International Countertrade With A Social Purpose

                                        http://www.boeing.com/boeing/history/narrative/n080mdc.page

Global trader with a social cause in the making

By Melvin J. Howard

Circumstance has away of preparing you for life without you knowing it. For example when I was in College I got a job that was arranged by my alumni department head. It was working for a major defense contractor in their countertrade division. Little did I know at the time it would play a major roll in my life now? Countertrade is a term used for parallel business transactions, linking sellers and buyers in reciprocal commitments, which usually lie outside the realm of typical monetary trade. Some of the common forms of countertrade transactions include barter, counterpurchase, compensation, buyback, clearing arrangements, offset and switch trading. More than 10% of world trade today involves some form of countertrade.The World Trade Organization estimates that 15% or $8.43 billion  of the $5.62 trillion in international trade is conducted on a non-cash basis.

My mentor was a great teacher he was a Vice President of the defence firm I was working for. I was learning first hand how to do world trade not in the classroom but on the front lines. He took me under his wings and taught me the most basic and the most complicated forms of Trade.  Offsets–an umbrella term for a broad range of industrial and commercial compensation practices required of foreign suppliers under primarily government agency of state-owned enterprise acquisitions–were made a common requirement for the procurement of either military (e.g., fighter aircraft) or high-cost civilian hardware (e.g., commercial aircraft). Both defense and non-military offsets may entail overseas co-production of the procured item, as well as other economically beneficial transfers to the importing country that are not related to the original export. To assist their exporters some industrialized country governments also promoted countertrade under government agreements. For example, the French Ministry of Agriculture signed in 1989 an agreement with the USSR Council of Ministers which provided for exchanges of Soviet commodities for French agricultural and food processing equipment and technologies. Other Western governments, such as those of the United States, Canada, Belgium, Holland, the United Kingdom, and Italy, established special countertrade service units within public agencies to provide countertrade-related advisory assistance to their exporters. The French Government has supported instead the formation of a separate countertrade assistance entity in the private sector. The Swedish Government was until 1990 a major stockholder, through interests by the Swedish Investment Bank, in a private sector company involved in countertrade. Now with trade agreements like NAFTA in 1994, which integrate regional trade, based on free market principles some countertrade has abated somewhat.

International countertrade practices are now increasingly associated with bidding on major defense and non-military government procurement contracts and with project financing–a contract-based, off-balance-sheet finance technique whereby revenues generated from the output of the financed project are directly allocated to service outstanding debt and principal. A variation of the countertrade buy-back contract which links foreign contractors’ repayments to the output products of the production capacity they supplied, project financing relies instead mainly on contractual recourse to the project’s revenue streams. (According to the World Bank, developing countries are now spending around $200 billion a year on new infrastructure investment, one-fifth of their total investment.) High procurement costs and tighter budgets have prompted many emerging country governments in the 1990s to issue new civilian offset regulations (e.g., United Arab Emirates, Kuwait). Civil offset requirements, therefore, are increasingly acquiring a financing rationale in these markets. In a global environment of budgetary constraints, the ability of suppliers to meet offset requirements and/or to provide their clients with financial packages that can best those of competing bidders is a major competitive edge.

International trade in medical services will become increasingly more important. For ensuring quality, well-known medical facilities are likely to invest (commercial presence) in countries. Likely to be the destination of “consumption abroad” mode. Likely to be the supplier of patients mainly due to “poor quality” of medical care rather than the cost of care. International migration of foreign medical graduates will likely to be associated with commercial presence rather than traditional migration. New migration pattern will further encourage adoption of consumption abroad approach for reducing overall healthcare cost in both developed and low-income developing countries. Further expansion of consumption abroad will discourage purchase of expensive health insurance plans. In high medical care cost countries; international trade in health services will encourage purchase of catastrophic insurance plans. Health expenditure in the world in 2005 was about $4.8 trillion ($60 trillion was the global income) $4.0 trillion in OECD countries,  $800 billion in the remaining 160 countries of the world. Globalization has increased trading in health care services. Cost of international communication, travel has declined. Time lag has declined significantly and for electronic transfer of information, it has become almost zero (origin to destination). Cost of obtaining services of similar quality varies significantly among developing countries as well as between developing and developed countries of the world. There are types of medical care services that are extremely time sensitive. Waiting will rapidly reduce the benefit of treatment.

