkansas farmer who this year may not plant rice for the first time in three decades, told a Bloomberg reporter. “Farming is a business, and you’ve got to look at the economics of it. Now, the economics on rice are very dim.”

Because the U.S. crop lags its Asian counterparts, such changes in planting plans by U.S. farmers will affect worldwide rice supplies in six months to nine months.

The “Egypt Effect”

The uprising in Egypt has been directly linked to the cost of wheat, as Russia was the supplier of wheat to the Middle East region. This historical relationship was put into doubt when Russia cancelled its exports of grains last summer.

Egypt has started to go into the spot market to purchase more expensive wheat to feed its growing population. The uprising is going to play havoc with additional supplies arriving and being distributed to the hungry population. And Egypt is not the only nation that has had to make large bulk purchases of food to try to meet domestic demand.

Take Indonesia, which is the first of many nations to come to market in an attempt to make larger-than-normal purchases of a particular commodity. In large part because of runaway food prices, Indonesia is facing an inflation rate of better than 7% – in a year in which the inflation rate had been expected to decline.

Cheap rice has risen 22% in the past year. Cooking oil jumped 15% and various types of “chillies” zoomed between 90% and 314%, The Australian newspaper reported.

Now the largest economy in Southeast Asia is importing rice in bulk for the first time since 2007. And Jakarta recently made an emergency decision to temporarily halt import duties on foreign supplies of rice, soybeans and wheat to ease food prices and take the sting out of inflation.

In fact, as a longtime observer of the global markets, I’ve found it interesting to observe the differing strategies that governments around the world have resorted to as they respond to the events in Tunisia and Egypt.

After the global food prices scare of 2008, authorities around the world were aware of the risks and better prepared to cope with rising food costs this time around, says Indonesia central bank spokesman Difi A. Johansyah.

“We expect food prices can be controlled so they won’t raise inflation expectations,” he said.

Indonesia President Susilo Bambang Yudhoyono said that possible steps to avoid a food crisis included waiving value-added taxes or import taxes for rice and cooking oil, maintaining sufficient stockpiles and preventing smuggling or hoarding.

Countries that operate under an autocratic government are announcing changes in their governments in an attempt to address the anger of a population that has no real say in deciding who will lead them. Shuffling the deck chairs on the Titanic has not fixed the problems before, and it won’t make a difference today.

The people are experiencing the pain that accompanies big increases in staple food prices. In such situations, it’s the price of the calories that drives the anger. And a fear of that anger will continue to induce governments to make the kind of hasty decisions that actually exacerbate the problem.

As investors in capitalist markets who will also feel some of that pocketbook pain, we have the ability to improve our lot by making investments that can offset the price increases. And we should make those moves now.

Article Source By Jack Barnes, Contributing Writer, Money Morning

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Crude Oil: The Best Commodity Play for 2012

 

Crude oil may not only be the best commodity play for 2012, it could prove to be the best commodity play of the next three to four years, soundly beating both gold and silver. I’m not talking about oil producers, refiners or drillers…or any individual stock — but the real thing: crude oil itself.

 

Don’t get us wrong, we still like gold and silver and will probably recommend jumping back into silver shortly. But you can’t pour gold into a farm tractor and use it to grow more food. You can’t pump silver into a 747 and use it to transport cargo. You can’t use gold or silver to make overall production more efficient and generate a higher standard of living. In fact, you can’t do any of these things without crude oil. This is why crude is and will continue to be the world’s most essential commodity.

5 Reasons to Buy Crude Oil Now

1) Oil supplies have peaked — oil supply lags discovery by approximately 40 years. New oil discoveries peaked in 1965. Not surprisingly, production has basically flat-lined since 2005. Despite all the press given to new deep water discoveries and North American shale supplies, new production is not keeping up with the depletion of old wells.

 

2) Producing nations are consuming more of their own output and exporting less. Saudi Arabia, Iran, Norway and Venezuela are exporting far less oil than they did in 2006.

3) Global population is growing rapidly and more people are growing accustomed to better, more energy-dependent lifestyles.

4) Crude oil is decoupling from the dollar. For most of 2011, crude oil was a “risk on”, short dollar play. No longer. Crude is rallying in both strong and weak dollar environments. This is bullish.

