Trickle down policy

Posted on 19. Oct, 2011 by Stephan Helgesen in Energy/Environment, Politics

“When paperwork gets in the way of benefits, that’s a problem.” So said John Bemis, Secretary-designate of New Mexico’s Energy, Minerals and Natural Resources Department, appointed by Governor Susana Martinez. What is significant about Bemis’ comment, made during a presentation in front of the New Mexico Oil and Gas Association’s Annual meeting on October 3, is that it represents a total change in attitude from the previous administration and is indicative of the difference one person—at the top—can make. The change in attitude in NM presents a case study from which the rest of the US would be wise to learn.

Governor Richardson’s approach was very much like President Obama’s. He added regulations and appointed people to positions of leadership who made doing business in the state difficult—especially in regard to natural resource management. As a result, businesses moved to other states and revenues suffered.  While some people think one person can’t make that much of a difference, NM is proving that couldn’t be farther from the truth. A culture of growth and prosperity starts with attitudes at the top.

Governor Martinez was elected in 2010. She appointed her people to head up the various agencies—including John Bemis at the Energy, Minerals and Natural Resources Department. The rules didn’t change; instead the new leadership reevaluated their application. Rather than dictating just because she can, Governor Martinez has chosen to focus where she can get the most bang for the buck. For example, the limited resources of the Oil Conservation Division can now be directed toward actual environmental issues, rather than enforcing paperwork.

As a result of the change in attitude at the top, industry is more enthusiastic about doing business in the state. As I usually do during August, September and October, I participated in three state-wide events; the annual meetings of the Independent Petroleum Association of New Mexico, New Mexico Mining Association, and New Mexico Oil and Gas Association. The contrast from previous years in the outlook of the participants was startling. They are excited about the possibilities! Instead of the regulations being used like a hammer to beat down all development, departments are now looking to help folks work within the regulations. If the regulations are excessively punitive or inappropriate, industry is encouraged to submit proposed changes—which they’ve done and which are being considered. Things are picking up in New Mexico.

Across the US, we have much the same problem as New Mexico did. We have excessive regulations, businesses are leaving, and revenues are suffering. The leadership has the power to reverse the trend. We’ve seen it in New Mexico. We saw it in August when President Obama instructed the EPA to delay the ozone regulations—which would have been one of the costliest in the history of the US as hundreds of counties would be instantly out of compliance for things as simple as fireworks displays.

The EPA has more tricks up its sleeve, and President Obama’s pick to head up the EPA, Lisa Jackson, has no intention of slowing down.

On October 10, an unprecedented group of Attorney Generals from 25 different states, joined together to ask Secretary Jackson to postpone implementation of the Utility MACT rule because it threatens to endanger electric reliability, eliminate jobs, and saddle consumers with significantly higher costs. The next day, the EPA issued a statement declaring that the rule would be implemented as planned on November 16. The MACT (Maximum Achievable Control Technology) rule condenses potential future coal-fueled power plant improvements and upgrades into an unachievable timeline. As a result of the Utility MACT rule, electricity providers already have outlined which coal-fueled power plants will be shut down. The remaining plants will have to spend billions for the required overhauls for marginal or questionable benefits to public health.

As he did in early September with the ozone regulations, President Obama has the power to tell Secretary Jackson to slow down, delay, or stop altogether. However, without intense public pressure, he is unlikely to do anything. The Utility MACT rule is just one of the expensive rules flowing down from the EPA that will cause America to lose important and cost-effective energy that is essential to economic growth. The higher costs will be passed on to the already struggling businesses and households.

It is actions like the EPA’s complete disregard for the public’s outcry, as expressed by the 25 attorney generals, that has pushed Congress to attempt to limit these excessive regulations through the EPA Regulatory Relief Act of 2011 (HR 2250) passed by the House on October 13—which President Obama says he’ll veto should it make it through the Senate.

The one person at the top makes the difference.  Another example is the Wilderness and Roadless Area Relief Act (HR 1581), which aims to legislatively push what the one person at the top won’t do.

There are 43 million acres of federal lands that for decades have been managed as “wilderness”—meaning that potential grazing and resource development is limited, firefighting efforts are thwarted, and recreation and tourism are restricted—despite the fact that these areas have already been studied and determined to be unsuitable for wilderness. The BLM and the Forest Service has recommended that the restrictive management practices be lifted. Instead of encouraging Congress to do so, President Obama’s Interior Secretary Ken Salazar issued an order to lock up more lands with a new label: “Wild Lands”—conflicting with the Wilderness Act which states that only Congress has the right to designate wilderness areas.

The Wilderness and Roadless Area Relief Act will remove these lands from limbo and opens them up for multiple uses, while giving local communities a voice in how the lands are managed. Unfortunately, based on their record, the people at the top are unlikely to support the recommendations of the BLM and Forest Service. They will probably choose to keep these lands locked up, blocking economic development and job creation.

However, remember, President Obama did order Secretary Jackson to delay implementation of the ozone rules. We can be confident that he didn’t do this because he one day had an epiphany and realized that the regulations were too harsh. He backed down because public pressure was so intense that it became clear his support of the expensive rule threatened his re-election.

Ideally, the public pressure changes the behavior of people at the top—absent that, like we did in New Mexico—we change the people at the top. Because, one person can make a difference.

This article was submitted by Marita Noon who is the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and, the environment through public events, speaking engagements, and media, the organizations’ combined efforts serve as America’s voice for energy. Marita’s twentieth book, Energy Freedom, has just been released.


Should teachers be provided with federal income tax relief?

