Friday, September 24, 2010

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You Call This a Private Sector?

Friday, September 24, 2010
We don't tend to agree with the Cato Institute on Cuba policy, but this analysis is right-on-point:
Cuban Government Will Choke the Nascent Private Sector
Following the announcement of massive layoffs in the public sector, the Cuban government published today new guidelines that will allow private employment in 178 economic activities. Among the newly authorized private occupations are masseurs, clowns, shoemakers, locksmiths, and gardeners.

However, these new entrepreneurs will face a few hurdles before enjoying the benefits of their own work. Not only must they get a government license in order to operate (according to official sources the number of permits will be capped at 250,000), but they will also have to pay high taxes. A leaked document from the Communist Party says that small businesses will pay between 10 to 40 percent of their gross income in taxes. On top of that, they will have to contribute 25 percent of their incomes to social security.

Don't expect a thriving private sector in Cuba any time soon.
S: Capitol Hill Cubans

Cuba details brave new world of private enterprise

People speak in front of a soft drinks stall on a street in Havana, Cuba, Wednesday, Sept. 22, 2010. (AP Photo/Franklin Reyes) AP – People speak in front of a soft drinks stall on a street in Havana, Cuba, Wednesday, Sept. 22, 2010. …
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HAVANA – Cuba's communist leaders began laying out the details of their drive to create more free enterprise on the island on Friday, mapping out a brave new world of bosses and employees, personal accountants and a dizzying number of small-time businesses.
The plans — laid out in a three-page spread in the Communist Party-daily Granma — follow last week's announcement that the government will lay off 500,000 workers by the end of March, the biggest change in this country's economic system since the early 1990s.
For the first time, Cubans in 83 private activities will be allowed to employ people other than their relatives. The Central Bank is even studying ways to get small loans into the hands of the country's new entrepreneurs, according to the newspaper, which cited Economy Minister Marino Murillo Jorge and a vice-minister of labor and social security, Admi Valhuerdi Cepero.
"The decision to loosen the rules on private employment is one of the steps the country has taken in the redesign of its economic policies to increase production levels and efficiency," Granma reported.
Cubans authorized to live overseas — though apparently not exiles — will be able to take part in the economic changes by naming a representative on the island who can help them rent the cars they left behind.
It also loosens rules on Cubans who want to rent their homes out to travelers, saying they no longer have to live there themselves and can hire staff. That creates the possibility of posh bed and breakfasts, instead of the threadbare boarding houses that exist now.
Granma is the voice of the Communist Party and one of the principal ways the government communicates plans with the people. The paper promised more details in coming days, saying that the expanded private enterprise would be "another opportunity, under the watchful eye of the state" to "improve the quality of life of Cubans."
The new openings are sure to be welcome in a country where young people have been clamoring for more opportunities for years, but they will also create tension and upheaval.
Marley Martinez, 22, is one of those who says she is already weighing her options. She's a state-trained accountant but is studying to become a hair dresser and hopes to open her own shop. Barber is No. 77 on Granma's list of self-employment jobs.
"It's not really a dream, but it's something I want to do and feel I need to do," said Martinez, who was strolling through a crowded Havana shopping center. "What the people need are more economic freedoms, the ability to work for themselves."
Currently, the state dominates nearly every aspect of the Cuban economy, employing at least 84 percent of the work force and paying an average of $20 a month. In return, islanders are guaranteed free education and health care, as well as nearly free housing, transportation and basic food.
President Raul Castro has said the cash-strapped government can no longer afford such generous subsidies and that he wants to modernize Cuba's economy, without abandoning socialism. The goal of the reforms is to lower the government payroll while simultaneously boosting state revenue by charging private enterprise taxes.
Granma said those taking advantage of the new opportunities would have to not only pay personal income tax, but also sales and payroll taxes — as well as contribute to social security. Analysts say the success of the program depends largely on the government's ability to collect those revenues, no small feat in an economy that is overwhelmingly cash based.
A vibrant black market already exists in Cuba offering many of the services the government hopes to legitimize, and nobody involved pays income or sales tax.
The article tries to allay any fears that the country is embracing free-market capitalism, saying that the changes will always be "faithful to the socialist principles our constitution demands."
Still the changes outlined over the past two weeks are sure to expand the breach between haves and have-nots in a land that has spent 50 years striving for an egalitarian utopia.
In all, some 178 private activities will be allowed and expanded, though only seven of those are entirely new — including accountants, bathroom attendants, tutors and fruit vendors. One entire page of the newspaper was devoted to listing jobs that will qualify for self-employment. The list has everything from floral wreath arrangers to animal trainers to interior decorators.
The rules, which are set to go into effect next month, will also allow for a great expansion of private restaurants — called paladares — which will be able to serve up to 20 people and expand their menus to include higher-priced items like beef and lobster.
Previously, government rules limited them to 12 seats and placed restrictions on what their menus could offer, though most establishments blatantly violated the rules.
Editor's Note: Associated Press reporter Will Weissert contributed to this report.