5) The odds of a preemptive strike against Iran (the 3rd largest oil producer) are the highest they’ve been in years. 33% of global tanker traffic passes through the Strait of Hormuz which Iran has threatened to close in retaliation for global trade sanctions. Expect it to make good on those threats if bombs start falling on its nuclear facilities.

Therefore, we believe crude has a better chance of doubling from its current $100 per barrel level than gold has doubling from its current levels of $1,575 per ounce. It’s not that we hate gold. We don’t. Some of the same conditions that favor crude will also favor the shiny stuff. But for “bang for the buck,” we feel crude oil is the best opportunity on the board right now.

What is the best way to play it? Energy stocks tend to under perform actual energy products during bullish price spikes. Producer/processor Exxon rose 23.3% and refiner Valero rose 54.5% during crude’s last run-up to $147 per barrel in 2008. Crude oil itself nearly tripled. Why trade crude oil producers, refiners and drillers when we can just trade crude oil itself?

I recommend using NYMEX crude oil options. NYMEX crude oil options are the most liquid (no pun intended) oil option market in the world — making buying and selling them about as easy as buying and selling most stocks. NYMEX crude options are a DIRECT PLAY on the price of the oil itself. NYMEX crude oil options also provide big leverage with fixed risk. That means we can devote a small amount of capital to our oil investment while keeping the bulk of our hard-earned dollars in safe, interest-bearing instruments.

There are many different ways to structure a bullish trade on crude oil. But I recommend the kinds of structures that provide plenty of time for the trade to succeed. Even though I expect crude to make a very strong move to the upside in 2012, I could certainly be wrong about that. So my favorite way to bet on crude oil right now is to utilize a “bull call spread” that does not expire until 2015.

This professional trading strategy may sound complicated, but it is really quite simple. And more importantly, is one of the safest options strategies that professional investors use. The bull call spread I like right now combines two different options. The first gives the investor the right to own 1,000 barrels of crude oil at $125 per barrel. The second option creates obligation to sell 1,000 barrels of crude oil at $150 per barrel.

So that means the investor has the right to buy crude oil at $125, but must also sell that crude oil at $150. Therefore, the investor can make the $25 per barrel difference, but no more. $25 times the 1,000 barrel contract size equals $25,000. Subtract the $3,000 cost of the trade to get a net potential of $22,000 — that’s a 7-to-1 maximum upside.

If the trade does not work out as hoped, the investor’s maximum possible loss would be the initial $3,000 cost of the trade. That’s the kind of risk/reward opportunity I like. Oil is a buy…maybe the very best buy in the entire commodity sector.

By Steve Belmont for The Daily Reckoning

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Moving to Croatia?

Croatia -Economy

Real GDP growth (2010): -1.2%.
Inflation rate (2010): 1.9%.
Unemployment rate (average for 2010): 17.6%.
Natural resources: Oil, bauxite, low-grade iron ore, calcium, natural asphalt, mica, clays, salt, and hydropower.

Following World War II, rapid industrialization and diversification occurred within Croatia. Decentralization came in 1965, allowing growth of certain sectors, particularly the tourist industry. Profits from Croatian industry were used to develop poorer regions in the former Yugoslavia. This, coupled with austerity programs and hyperinflation in the 1980s, contributed to discontent in Croatia.

Privatization and the drive toward a market economy had barely begun under the new Croatian Government when war broke out in 1991. As a result of the war, the economic infrastructure sustained massive damage, particularly the revenue-rich tourism industry. From 1989 to 1993, GDP fell 40.5%. With the end of the war in 1995, tourism and Croatia’s economy recovered moderately. However, corruption, cronyism, and a general lack of transparency stymied meaningful economic reform, as well as much-needed foreign investment.

Croatia’s economy grew strongly in the 2000s, stimulated by a credit boom led by newly privatized and foreign-capitalized banks, some capital investment (most importantly road construction), further growth in tourism, and gains by small- and medium-sized private enterprises. One downside to these steadily improving trends was a strong growth in Croatia’s stock of foreign debt, which by 2010 had reached almost 100% of GDP.