Posted on 19. Oct, 2011 by Stephan Helgesen in Education

Tax traders, exempt teachers: Close the ‘carried interest’ loophole

A bedrock principle of our society is that we obey laws and follow rules. And one set of laws where voluntary compliance is critical involves the collection of taxes. We currently have the world’s most efficient tax collection system because most Americans scrupulously obey these laws, even as tax rules grow ever more complex.

Our political leaders, however, cannot expect compliance to go on forever when tax unfairness is rampant. This disparity is particularly clear in New York City – where the South Bronx, the poorest urban county in the country, lies just 10 miles from the excess of Wall Street.

One starkly unjust tax provision once again garnering attention – this time as part of President Obama‘s American Jobs Act – is “carried interest.” Since the mid-1980s, the performance-based management income earned by a few thousand extremely wealthy private equity, hedge fund and other money managers has been taxed as capital gains, when all that these managers do is manage money – specifically not their own money – for other people. This management income, in form and substance, is no different from the management income that hundreds of thousands of other managers earn every day from the results of the businesses they oversee.

Yet carried interest alone is taxed as capital gains, while everyone else is taxed on ordinary income. Because the 15% capital gains tax rate is less than half the 35% maximum ordinary income tax rate, the cost to the Treasury is massive. We estimate annual loss of tax revenue from carried interest is at least $10 billion a year, or $100 per American household a year. Our state manages 41% of the world’s hedge fund assets, more than any other city on Earth.

Investment partnership managers say that reforming carried interest would create an “investment tax” of sorts, with dire consequences for the American economy. Yet the consequence would only be to the managers’ incentive fees.

They also claim the annual amount to be collected by changing this tax policy is “only” a couple of billion dollars a year, so the deficit- and debt-closing effect would be minimal. This argument doesn’t properly account for the activities of the more than 1,000 private equity funds, 8,000 to 9,000 hedge funds, 1.2 million real estate limited partnerships and the 1.3 million “other” limited partnerships that each year file with the IRS. It also makes the false assumption that the managers will adjust their behavior to avoid higher taxes, even though carried interest is determined by contract and is therefore immune from so-called “avoidance schemes.”

This has to change, and we believe we have just the way to do it. It is time to convert carried interest into public interest by redirecting this annual $10 billion tax break to people who actually need it, namely America‘s K-12 teachers – some 80,000 of whom work in New York City, the largest public school system in the country.

The $10 billion a year gained from ending the carried interest exemption, in fact, is just about enough to waive the income taxes on those who choose to teach our children – enabling us to give refundable tax credits to K-12 teachers based on their qualifications and teaching specialties, in order to increase the pool of teachers in critically important areas such as languages, math and sciences, and instructing disadvantaged students.

America has a long and successful record of using the tax code to reward desirable social actions. In the 1960s, we gave income tax relief to VISTA and Peace Corps volunteers because their work was deemed so important, and today, we proudly give substantial relief to our courageous active-duty military personnel.

Teachers are just as patriotic and important, and vis-a-vis all other municipal professions they are far and away the most difficult public servants to recruit and retain. New York City’s teachers serve more than a million students in nearly 1,700 schools.  All informed citizens want high teaching standards and accountability. But they also understand the economic plight of our K-12 teachers is a major obstacle when it comes to developing top talent.

Providing federal income tax relief to teachers would be a powerful response to this demand, and an important step toward restoring the health of our national economy and our global competitiveness. Properly taxing carried interest is the means to this end.

This article was submitted by Leo Hindery who is chairman of the Smart Globalization Initiative at the New America Foundation and former chairman of Teach for America. Kerrey, a former U.S. senator from Nebraska and earlier its governor, is president emeritus of the New School and currently executive chairman of Global Scholar in New York City.

 

 

Pass the Magic Marker

Posted on 12. Oct, 2011 by Stephan Helgesen in Social/Cultural

My first recollections of the power of ‘Street Speech’ (protests) took place on September 2, 1957 in Little Rock, Arkansas when nine black students tried to enter Central High School. They were stopped by the Arkansas National Guard that was called out by Governor Orval Faubus. The protests were initiated by whites who were opposed to integration. I was shocked, first because I had never seen so many black people in one place at one time and more shocked by the actions the government took to keep them out of school.

Next, Vice-President Richard Nixon made a goodwill trip to Latin America (Uruguay, Peru and Venezuela) in 1958. Boy, was he surprised when his motorcade was assaulted with jeers, raised fists and flying vegetables! Seems these folks didn’t quite appreciate something called, ‘American Imperialism.’ It looked to me on our black and white Sylvania TV set like we lost the battle for the hearts and minds of our southerly neighbors. As a young man I didn’t know why people would dislike us so much that they’d throw things at Mr. Nixon. I found out later when I read about our Latin American foreign policy. Fidel Castro came to New York City in 1959, and some folks were not too pleased to see him and protested his visit. I remember he was interviewed by Jack Paar. He seemed to be a pretty nice guy (for a guerilla fighter), but that was before I read about how the Cuban revolution went down.

Then there were protests against Senator John F. Kennedy in 1960 for being Catholic (something I thought was pretty harmless, but then I’ve never lived in Ireland, either). Fast forward to the counter-culture hippie-inspired protests in the mid-sixties and couple them with the civil rights protests AND the anti-Vietnam War protests leading up to the Democratic National Convention in Chicago in 1968. The American protest movement was at its zenith, or so we thought until the anti-Vietnam protests continued even beyond the Paris Peace talks and the Peace Accords.