 The benefit function declines rapidly. If the time lag between the onset of the condition and reservation benefit level is shorter than the time needed to travel to a country, the service will be demanded locally. Worldwide, 1.3 billion people do not have access to effective and affordable health care. Low- and middle-income countries bear 93% of the world's disease burden, yet account for only 18% of world income and 11% of global health spending. What governance structures are necessary to encourage the right mix of public and private health care provision? What regulatory framework is needed to induce businesses to provide insurance, provision and finance for health in poor countries? How can the fruits of medical knowledge and technologies be shared among rich and poor countries without destroying incentives to generate more knowledge? What forms of international cooperation are conducive to the finance of health systems in developing countries? What international institutions are required to make health care for the poor an attractive opportunity for business? One thing is clear groups or individuals who think health care is static or promote the status-quo are sticking their heads in the sand. Recent economic conditions highlight the need for new sources of capital to be brought to bear on social problems.

At the heart of the social enterprise movement is the ongoing challenge of accessing investment capital for socially responsible purposes.  Acquiring start-up capital is a common issue for many nonprofits. It's exacerbated by federal tax laws that restrict nonprofits from accessing traditional forms of equity, such as venture capital and, sometimes, commercial debt. For the most part, nonprofits must rely on private foundation grants, government support, and, for some, earned income such as fees for services. To subsidize their earned income, some nonprofits have set up separate social enterprise business sidelines. The for-profit sector faces its own challenges in funding charitable activities because federal tax laws generally restrict private business entities from accessing foundation grants and government assistance. In addition, for-profit investors expect market-rate returns and maximized profits. Their expectations don't align well with social mission-focused entities, which need "patient capital" and typically have slower, more modest growth.

There is a growing body of thought that new business models and possibly new tax incentives or structures are needed to effectively bridge the "sector" gap. These new models would eliminate the need for social entrepreneurs to either choose between the for-profit and nonprofit business models or create and manage both. One such model, could be a form of business that blends attributes of nonprofit and for-profit organizations in order to promote investment in socially responsible objectives. “It’s time we utilize innovative ways to stimulate the economy and create jobs we need to spur the growth of socially responsible business by simplifying partnerships between nonprofit foundations and for-profit investors. Hybrid financial tools can generate a vast pool of investment funds needed to develop companies dedicated to the public good.

There are major lessons learned from the global greed era we are leaving behind to a new era which creates an opportunity for the investment of private capital to further social purposes.

MELVIN J. HOWARD FOUNDATION INC.

The Washington Award Program has chosen Melvin J Howard Foundation, Inc for the 2013 Washington Awards in the Non-Profit Organizations classification.

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Mental Health Of Success On The Couch

Paying That Price For Success

By Melvin J. Howard

The first rule of paying the price is a very important rule, and, indeed, possibly covers most of the subject matter. Before you make any formal resolutions whatsoever, make certain that you genuinely desire to carry it out. Let there be no doubt that the end you have in view is so desirable or advantageous that it will outweigh all desires and advantages or all other ends that are likely to have to be foregone or abandoned in order to attain it. In short, be sure you are willing to pay the price. This rule is the corner-stone this is of great importance. There is a price for everything for doing and not doing. Paying the price is characteristic and a passionate desire to succeed, a desire so strong and overbearing that it amounts to a demand, and that, in the strictly economic sense to which I means willingness to pay the price. 

The price is first of all singleness of purpose and concentration of effort. Nearly all of us, at school, have thought that we should someday like to be President of the United States. But not all of us have made it a point to study the lives of past presidents to see how they did it. Not all of us have taken a law course with that special insight like constitutional law. Not all of us have refused tempting commercial opportunities for certain poverty and struggle for a time to gain an end in which the mathematical chances were ridiculously and overwhelmingly against us. Not all of us have kept desperately fanning the embers of dissatisfaction, fanning them into a constant white-hot flame. With most of us the early fire dies; the embers fade and grow cool. We reach as high a level as we ever seriously hope to reach. We have spasms of dissatisfaction with our position in the world, but not sufficient dissatisfaction to make us work our way out of the rut to a higher position. We have moments of longing for the mountain tops, but not enough longing to make us willing to give up something for them. Strolling in the valleys is so much more pleasant than climbing.

And singleness of purpose demands more sacrifices than mere industry. It involves giving up all pleasures that interfere with it. They may be quite innocent pleasures, their sole offense being that they occupy time. It involves making oneself narrow; one cannot be a success in any one line if one dissipates one’s energies in a number of activities—unless, of course, one be a versatile genius whose energies overflow, like Benjamin Franklin, Leonardo da Vinci, or Goethe—and such instances are so rare that they may be ignored. Let there be no mistake. I do not mean to discourage efforts to become a Success. I mean merely to indicate that the goal has a price. I want you merely to ask yourself whether you are willing to pay that price; to ask yourself candidly how far you want to go and how much you are willing to pay; for if you do not ask yourself now, before you make your Success resolutions, you are likely to ask yourself later on. 

As you see obstacles and disappointments pile up, you are apt to begin wondering whether the game is worth the pain. And if you decide to give up then, you will have broken your early resolution, with all the undermining of self-confidence and faith in your will which that involves. 