Japan to release Chinese boat captain amid dispute

Zhan Qixiong AP – File - In this Sept. 8, 2010 file photo, Zhan Qixiong, center, the 41-year-old Chinese captain of a Chinese …
TOKYO – Japanese prosecutors decided Friday to release a Chinese fishing boat captain involved in a collision near disputed islands, following intense pressure from China in the worst spat between the Asian neighbors in years.
The move will likely ease the escalating tensions sparked when Japan arrested the captain earlier this month after his trawler collided with two Japanese patrol boats near islands in the East China Sea claimed by both countries.
Beijing suspended ministerial-level dialogue with Tokyo and postponed talks on developing disputed undersea gas fields. Chinese Premier Wen Jiabao earlier this week sternly threatened "further action" against Japan if it did not immediately release the captain.
On Thursday, Beijing said it was investigating four Japanese suspected of illegally filming military targets and entering a military zone without authorization. Also, there were reports China had suspended Japan-bound shipments of rare earth metals critical in advanced manufacturing.
The captain's arrest, and the territorial dispute behind it, stirred nationalistic sentiment in China and Japan and threatened to undermine business ties between their intertwined economies — the world's second- and third-largest.
It is also one of several territorial spats straining China's ties with its Asian neighbors while its increasingly powerful navy enforces claims in disputed waters. Washington has signaled its intention to protect its interests in those waters and to keep them open for commerce, drawing China's irritation by urging it to resolve the disputes.
Prosecutors in Okinawa, southern Japan, where the 41-year-old captain, Zhan Qixiong, has been in custody for more than two weeks, said they would let him go partly because they did not perceive any premeditated intent to damage the Japanese coast guard boats — but also for diplomatic reasons.
"We have decided that further investigation while keeping the captain in custody would not be appropriate, considering the impact on the people of our country, as well as the Japan-China relations in the future," said Toru Suzuki of the Naha, Okinawa, prosecutors office.
Authorities in Okinawa also said they wouldn't officially close the case — leaving room for some ambiguity that would allow both countries to save face.
"The Japanese government had to balance the Japanese people's feelings about the territorial issue and those of China and Taiwan and seek a win-win scenario which is to be ambiguous," said Takehiko Yamamoto, an international politics professor at Waseda University in Tokyo.
But others, including Tokyo's outspoken governor, Shintaro Ishihara, said Japan had caved in to Chinese pressure. "The government made an incredibly wrong decision in this case," he said.
Comments left on popular Japanese online communities were largely critical of the move. One Tweet said it was like "admitting Japan is wrong!"
Japanese news reports said Zhan would likely be released later Friday. Chinese Foreign Ministry spokeswoman Jiang Yu said China would send a charter flight back to bring him home.
"I reiterate that what Japan did to the Chinese boat captain in its so-called judicial proceedings were illegal and invalid," Jiang said in a statement posted on the ministry's website.
Zhan was arrested on Sept. 8 after the collision off the uninhabited chain of islands call Diaoyu or Diaoyutai in Chinese and Senkaku in Japanese. Located 120 miles (190 kilometers) east of Taiwan, the islands are controlled by Japan, but also claimed by Taiwan and China.
Prosecutors had detained and questioned the captain while they decided whether to press charges. His 14-member crew and ship were returned to China.

At a regular press conference, Chief Cabinet Secretary Yoshito Sengoku said that Tokyo had no input on the prosecutors' decision, and that they respected it as such.
But he also said he hoped that the two countries could quickly put the incident behind them and work at repairing relations.
"It is a fact that Japan-China relations had the potential, and were showing indications, of worsening over this issue," he said.
Washington has urged China to resolve separate, long-running territorial disputes with its Southeast Asian neighbors involving the Spratleys and other islands in the South China Sea. President Barack Obama was expected to sign a communique on the issue with Southeast Asian leaders later Friday in New York. Beijing has accused Washington of interfering in an Asian issue.
Liu Jiangyong, a professor with Institute of International Studies at Tsinghua University in Beijing, called the release a "wise decision" by the Japanese government that could even lead to stronger ties.
"The decision may become a turning point for the improvement of relations between the countries, and both sides should grasp the opportunity to get relations back to the correct track," Liu said.
But new wrinkles this week could complicate matters.
Fujita Corp., a Japanese construction company, confirmed Friday that four of its Japanese employees were being questioned by Chinese authorities. The company said the men traveled to Hebei province on Sept. 20 to gather information about the area, and were working to prepare a bid for a project to dispose of chemical weapons abandoned in China by the Japanese military during World War II.
Chinese authorities accuse the men of entering a military zone without authorization.
Meanwhile, Japanese trading company officials said that starting Tuesday, China had halted exports to Japan of rare earth elements, which are essential for making superconductors, computers, hybrid electric cars and other high-tech products. Japan imports 50 percent of China's rare earth shipments.
China's Trade Ministry denied reports that Beijing is tightening curbs on exports of rare earths to Japan, but Japan's trade minister, Akihiro Ohata, said he has "information" that China's exports to some Japanese trading houses have been stopped. He said China's government has not informed Tokyo of such a move.
Associated Press writers Mari Yamaguchi, Shino Yuasa and Jay Alabaster in Tokyo and Alexa Olesen and Anita Chang in Beijing contributed to this report.