Protesting had become a fixed part of American life – an industry. We could see it every time we tuned in to the evening news. There were handbooks that guided protesters like, “Rules for Radicals,” by Saul Alinsky that was published in 1971. The first chapter says, “What follows is for those who want to change the world from what it is to what they believe it should be. The Prince was written by Machiavelli for the Haves on how to hold power. Rules for Radicals is written for the Have-Nots on how to take it away.”

If that didn’t presage what we are seeing today with angry and often violent union protests and the ‘Occupy Wall Street’ (OWS) movement, I don’t what could have. Many Americans are simply tired of the ballot box and feel that voting makes no difference anymore – that no matter who you choose, they will disappoint you once they get into office. Many of the OWS are young people, probably unemployed, and certainly angry. They may say they’re there for ideological reasons and to ‘change the system,’ but frankly I don’t think many of them know the difference between Karl Marx and Harpo Marx or understand that it’s the very capitalism they’re protesting that made America and Americans rich.

Protests do prove one thing, though. They teach us that while freedom of speech may be difficult to stomach (especially if you disagree with the person who’s holding the protest sign two inches from your nose and calling you names), it’s a whole lot better than the alternative.

- Editor


Choosing Our Candidates

Posted on 11. Oct, 2011 by Stephan Helgesen in Politics

Straw polls, caucuses, primaries, debates, town halls, ‘grab ‘n grips’. They all leave me wanting something different than the business as usual venues we use to choose our Congressional Representatives and the leader of the Free World.

Sure we need order and structure, procedures, roll calls, hobnobbing, hot dog eating and baby-kissing, but c’mon folks, at the end of the season we’re bone-tired of these candidates  – long before they take their oath of office!

I give myself a test. It’s totally unscientific and not focus-group tested. I ask myself the BIG question, “Can I stand to listen to a candidate’s speaking voice for two, four or six years?” If I can’t, I won’t vote for ‘em. I come from the hayseed Midwest. It’s said that we have the least accent of any of our American brethren, but accents aren’t really an issue for me. I don’t mind most of them, except maybe the New York City brand. It’s the voices coupled with their pitch that assault my inner ear.

It may be a man thing or an old guy thing or a curmudgeon thing. Every time I hear a high-pitched voice with a nasal tone riding piggyback, I want to climb Mount Taylor and throw myself into the abyss. They’re worse than nails on blackboards or the air raid sirens of my childhood that signaled a quick dive under the desk to escape the A-bomb. I swear they’d even make Professor Henry Higgins take the night train to the closest monastery!

We New Mexicans have an interesting collection of Congressional voices that represent us in DC. One of them is a dead ringer for Jimmy Stewart in Mr. Smith goes to Washington. Can you guess which one it is? Actually, his is a comforting tone, and I think he could win any race in our state if he didn’t have to contend with pesky things like his voting record. Now, that brings me to the methods for choosing a leader. I think most of us will agree that the upcoming election in 2012 is going to be a barn-burner of a media circus, so let’s see if we can spare ourselves some of the normal palaver from the wannabees and do something different!

Game shows to the rescue!

Let’s make all the candidates compete on game shows. I can think of no better images than the candidates merengueing on Dancing with the Stars or answering questions on Jeopardy like which exotic beetle builds its nest out of dung.  These are sure to eliminate any opportunity for throwing talking points at us. How about American Gladiator (if it’s still on)? Make them dress up in those ridiculous costumes with shoulder pads, tights and helmets while wielding those oversized cotton swabs to beat each other with. Survivor would be a good choice. Let’s see how many of them can start a fire or purify water with basic tools.

The coup de grace would be America’s Funniest Home Videos. Each candidate would have to show John Q. Public his or her most embarrassing, private, bone-headed moment in living color. I’m sure there are many more shows we could choose from that would not only give us insight into the candidates’ real character and sense of humor, and I invite you come up with your own list. The mental gymnastics are worth the effort.

Game show participation is bound to be a darn sight more entertaining than seeing the candidates in a debate, all lined up like the stone sentinels on Easter Island, waiting for the ‘killer question’ they can hit out of the park with a practiced one-liner.

One thing’s for certain. The advertisers would be happy. No viewer would dare leave the room during the commercials for fear of missing their favorite candidate’s performance.

- Editor

Rushing headlong over the cliff

Posted on 09. Oct, 2011 by Stephan Helgesen in Energy/Environment

When it comes to America’s energy policy, we are continuing our headlong rush, like lemmings over a cliff, to self-extinction. September 30 was the deadline by which the Department of Energy needed to get the remaining billions in stimulus funds out the door. Apparently, no one learned any lessons from the Solyndra scandal.

Shoveling $4.7 billion in stimulus funds to four solar projects is a big issue being covered by the national media. In two little states, the lemming analogy is still relevant, though under reported.

Both Delaware and Rhode Island are a part of the floundering Regional Greenhouse Gas Initiative (RGGI), and both have a Renewable Portfolio Standard (RPS), requiring cuts in carbon emissions and increases in renewable energy. Both raise energy costs to consumers.

In Delaware, they are pushing forward with two projects that they believe will put them at the forefront of the “Green Revolution.” (Considering the state of the green revolution, I am not sure why any state would want to be at the forefront.) Delaware’s projects require surcharges, subsidies, grants, and guarantees—but give the government officials bragging rights!

Delaware’s projects include a solar park—touted as the second largest east of the Mississippi, and an experimental fuel-cell facility that will allow Delaware to be cutting edge when it comes to energy. The Bloom Energy project to be built on the site of a defunct Chrysler factory and the Dover Sun Park both use viable technology to produce electricity—but both will cost businesses and consumers more for electricity.

