Director,
T.E.(Terry)
Manning,
Schoener 50,
1771 ED
Wieringerwerf,
The Netherlands.
Tel:
0031-227-604128
Homepage:
http://www.flowman.nl
E-mail:
(nameatendofline)@xs4all.nl : bakensverzet
and
"Money is not
the key that opens the gates of the market but the bolt that bars them"
Gesell, Silvio The
Natural Economic Order
Revised English edition,
Peter Owen,
“Poverty is created scarcity”
Wahu Kaara, point 8 of the Global Call to Action Against Poverty, 58th
annual NGO Conference, United Nations,
Purchases in formal money of capital goods for production purposes will
normally need to be imported into the country where the project area is
situated.
The
first series of such purchases is usually made with the original loan funds.
Since the original loan funds are made available in Euro or other leading
international currency, and converted into the local currency for the purposes
of the project, their re-conversion where necessary from the local currency
into the international currency should not pose a problem.
The
amount of capital goods needed for local productivity increase under recycled
micro-loans could, however, amount to several times (5 or 6 times or more) the
amount of the original interest-free loan expressed in foreign currency.
A
condition for the granting of an interest-free loan under the Model is,
normally, that the beneficiary be able initially to sell some of the goods or
services in question outside the project area for formal money to enable him to
repay the loan. The beneficiary therefore exports the goods or services outside
the project area for formal local currency, but not necessarily outside the
national borders. Since capital goods may often need to be imported into the
country where the project area is situated, a situation of financial leakage of
formal national currency occurs for the purpose of buying the foreign currency
necessary for the purchase of new capital goods for production purposes. This
financial leakage is not desirable but it may in part be offset by the increase
of local production tending towards a reduction in the need for imported goods.
The leakage can only be completely avoided where the project area succeeds with
time to export directly outside national boundaries enough of its production to
earn enough foreign currency to cover the costs of the imported goods. It is
unlikely this be possible at least in the early phases of a project
application. The local government must therefore when it approves a project
application under the Model accept that this (temporary) financial leakage is
going to take place during the initial stages of the project. Its Finance
Ministry must ensure flexibility in granting leave to convert local formal
money into the foreign currency necessary for the purchase of the capital goods.
Failure of the Ministry to do so would in practice lead to serious delays in
project execution. The more often the project funds are recycled the more
rapidly the project area will develop. The Project Coordinator, on the other
hand, is bound to endeavour to reduce the financial leakage of formal currency
in question by purchasing capital equipment, where available, which has already
been imported and is available on the local market.
The following schedule will
produce a zero national import/export balance for the project during its
execution and a long-term ongoing credit balance:
First two (executive) years : zero franchise
Third year, at least 35% of imported value exported
Fourth year, at least 50% of imported value exported
Fifth year, at least 75% of imported value exported
Sixth year, at least 100% of imported value exported
Seventh year, at least 125% of imported value exported
Eight and following years, at least 150% of imported value exported
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