Despite the gains, substantial challenges remain. Croatia’s economy was hit hard by the global financial crisis, and has recovered more slowly than many of its neighbors. The country experienced a drop from 2.4% GDP growth in 2008 to a 5.8% contraction in 2009. GDP fell a further 1.2% in 2010 (about $62.25 billion), while estimates for growth in 2011 range from around 1.3% to 1.8%. Official unemployment is 17.6%. Croatia’s external imbalances and high foreign debt present long-term risks to its economic well-being, as continued access to foreign credit may be severely limited. An inefficient bureaucracy, relatively high labor costs, and lack of transparency in taxes, fees, and the public tender process have all led to a generally unfavorable climate for foreign investment. To address this, the government has begun to eliminate certain non-tax fees on business, consolidate overlapping government agencies, and identify administrative barriers to foreign investment, but progress is slow. Improvements to Croatia’s judicial system are not yet fully achieved, another hindrance to economic development.

The privatization process, begun in the 1990s, has been unsteady, largely as a result of public mistrust engendered when many state-owned companies were sold to the politically well-connected at below-market prices. The government sold three large metals plants in early 2007, but the Croatian state still controls a significant part of the economy, with government spending accounting for as much as 50% of GDP. Some large, state-owned industries continue to rely on government subsidies, crowding out investment in education and technology needed to ensure the economy’s long-term competitiveness. The government is trying to privatize several state-owned shipyards as part of its European Union accession bid. As of April 2011, there were signs of progress in this area, but the process has not yet been finalized.

CROATIA -GOVERNMENT AND POLITICAL CONDITIONS
Type: Parliamentary democracy.
Constitution: Adopted December 22, 1990.
Independence (from Yugoslavia): June 25, 1991.
Branches: Executive–president (chief of state), prime minister (head of government), cabinet of ministers. Legislative–unicameral Parliament or Sabor. Judicial–three-tiered system.
Political parties (represented in Parliament): Croatian Democratic Union (HDZ), Social Democratic Party of Croatia (SDP), Croatian People’s Party-Liberal Democrats (HNS), Croatian Peasant Party (HSS), Croatian Party of Rights (HSP), Istrian Democratic Assembly (IDS), Croatian Social Liberal Party (HSLS), Independent Democratic Serb Party (SDSS), Croatian Party of Pensioners (HSU), Croatian Democratic Alliance of Slavonia and Baranja (HDSSB), Party of Democratic Action of Croatia (SDAH), Croatian Labor (HL), and Croatian Social Democrats (HSD).
The Croatian Parliament, also known as the Sabor, became a unicameral body after its upper house (Chamber of Counties) was eliminated by constitutional amendment in March 2001. The remaining body, the Chamber of Representatives, consists of 153 members who serve 4-year terms elected by direct vote. The Sabor includes 140 members from 10 geographic districts within Croatia (each district holds 14 seats), as well as eight seats guaranteed to representatives of national minorities (three for the Serb minority, and five for other smaller groups), and seats for Croatians abroad without fixed residence in Croatia, the large majority of whom reside in Bosnia-Herzegovina. As of the November 2007 parliamentary elections, the diaspora representatives held five Sabor seats. Following changes to the constitution in 2010, diaspora representatives would be guaranteed three seats in the Sabor. The Sabor meets twice a year–from January 15 to July 15 and from September 15 to December 15.

The powers of the legislature include enactment and amendment of the constitution, passage of laws, adoption of the state budget, declarations of war and peace, alteration of the boundaries of the republic, and carrying out elections and appointments to office.

Following the death of President Tudjman, the powers of the presidency were curtailed and greater responsibility was vested in Parliament. The president is the head of state and is elected by direct popular vote for a term of 5 years. The president is limited to serving no more than two terms. In addition to being the commander in chief, the president nominates the prime minister-designate based on election results.