The fuel cells, called Bloom Boxes, use natural gas to generate electricity. It does work. But it only comes close to being cost-effective if it qualifies for the state’s renewable energy credits, which are designed to move the state away from fossil fuels. Despite Nancy Pelosi’s firm assertion that “natural gas is a clean, cheap alternative to fossil fuels,” natural gas is a fossil fuel. Delaware’s Governor Jack Markell persuaded the legislature to change the state code to allow power from fuel-cells to count towards its RPS.

At least building more natural-gas-fueled electricity generation makes some sense for Delaware. The state is located near the plentiful natural gas of the Marcellus Shale, and, due to the abundance of new natural gas discoveries, it is relatively cheap. However, a better investment of tax-payer dollars would be on a proven winner such as combined cycle natural-gas-fueled power plants rather than on 150-year-old technology that has yet to yield a profitable fuel cell company—even if it is supposedly green.

The 10-mega-watt, 103-acre, $50-million Dover Sun Park was commissioned in August and is now delivering power—albeit more expensive electricity. The bragging rights here are that it is the state’s first utility-scale solar project. According to estimates provided by the U.S. Environmental Protection Agency, it will offset more than 12,000 tons of carbon dioxide emissions each year. Delaware participates in regional cap-and-trade auctions, and permits to emit 12,000 tons of carbon are only worth about $22,000 a year— if they could be sold. The market for carbon permits has collapsed since New Jersey pulled out of the market and 83% of the offered credits went unsold at the September auction.

What helped make the solar project attractive is that the renewable energy credits would be tradable/salable through the manufactured energy-credit market. However, between the time the Dover Solar Park was planned and the time the first megawatt was delivered, the market has all but fallen apart. The price for the energy credits was about $270 and is now about a third of the planned-for price. Delaware utilities signed long-term contracts for these credits at higher than market prices and, now the ratepayers will pay the price for the next twenty years.

Who makes up the difference?

One way or another, like an environmental plague, it hurts the public—either in the form of rate increases or government subsidies which come from our taxes.

In Rhode Island, two of the state’s top elected officials, Governor Chafee and Senator Whitehouse, supported Turbines, Towers & Vessels, an event designed to help vendors get “incentives” to underwrite renewable energy projects in the state—specifically off shore wind projects. The Cape Wind offshore project took 10 years before it finally got approved and even now it faces lawsuits. The event’s publicity states that offshore wind projects are “catapulting forward” and that they will “Make Rhode Island a leader in the emerging clean energy economy.” The conference was held in Providence last month and vendors lined up get their share of rate payer-funded projects.

All of these projects would be great if they were a better mouse trap; if they were cheaper, more reliable and provided better land use. But they are not. They are more expensive, less reliable and use more land (or water). They also require tax and/or rate payer-funded subsidies or “incentives”—for what?

The whole idea of renewable energy is based on two once-popular fallacies:

1)      Climate change is a manmade crisis caused by the burning of fossil fuels, and it can be fixed by replacing fossil fuels with “renewables”—even if only the United States plays along.

2)      We have an energy shortage.

So we are going to go into debt and pay more for energy, for what? When these two false assumptions are removed, the renewable energy rush, heads off the cliff. We create problems while solving none. As the governors of Delaware and Rhode Island believe, these projects create jobs—after all, the now complete Dover Sun Park did employ 100+ people for 6 months. But the higher energy costs kill jobs.

In Rhode Island, Toray Plastics, one of the state’s largest employers, is making expansion decisions, based on energy costs. They have a plant in Rhode Island and one in Virginia. The manufacture of the plastics is energy intensive so costs factor heavily into the decision. Electricity in Rhode Island is twice as expensive as in Virginia. The expansion has the potential for an additional 230 jobs and Rhode Island doesn’t want to lose them. The solution? In October 2010, Toray received approval for $500,000 in stimulus funds and a $454,482 federal tax credit to move forward on a $2 million project solar farm at Toray’s RI plant. Then they got a $1 million grant from the RI Economic Development Corporation with $750,000 coming from the Renewable Energy Fund—generated by a surcharge on electric bills (taking from the customers to give it back to the customers, minus some off the top for government administration). The remaining $250,000 will come from federal stimulus money received by the state. These funds make the solar project feasible and, as a result, Toray can afford to expand in RI, meaning more jobs at the RI plant.

Perhaps it would have been better to toss the RPS, exit RGGI and focus on keeping energy as cost-effective as possible—especially for these two states that already have comparatively high energy costs—until a better mouse-trap does come along. When someone really does have a better mouse-trap, people will be jumping off the cliff to invest their money. A citizen at a September 29 hearing for the Bloom project summed up the whole situation when he said he had no trouble with Bloom. “If it was a private venture, I’d be patting you guys on the back. I’d like to see all subsidies end.”

A true better mouse-trap doesn’t need stimulus funds. By contrast, with Solyndra, our tax dollars rushed off the cliff to predicted extinction.

Bloom Boxes, the Dover Sun Park, Turbines, Towers & Vessels—I smell a rat.

This article was submitted by Marita Noon who is the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and, the environment through public events, speaking engagements, and media, the organizations’ combined efforts serve as America’s voice for energy. Marita’s twentieth book, Energy Freedom, will be released in October.


 

 

 

 

Straight Talk for Exporters – “Threading the cultural and distribution needle” 6th in a series of articles for exporters

Posted on 07. Oct, 2011 by Stephan Helgesen in Economy

Good overseas distributors are hard to find. I know. I helped find hundreds of them for American manufacturers over a 20-year period. Back in the mid-80s, I was surprised at how little many U.S. companies knew about their target markets let alone the unique distribution systems that formed the backbone of the sales infrastructure in those markets. Fortunately, those times have changed.