Once you have made your decision, having coldly decided that is what you want and that you are willing to pay the price, your decision is forever beyond dispute. You should never ask yourself again whether the other course is possible; whether it is really worth while staying home to study for a specified number of evenings each week; whether a man who has resolved to stop drinking can really do so suddenly without blowing to pieces; whether a man in a moderate position, without so many responsibilities and burdens on his shoulders, doesn’t really get just as much enjoyment out of life as the Success. Can I do it a person that comes from Hoboken anywhere can actually accomplish what he sets out to do. Those questions are forever closed; you have asked them before and have decided them. You will know that thoughts determine action, and to control your actions you will begin by controlling your thoughts. You will vivify all the advantages that will come from carrying out your resolution. You will paint them in glowing colors.

You will dwell on them constantly. The disadvantages you will ignore. They are disadvantages only to fools; a wise man does not think them so. Concentrate on the positive side; avoid the negative at all costs friends, family anyone that would dampen your spirit. Picture yourself already a success. I have come across many people in my life that want the easy life the glamorous life the rich life. But they are never willing to pay the price. Each successful person knows what I am talking about they have paid the price. What looks to the outside world of easy success is an illusion the price these individuals paid could be number of things that we will never know about. 

Medical Debt And Your Credit Score

Medical Credit Score

Til Debt Do Us Part #3

By Melvin J. Howard

Do ever wonder why you have a low credit score or why you never seem to qualify for the lowest interest rates on home, car, or other loans, the problem may be medical debt. This is true even if you paid an overdue medical bill. The Federal Reserve has shown that more than half of all collection accounts that negatively impact credit reports are medical debt. This is a result of the fact that health care costs are on the rise and tens of millions are uninsured. But it is also because medical debt is treated differently from other kinds of debt. Private health insurance reimbursement is incredibly cumbersome. Different benefits are often covered by different companies and at different rates, leading to a lengthy, circuitous billing process that often leaves patients holding the bag. If you have ever received a medical bill that you didn’t understand or that you thought your insurance was supposed to cover, you have been caught up in this system. If you have ever received a letter from a health care provider stamped with the notice “This Is Not A Bill,” or if you have signed a form at a doctor’s office promising to pay anything your insurance fails to cover, you have been an unwitting victim in the tangled web of medical billing, an industry that thrives on patient and health care provider confusion.

One study found that nearly one-third of respondents let a medical bill go to a collection agency because they did not understand the bill or explanation of benefits statement. Another study estimated 14 million American adults said that a medical bill was sent to a collection agency because of a billing mistake.

Confusion keeps the medical collections industry turning. It’s hard not to think that billing “mistakes” may not be mistakes at all but part of an intentional strategy to keep patients in the dark and in the red. In addition to patient confusion, medical debt is more likely to end up in collection because hospitals routinely sell medical debt to debt collectors after 60-90 days of nonpayment, far less than the customary 180 days for other kinds of debt. Health care providers rarely report paid medical bills to the credit reporting agencies. So, even if you are billed in error, your health care provider may send your bill to a collection agency before you can dispute the charge. Once in default, a medical debt stays on a credit report for up to 7 years, even if you pay the bill. Research by the Commonwealth Fund shows that, in 2010, 9.2 million people wound up in default on a medical bill because of a billing mistake.

These mistakes have serious consequences. A single paid medical bill can lower a consumer credit score by as many as 80 points. That means you will pay a higher interest rate for almost anything else you want to buy on credit, including a home or a car. The fact that a relatively small medical bill can end up costing thousands in interest charges down the line demonstrates the obscene power of the credit rating agencies. No other companies have more power over the American consumer than the top three credit reporting agencies, Equifax, TransUnion, and Experian.

If patients are powerless, so are many health care providers. It’s important to note that your doctor may be just as confused as you are. Talk to any health care worker around the country, and they tell you that they are as frustrated as patients when it comes to medical billing. Why do insurance companies and ratings agencies have so much power over our lives? Why do we live in such perpetual confusion?

The Medical Debt Relief Act attempts to prohibit credit reporting agencies from listing medical debts on credit scores. Yet, even this minor reform has little chance of passing because the credit rating agencies and insurance companies are a powerful lobby in Washington. And even if the MDRA were to make it through the Senate, it only applies to paid medical bills. Indeed, the evidence actually indicates that if we don't act things will get worse for patients and debtors before they get better. FICO has begun developing a special ratings system to rank potential patients on how likely they are to pay their medical bills. Like having a barcode tattooed on your forehead, we could be looking at a brave new world in which your credit rating determines not only whether you can obtain a credit card but whether you receive medical care when you get sick.