The prime minister, who is nominated by the president, assumes office following a parliamentary vote of confidence in the new government. The prime minister and government are responsible for proposing legislation and a budget, executing the laws, and guiding the foreign and internal policies of the republic. The HDZ-led government that assumed office in January 2008 represented a coalition agreement between the HDZ (66 seats), the Croatian Peasant Party (HSS) (6 seats), the Independent Democratic Serbian Party (SDSS) (3 seats), and other minority representatives. The Croatian Social Liberal Party (HSLS), which had two seats in the Sabor, decided to leave the coalition in June 2010 but the two HSLS deputies split with their party and reached an agreement to cooperate with the ruling coalition. The lone representative of the Croatian Party of Pensioners (HSU) previously left the coalition government in July 2009. The current government has, in addition to Prime Minister Kosor, 18 ministers, which includes six deputy prime ministers. Minor coalition partners hold three cabinet seats: tourism and two deputy prime minister seats, including one responsible for regional development and returns held by a representative of the Croatian Serb SDSS party. This is the highest-ranking government position held by a Croatian Serb since Croatia’s independence in 1991.

Croatia has a three-tiered judicial system, consisting of the Supreme Court, county courts, and municipal courts. Croatia’s Supreme Court is the highest court in the republic. The Supreme Court assures the uniform application of laws. Members of the high court are appointed by the National Judicial Council, a body of 11 members, and justices on the Supreme Court are appointed for life. The court’s hearings are generally open to the public.

The Constitutional Court is a body of 13 judges appointed by Parliament for an 8-year term. The Constitutional Court works to assure the conformity of all laws to the constitution.

Real Estate Tax in Croatia

The Republic of Croatia has a unified tax rate of 5% for all types of real estate and respective transactions. The tax is defined based on the price of the real estate in the sales contract and the value estimate by the authorized tax authority in charge for the area in which the real estate is located. According to the Law, tax on purchase of real estate is paid by the customer or the seller on behalf of the customer, if the parties agree upon this.

 

FOREIGN RELATIONS
Croatia has made great strides on the road to Euro-Atlantic integration. NATO and EU membership have been strategic goals, as Croatia seeks to forge stronger ties with the west. Croatia received an invitation to join NATO at the NATO Summit in Bucharest, Romania in April 2008; it became a full member of the Alliance in April 2009. Croatia is now in the final stage of its EU accession negotiations, which it hopes to conclude by June 2011,

One of the EU accession requirements is for Croatia to demonstrate full cooperation with the International Criminal Tribunal for the former Yugoslavia (ICTY). One of the central cases associated with this requirement involves former General Ante Gotovina, currently standing trial for war crimes in The Hague. A fugitive from justice since 2002, Gotovina was arrested in December 2005 by Spanish authorities in the Canary Islands, partially as a result of intelligence information provided by the Croatian Government. More recently, Croatia’s ICTY cooperation has been assessed, in part, based on its ability to track down missing documents requested by the ICTY for use in the prosecution of Gotovina. The ICTY is scheduled to announce a verdict in the case, which includes two other Croatian generals, on April 15, 2011.

In May 2003, the United States joined Croatia, Albania, and Macedonia to sign the Adriatic Charter, in which the three NATO aspirants pledged their commitment to NATO values and their cooperative efforts to further their collective NATO aspirations. In 2008, the Adriatic Charter expanded to include two new countries, Bosnia and Herzegovina and Montenegro.

Croatia has been a member of the United Nations since 1992, and contributes troops to a number of UN operations, including those in the Golan Heights, Cyprus, Sudan, Liberia, Lebanon, Western Sahara, and Kashmir. In December 2009, Croatia ended a 2-year term as a non-permanent member of the UN Security Council. Croatia also contributes troops to support NATO-led Kosovo Force (KFOR) and since 2003 has participated in the International Stabilization Assistance Force (ISAF) in Afghanistan. The Croatian Parliament in December 2010 approved raising the ceiling on the number of soldiers in Afghanistan to 350. Croatia is a member of the World Trade Organization and the Central European Free Trade Organization.

Croatia is also active in the region, particularly in supporting its neighbors’ Euro-Atlantic aspirations. Croatia has made progress on dealing with a number of post-conflict issues. Some of these, such as the status of refugees displaced during the 1991-95 war and determining the fate of missing persons from the war, remain key issues influencing Croatia’s relations with its neighbors.