Back then, this lack of awareness was not confined to the more ‘obscure’ (read: difficult to understand because of language challenges) markets like those of Southeast Asia and China, it also applied to lesser-known ‘second-tier’ European markets like the Benelux countries (Belgium, The Netherlands and Luxembourg), Scandinavia (Denmark, Norway, Sweden and Finland) and the Baltics (Lithuania, Latvia and Estonia), places where I lived and worked.

While those countries might share some similarities, they are as different as Poffertjes and Pommes Frites*). Often times we lump countries in with one another precisely because they share common traits like language or cuisine or geography, but if we only look at the similarities we will overlook the huge differences that make them the sovereign nations and intricate markets they are. That could be disastrous for exporters who are laying a lot of money on the line – money that is tied up in advertising campaigns, trade show exhibitions, point-of-sale displays, and agent/distributor commissions.

Are they hearing what you’re saying?

I saw the consequences of ill-conceived plans in several countries executed by several well-known American companies that should have known better. Their big mistake was applying the same marketing plan and using the same advertising (sometimes in the same language like Dutch in The Netherlands AND in Belgium) in several markets – without testing and without outside advice.

If we take the Belgium and Netherlands example, the mistakes were many. First, the countries are very different. The Netherlands is an economic powerhouse with massive distribution to the rest of Europe, and Belgium is much smaller and less commercially international (they are definitely international though as they house NATO and are one of the seats of the EU government). In The Netherlands, Dutch is the principal local language followed by English and German and French, in that order. In Belgium, there are two principal languages: Flemish (Dutch) and French followed by German and English in that order. If you advertise only in Dutch in Belgium, you will miss hitting the Walloons (French-speakers).

If you advertise in The Netherlands (by the way, it is ‘The Netherlands’ not Holland; Holland is a province of The Netherlands) only in English you will probably achieve good message penetration because so many people speak English, but you may end up alienating your target audience because you are by-passing their native language.

So, one of the most important decisions you must make is: which single-country markets will you target. Answer that question and you can drill down to see if there are any enclave markets (border markets where multiple languages are spoken because of the proximity to a neighboring country). There are several of these like: Southern Jutland in Denmark (close to Germany), Maastricht, The Netherlands (also close to Germany), Northern Estonia (close to Finland and Russia), etc.

Southeast Asia shares similar characteristics. Take Singapore, a tiny country (it’s a city and a state) of 3.5 million, principally Chinese speaking (over 65% of the population) followed by Malay and Hindi. English is the principal lingua franca of commerce. Therefore, American companies can use their good old American English (no colloquialisms please) in their marketing and advertising materials.

Singapore is an excellent Southeast Asian base of operations because of its proximity and connections to and with Malaysia, Indonesia, and China, to name a few markets. (Its container port is the busiest in the world.) Indeed, many American companies have their SE Asian headquarters in Singapore and their factories in the countries mentioned above. Singapore’s sophisticated business climate makes it an attractive place for expats from all nationalities.

Distribution: Getting it from here to there, profitably

Now that we’ve conquered language, let’s move on to distribution. You’re going to need some form of distribution for your products or services. Which will it be? Agent? Distributor? Master Stocking Distributor? Will you warehouse? To answer those questions will take more time because it will require an accommodation of your company’s sales philosophy with the distribution preferences for your industry in your chosen market(s).

How big will the export territory be? Will it be divided along country boundaries or be decided on the basis of concentration of customers? Who will dictate pricing? How much will commissions be? Who will service/repair?

Once you’ve decided these questions, you’ll need to choose under whose civil law the representation contract will be adjudicated. If your contract is with a Belgium firm, be prepared for a protracted notification period. (Belgian distributors are entitled to an extremely long waiting period before contracts are declared null and void.)

Many companies have chosen large shipping ports as their entrépôts (intermediary market for sale and transshipment) as  these are usually near large population centers, have sophisticated in-country distribution and transportation, ample warehousing and even Duty Free Zone space where value may be added to products, free from taxation.

Whether you choose a single-country market, a regional market, a niche market or a test market, time’s a wastin’. Chances are the competition already has a presence there and has signed one of the premier distributors. Don’t let that stop you or anything else for that matter. Exporting is worth the effort. Just ask the film industry. It is estimated, that as a part of their total revenues, film showings and distribution agreements with European theatres provide the industry with all of its profit… and that’s a front row seat in anybody’s language!

*) Poffertjes are small Dutch dough balls and Pommes Frites are French Fries

Submitted by Stephan Helgesen, a 20-year veteran of the U.S. and Foreign Commercial Service of the U.S. Department of Commerce. He has worked in over 24 countries and advised hundreds of exporters on three continents. He is currently the Honorary Consul for Germany in New Mexico and CEO of 2nd Opinion Marketing & Communications, an export consultancy. He can be reached at: helgesen@2ndopinionmarketing.com

Copyright © 2011 Second Opinion Marketing & Communications

 

 

 

 

 

The non-attack attack

Posted on 03. Oct, 2011 by Stephan Helgesen in Politics

This is a warning…lovers of free speech are encouraged to stop reading, otherwise you may find yourself going into a catatonic fit (Definition: of, relating to, being, resembling, or affected by schizophrenia characterized especially by a marked psychomotor disturbance that may involve stupor or mutism, negativism, rigidity, purposeless excitement, and inappropriate or bizarre posturing or 2. uncontrollable urge to throw your voter registration card out of a moving vehicle, ripping bumper stickers off parked cars or shouting at your computer).

In a moment of uncontrollable curiosity, I logged on to the Obama 2012 Campaign website, www.attackwatch.com, to find out what all the hubbub was about this new initiative to protect the sanctity of the truth. To my chagrin, my mind raced back to George Orwell’s famous book, “1984” (published in 1949). You remember that one don’t you, the novel that took place in Oceania, a society ruled by an oligarchical dictatorship with pervasive government surveillance and incessant public mind control, accomplished with a political system euphemistically named English Socialism (Ingsoc). It was administrated by a privileged Inner Party elite (cult) headed up by a character called, Big Brother at the helm.

BB ruled with a philosophy that eschews individuality and reason as thoughtcrimes and where the people of Oceania are subordinated to a supposed collective greater good. It’s a classic. You ought to read it if you haven’t already done so. Before you start lighting torches or sending volumes of spam email my way, let me say that I’m not directly comparing this website or the campaign that spawned it to ‘1984.’ I am merely noting the website’s existence and wondering why it was necessary, that’s all.

Life imitates art, and sometimes our writers stumble onto truths that haven’t happened yet. 1984 is one of those works that are like a crystal ball and a barometer, working in tandem, backwards and forwards in time.

Some of the categories in the website are: “Attack Files, Report an Attack, Support the Truth.” Deeper in the site are all the ‘smears and untruths’ perpetrated by those nasty characters that are out to sink the ship of state and wound the President’s chances of being reelected. All the ‘usual suspects’ are there: the Republican presidential candidates, Glenn Beck, Karl Rove and all manner of other dastardly dudes that concoct rumors against the Pres.

Make no mistake, the gloves are off (if they ever were on) and ‘AttackWatch’ is trying, apparently, in its own way to clear away all the clutter of public opinion and point you in the ‘right’ direction. Maybe it’s just the name that unnerves me. I thought warspeak was out of bounds, and that we were all change agents, moving towards the sunlight instead of cowering behind innuendo and euphemisms.

I’m no political Pollyanna. I’ve followed politics for decades since the Nixon-Kennedy presidential campaign. I’ve actively supported candidates and even run a campaign myself, and I always felt that we benefited from illuminating the debate not by inflaming it.

I’d like to cut the website some slack, so I looked up ‘TruthWatch’ thinking that maybe that domain name might have been available to the Obama campaign. Unfortunately, it wasn’t. On ‘TruthWatch’ I found the following mission statement, “Truth Watch is a group of Evangelical Believers – dedicated to the need for a new reformation. Our purpose is founded in Scripture: 1 Thessalonians 5:21 exhorts all believers to, “Test Everything, Hold on to the Good.”

Truth is good. And the search for truth is a noble endeavor, but sometimes how we conduct that search tells us more about the truth than what we actually uncover.

- Editor

 

Decency takes a holiday

Posted on 02. Oct, 2011 by Stephan Helgesen in Social/Cultural

Each generation complains about the next one. I think many of these complaints are leveled because we feel that we’re being pushed farther into the background, like an old photo in a family album. One day, we too, will be in there with a handwritten description under our photo, “Uncle Chuck. Always wore I love Woodstock tee shirt and came to our wedding on a motorized skateboard.”

One prevailing fear dominates this generational anxiety and that is the fear of irrelevancy based on the prospect that all gains made by our generation are now being reversed by the current one. Our short life spans disadvantage us somewhat, leaving us only a short window of comparison. What would it be like to be transported back to the antebellum south of the 1850s, for example – to those halcyon days of mint juleps, porch swings and dress-up balls?  Great, if you were white and wealthy. Not so great if you were poor and black.

Or what about those pioneer days of a few decades later – braving the journey from Missouri to Santa Fe in a ‘prairie schooner’?  How exciting! Not for the very young or very old that contracted serious diseases and were buried along the way. Fast forward to the early years of the 20th century. What a fantastic time, except for WWI, WWII, deplorable working conditions, crime waves, crop failures and the like. You get my point.

Each generation experiences tragedies and has its own crosses to bear. Floods, fires, financial catastrophes, earthquakes, unemployment, scandals, wars, crime, disease – it’s all part and parcel of life, whether you’re in the fast or slow lane.  So what is it that makes a generation great? Tom Brokaw wrote about, The Greatest Generation, and while I have to agree that those who safeguarded America’s (and the world’s) freedom with their sacrifices in the 1940s were extraordinary, it may be hard to crown them the greatest for that singular achievement especially when we remember the Revolutionary War and other hardships that challenged our country. Their pluck and grit certainly puts them in the running for the top prize, though.

What’s on a successful generation’s resume that distinguishes it from the others? What are the qualities and attributes that a generation must have to rise above its own slag, improve the world and hand it off in better shape than they found it to the next generation? The list may be debatable, but I believe that among the top five are decency and fairness. The others are: personal responsibility, vision, and industriousness.

People used to address one another as Mr. or Mrs. and children never dreamt of calling an older person by their first name. Women were treated with respect – not condescension – and we called each other ladies and gentlemen not guys . Admittedly, this is a small thing, but it’s indicative of the trade-off we’ve made, exchanging manners for folksiness. Every society has its own social currency, and the first step towards devaluing it is not treating each other with a modicum of respect. For example, we always referred to the President of the United States as Mr. President or ‘the President.’ We did this out of respect for the office and the enormous responsibility that went with it, no matter how much we disagreed with the man who held it. Where has this gone?

It’s inevitable that each generation interprets what decency and fairness is for its time, but these interpretations should be refinements not wholesale re-definitions of it. Give me a Mr. any day. Leave your four-letter words off my TV, out of my magazines and daily conversation. Keep your degradation of women and minorities, needless criticism of hard-working and wealthy people along with unwarranted personal attacks to yourself. There is no place in my American society or in my generation for them.