 

U.S.-CROATIAN RELATIONS
Bilateral relations between the U.S. and Croatia are very strong. The United States opened its Embassy in Zagreb in 1992. U.S. engagement in Croatia is aimed at fostering a democratic, secure, and market-oriented society that will be a strong partner in Euro-Atlantic institutions. The U.S. also welcomes Croatia’s desire to play a positive and stabilizing role in the region.

In an effort to promote regional stability through refugee returns, the United States has given more than $27 million since 1998 in humanitarian demining assistance. Croatia hopes to remove an estimated 90,000 remaining mines by 2019. The United States has also provided additional financial assistance to Croatia through the Southeastern European Economic Development Program (SEED) to facilitate democratization and restructuring of Croatia’s financial sector, largely through programs managed by the U.S. Agency for International Development (USAID). Most SEED funding and USAID programs in Croatia concluded in 2008. USAID closed its offices in Croatia in 2008.

The Department of Defense has a robust military-to-military relationship with Croatia. The U.S. provides military assistance to Croatia in the form of training, equipment, equipment loans, and education in U.S. military schools. Croatia also has a state partnership with the Minnesota National Guard, and participates in a joint training team with U.S. troops in Afghanistan.

 

The U.S. Embassy in Croatia is located in Zagreb at Ul. Thomasa Jeffersona 2, 10010 Zagreb; telephone: [385] (1) 661-2200.

 

TRAVEL AND BUSINESS INFORMATION
The U.S. Department of State’s Consular Information Program advises Americans traveling and residing abroad through Country Specific Information, Travel Alerts, and Travel Warnings. Country Specific Information exists for all countries and includes information on entry and exit requirements, currency regulations, health conditions, safety and security, crime, political disturbances, and the addresses of the U.S. embassies and consulates abroad. Travel Alerts are issued to disseminate information quickly about terrorist threats and other relatively short-term conditions overseas that pose significant risks to the security of American travelers. Travel Warnings are issued when the State Department recommends that Americans avoid travel to a certain country because the situation is dangerous or unstable.

For the latest security information, Americans living and traveling abroad should regularly monitor the Department’s Bureau of Consular Affairs Internet web site at http://www.travel.state.gov, where the current Worldwide Caution, Travel Alerts, and Travel Warnings can be found. Consular Affairs Publications, which contain information on obtaining passports and planning a safe trip abroad, are also available at http://www.travel.state.gov. For additional information on international travel, see http://www.usa.gov/Citizen/Topics/Travel/International.shtml.

The Department of State encourages all U.S. citizens traveling or residing abroad to register via the State Department’s travel registration website or at the nearest U.S. embassy or consulate abroad. Registration will make your presence and whereabouts known in case it is necessary to contact you in an emergency and will enable you to receive up-to-date information on security conditions.

Emergency information concerning Americans traveling abroad may be obtained by calling 1-888-407-4747 toll free in the U.S. and Canada or the regular toll line 1-202-501-4444 for callers outside the U.S. and Canada.

The National Passport Information Center (NPIC) is the U.S. Department of State’s single, centralized public contact center for U.S. passport information. Telephone: 1-877-4-USA-PPT (1-877-487-2778); TDD/TTY: 1-888-874-7793. Passport information is available 24 hours, 7 days a week. You may speak with a representative Monday-Friday, 8 a.m. to 10 p.m., Eastern Time, excluding federal holidays.

Travelers can check the latest health information with the U.S. Centers for Disease Control and Prevention in Atlanta, Georgia. A hotline at 800-CDC-INFO (800-232-4636) and  CDC Center for Disease for Travelers Website gives the most recent health advisories, immunization recommendations or requirements, and advice on food and drinking water safety for regions and countries. The CDC publication “Health Information for International Travel” can be found at http://wwwn.cdc.gov/travel/contentYellowBook.aspx.

Further Electronic Information
Department of State Web Site. Available on the Internet at http://www.state.gov, the Department of State web site provides timely, global access to official U.S. foreign policy information, including Background Notes and daily press briefings along with the directory of key officers of Foreign Service posts and more. The Overseas Security Advisory Council (OSAC) provides security information and regional news that impact U.S. companies working abroad through its website http://www.osac.gov

Export.gov provides a portal to all export-related assistance and market information offered by the federal government and provides trade leads, free export counseling, help with the export process, and more.

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