- Editor


America’s Dichotomy?

Posted on 01. Oct, 2011 by Stephan Helgesen in Social/Cultural

I’ve given America’s inability to compromise a lot of thought. Matter of fact, I’ve even had some mini-epiphanies on the subject, some of which have come to me at strange times. Recently, I awoke with a visual impression of a grapefruit in a guillotine (I told you it was strange). I interpreted the grapefruit to be the USA or maybe our world and the guillotine the final solution to a country that was already coming apart at the seams, ideologically. The blade rushed downward and didn’t slice the grapefruit into two neat halves. Instead, it completely destroyed it.

This pretty much tells the story, and if I were a pessimist, I would simply stop writing now, head down to my fallout shelter and get ready for the inevitable dissolution of ‘my America’ and the disappearance of the American dream. But I’m not a pessimist, at least not when I’m awake.

Since I have a fervent belief in reincarnation and the revisiting of souls that didn’t quite do their homework, I cannot see how that spiritual ‘pay it forward’ wouldn’t also affect how we do politics as these souls come back for another bite of the apple. Maybe that’s an explanation of why we don’t seem to learn the most important lessons in life like: war is useless, violence doesn’t win hearts and minds, and there’s never quite enough toothpaste in the tube for one more thorough brushing.

Truth is, our differences of opinion have not elevated us to a level where discussion enables us to see the promised land of peace and tranquility. Instead, we have been cast into a sinkhole of despair, mistrust and outright anger, and the worst part of it is… we have our ideological opponents in the same hole with us!

History is rife with examples of how empires and societies rise and fall. I think many of them have something in common. First they implode, then they collapse. Implosion comes gradually as the basic pillars that support a society (like its ideology) are eroded, weakening the structure. Then, when the ‘beast’ cannot support itself, it falls to its knees and becomes vulnerable to predators that attack it, take it back to their lair and eventually devour it.

Nothing lives forever… or does it?

We’ve been told that America is an idea, and that once upon a time, it really was a BIG idea – the freedom of freedom. Somewhere along the way, freedom became a ‘progressive’ (read: fluid, changing with the times) idea, subject to review, refinement and re-definition. I can’t really put my finger on when this happened with absolute certainty, but I believe it may have started when we achieved a new national wealth (or opportunity) and had more time on our hands. I would guess somewhere in the late fifties/early sixties.

Too much idle time, too much money and sometimes too many opportunities do weird things to people. We became theoreticians, philosophers, social scientists and observers of life rather than active participants in it, and we started churning out ideas that questioned our values and ourselves. This led us to a place of insecurity and doubt (some would say a necessary step towards enlightenment) about what America was and should be.

Today, America is no longer one BIG idea, it is many ideas and they are pretty frightening and confusing for those of us who thought we understood the old one. It wouldn’t be so bad if we could talk to each other. We might figure this thing out, but the ideology of those ideas has separated us into two warring armies, each camped alongside the same river, knowing that we will be attacked if we venture down to drink from it. I can’t help conjuring up images of Matthew Brady’s photographs from the Civil War where young men with vacant eyes, looking like time travelers, are frozen on a battlefield, totally out of place and unable to drink from the river.

In 1862, my great, great grandfather, his father and family emigrated from Norway to the USA seeking the dream of freedom and prosperity. After they arrived, they soon realized that it was costlier to live here than they had expected, so my great great grandfather enlisted in the Union Army. He was given a rifle and told to go kill an American.

When he asked, “Which ones?” he was told, “The ones in the gray uniforms.” Imagine his torment. Was the New World no better than the old one? He hadn’t even had time to think about his feelings on the subject before necessity took over. He had a family to feed, so off he went to kill Americans to free America from Americans.

Our challenge today is whether or not we really need to destroy the village of ideas (or the one BIG idea) in order to rebuild it. The dichotomy is the war between the absolutists who believe in the consistent unwavering application of our laws and the selectivists who believe that laws are merely guidelines or suggestions and should be subject to interpretation.

In my dream, each of us has a shovel, and just before I awake, I see everybody pick up his own and look at the person next to him. What I don’t see is whether they bash each other over the heads with them or use them to fill up the gaping hole we’ve dug for ourselves. We’ve proven we can build a nation on an idea, now the trick is to see if we can sustain it.

- Editor

Straight Talk for Exporters – “Ten Speed Bumps on the Export Superhighway” 5th in a series of articles on exporting

Posted on 01. Oct, 2011 by Stephan Helgesen in Economy

There are more consultants claiming to be experts in export marketing than in any other sub-specialty of marketing. Unfortunately, many of them have never lived or worked overseas or even speak another language.  Their wisdom comes from college textbooks and courses on marketing theory.  Many have never met a payroll or owned a small business. With all this second-hand wisdom, it’s easy to understand the old saying, “A man who borrows his opinions can seldom repay his debts.”

Setting that aside, why export?  Isn’t it better to be satisfied with expanding your sales in the U.S.? The short answer may be ‘yes,’ but the smart money says ‘no.’  If you’re not convinced that exporting will help you or you don’t have the capability to export than you probably shouldn’t.  However, if you want to grow your business with export sales and create another revenue stream, then you should most definitely consider it. Before you travel that road, be aware of these ten speed bumps on the export superhighway.

Speed bump # 1.  Get over your fear of exporting

This is easier said than done, but it can be – and must be – done before you go any further. Ignoring the opportunities inherent in exporting is the same as not doing anything at all. Fear cannot live in an environment of knowledge.  That’s why you must become familiar with the world’s markets and seek the company of experienced exporters and professional consultants.

Speed bump #2.  How do I morph into an exporting company?

One of the big secrets of building a successful exporting company is first building a successful company.  If you are not successful selling domestically, you will probably not be successful selling overseas.  Start by doing an assessment of your company’s strengths. Where are you strongest and weakest?  How can you shore up the weak spots?  Start by calling your key people together from all departments: production, transportation, accounting and marketing.  Tell them you’re considering producing for export markets and that you want their input.  Then listen, carefully.

Speed bump #3.  Should I engage a foreign agent or sell directly to the end-user?

This decision must be based on an evaluation of which foreign market(s) you’ve chosen, prevailing practices for competing products, regulations concerning foreign representatives and your own preferences.  Some companies are capable of selling directly to end-users in faraway countries (Dell Computers, for example), but most small companies need a solution that is less resource-intensive. The choice is yours, but you will need to get good market intelligence before you make it.

Speed bump #4.  How do I choose the right market?

The operative word here is, right.  Anybody can help you choose a market, but choosing the absolute right one is a task best left to someone who knows international markets, intimately.  A good way to narrow your search is through good research.  Find the part of the world where your competition is located or where competitive products are being sold. Get the sales statistics by countries of origin, tariff rates, typical markups, pricing (wholesale and retail),  agents’ commissions, and any/all government regulations concerning product certification and testing before you make up your mind to pursue that market.

Speed bump #5.  No plan is a bad plan.

If you don’t know where you’re going, any road will take you there, just like a company without a good plan is a surefire recipe for disaster. Do yourself a favor and make a plan by combining your research with information on a few, likely, target markets and figure out your overseas costs for sales & marketing (new labeling, sales literature and advertising), shipping, distribution, dealer support, commissions and fees.  Add in your desired net profit margin, and see if your price matches your competitors’.  If it doesn’t, you better have a superior product with an obvious competitive advantage or you’ll need to rethink your costs.

Speed bump #6.  A banker in time saves nine.

Before you go any further with your export plan, do something everyone should do and show it to your banker.  Get his/her opinion on your intentions.  This will do three things:

1.) it will show that you are a serious business customer; 2.) it will reveal how astute your banker is to the ways of exporting, and 3.) it will legitimize your efforts with your stakeholders. Be ready for some good questions, however, especially if your banker is interested in your plan.  Banks can also be helpful with letters of credit and with other alternative financing opportunities, so it is wise to include them in your thinking early on.

Speed bump #7.  Take a deep breath in the USA and exhale overseas.

If you have the money and the time, try to schedule a visit to your chosen market, but before you go, gather your product information (and samples, if possible) and take them with you. Know why you’re going (to gather additional market research; to scout retail or distribution centers; to meet with U.S. Embassy Commercial Officers or to interview potential agents, just to name a few).

Speed bump #8.  A contract is a contract, or is it?

You’ve made your trip and checked out the market. You’ve observed how business is done, and you’ve chosen a likely agent.  Now is the time to formalize the relationship.  Your potential agent has suggested that he prepare a sample agreement, and you agree.  Three weeks later, you get an envelope with a thick sheaf of papers.  On the last page, the agent has neatly noted where you can sign.  Do you?  Of course not, not before your lawyer sees it.  Fortunately, you obtained a sample agent’s agreement from the local American Chamber of Commerce and one from the host country’s Agents Association, so you are prepared.  You pack them up along with the agent’s suggested contract and send them off to your lawyer. Good thing, too, because two weeks later, you get it back filled with red lines and suggestions in the margins.  You have just been saved from making a big (but common) mistake, trusting too much too soon.

Speed bump #9.  Cultural sensitivity isn’t born. It’s bred.

Cultural sensitivity is necessary for all exporters, whether you want to walk the overseas corridors of power, sit in their boardrooms or occupy space on their retail shelves.  Cultural sensitivity is an art and a science, and while it’s not learned overnight, anyone can master the basics after a few lessons from a professional.  Once you’ve learned how to be culturally sensitive in your market (this is more than just ‘political correctness’ as we know it in the U.S.), you will have prepared yourself to take the next important steps on the export superhighway!

Speed bump #10.  Communication, communication, communication

Nothing can replace good communication except more of the same.  Successful exporters must not only know what to say, but how to say it to a wide variety of audiences: sales representatives, agents, distributors, store owners, customers, government officials, consumer groups, the media, etc.  Sometimes your messages can be crafted in English. That’s the good news.  The bad news is that their English is not always our English.  It can be the Australians’, the British’, the Canadians’, the Indians’ or others who have English as one of their principal languages.  Often, messages will need to be translated into foreign languages.  This is where the services of a truly bi-lingual professional marketing person with experience in the chosen country are invaluable.

While we’re on the subject of communication, please remember to respond to all foreign inquiries that cross your desk.  In my 25 years of working with foreign companies, the most common complaint about American businesses was, “They never respond to my inquiries.  Finally, after two or three tries, we gave up.” That, my friends, is one of the reasons we have a trade deficit.

A final thought

Remember, speed bumps are there for a reason.  They give us time to look around.  By slowing down, we become more observant, and these observations help us form new opinions of the neighborhood and the people who live there.  And that’s something that’s good for all of us whether the street is in New Delhi, New Mexico or anywhere in between.

Submitted by Stephan Helgesen who spent 20 years as an American diplomat working overseas helping American companies become successful in foreign markets. He is now the Honorary Consul for Germany in New Mexico and CEO of Second Opinion Marketing & Communications, an  export consultancy. He can be reached at helgesen@2ndopinionmarketing.com

Copyright © 2011 Second Opinion Marketing & Communications

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