Reflections on travels to Cuba, Ukraine, Serbia, Macedonia, Turkey, Montenegro and Kazakhstan
I have just returned from a visit to all the countries cited above for work, consulting and lecturing. One exception, Cuba. That was a present from my wife for my 76th birthday. But I came away from Cuba with observations and perceptions that I want to share with you. To say that the trip, all of it, was a learning experience for me would be an understatement.
Incredible opportunities for investment. The island has a long coast- line (it’s an island, after all) and is sparsely populated. There is a great deal of land on which to build…new factories, high tech enterprises and resorts. The Bahamas fear the time when US sanctions are lifted. They will then have to face enormous competition from Cuba.
The reasons that underlie the fantastic opportunities for investment are quite clear and self evident. The Cuban people are well educated, but poorly paid. They are industrious by nature. There is no corruption to speak of. And its geographic location, a one hour flight from Miami, is like a gift from God.
As we were driving along the coast of Havana I saw dilapidated looking buildings. It was startling given the magical views. How can this be, I exclaimed. It felt like I was driving along Copacabana in Brazil, where the real estate prices are in the millions.
Under Fidel Castro, the government nationalized all property. Rented it to families, yes, but only the rooms in the building. The actual building itself is still owned and supposedly managed by the government.
The result is that inside the building the apartments are well taken care of, while the facade, the entryway and the stairs are all in total disrepair. What an opportunity to buy the buildings and renovate them…Don’t say, “but…” The reality is that it is possible to do just that now. The government is willing to sell.
I said earlier that the Cubans are industrious. You can see that at every street corner. They dress in local-color clothing just so tourists can take pictures with them, for a fee. They sell postcards. Paintings. Anything and everything.
It was forbidden in the past to engage in private enterprise, but the government has relaxed this limitation. Today anyone who wants can open a restaurant… in her home.
And what happened? Restaurants sprouted like mushrooms after the rain. Wherever you look there is a restaurant in the garden, in the living room…But you are not allowed to open a second restaurant. No chains. In other words it is just the beginning of capitalism. But it is coming…
I believe the USA is making a major mistake in holding onto the economic blockade of Cuba. Anyone with a foreign passport can invest in Cuba. Except those with American passports. Not that the Cubans forbid it. The US government forbids it.
So what is happening? Entrepreneurs from everywhere are rushing in. They see the great opportunity, the virgin territory in front of them. The Israeli are there with a major commercial real estate development plan. Investors from their nations are buying up prime real estate and developing their own businesses in Cuba. Only the USA is left behind, missing a great window of opportunity. And it’s all in plain view…just 90 miles away.
We visited the factory where the premier Cuban cigars are made. It was a typical sweat shop factory. People sitting in rows of tables rolling cigars. There is a quota spelling out how many cigars they need to produce each day. Very boring job. Repetitive. Manual. How do they keep the workers interested?
Here I found a very original solution. The factory has a reader. He or she reads the workers novels, poems, stories as they roll those cigars.
Now these are not any kind of stories. They are the classics. When we were there a woman was reading the Count of Monte Cristo. I was told those workers knew most of the classical literature quite well, no matter how many years of school they had completed. Working in the factory for years, day in day out, someone reading them a wonderful book, there is a lot of education going on.
The factory is owned by the government, but it is run like any other for- profit enterprise.
Whoever has the opportunity to visit Cuba, I urge you, go NOW. The place is changing rapidly and you might miss the opportunity of your life. It is not every day that we can see a country bypassing many of the problems countries in transition from communism are suffering: corruption, economic stagnation and dissatisfaction on the part of the people. In general, not present here. In Cuba I do not see the apathetic look on people’s face that I encounter in most countries in transition.
In those other countries trying to manage change there is often a sense of despair. You can see it in the streets, in the shops. In the slope of shoulders that look beaten. Apathy. Loss of hope. You know that corruption is rampant. In Ukraine, Serbia, Bosnia, Russia, those that can leave, emigrate. The best minds. The result is that those nations face a shortage of managerial resources and the economy suffers. Not in Cuba. I have not seen as many smiling faces in other countries as I saw in Cuba. And people are pleasant; they try to please. Not as many are desperate to leave anymore.
Don’t misunderstand. The population is very poor. Poorer than the people in Serbia, for example. So why the smiles? Because in Serbia there is frustration with the government. In Cuba the trust link has not been severed. The Cuban government is not corrupt. The political leaders have a vision and an ideology. In reality they have taken many wrong turns and created an economic disaster. However, on paper they look like their intentions are pure and in the people’s interest. So ironically, the populace suffers less.
As long as people feel safe from their government, even if they are poor, they still have energy and a willingness to smile. When the government abuses them, it is like losing trust in your own parents, the smiles quickly are wiped from people’s faces. Apathy, pain and surrendering to one’s economic condition prevails…. Unless of course one can escape the country.
Turkey is blooming if not booming. You can feel it in the supermarkets, in the way the people rush to work, in the bumper to bumper car traffic, in the construction of new buildings everywhere.
You can feel it in the new, incredibly modern airport, in the business lounge that rivals the one in Dubai in its opulence, and in the generosity with which food is offered. And Turkish Airlines justifiably was named the best European airline for the year 2012. Its business class rivals the service and comfort of first class on, say, Lufthansa.
The debate in the Turkish newspapers is all about the Prime Minister’s initiative to forbid co-habitation of males and females in the same building at universities. The press is agog: will his demand be accepted or not?
The whole subject is bogus. There are no cohabited buildings at universities. So what is the debate all about? People believe he is testing the waters to prohibit coeducation all together.
The Prime Minister, Endrogan, is working diligently it seems to me to make Turkey a modern Islamic state. Not necessarily run by the Sharia, but following Islamic behavioral rules based on Islamic values of modesty; and maintaining the role of women as home-makers whose role is to stay at home and take care of the family, instead of becoming a career women.
Turkey is thus going through a transition: it is moving from being exclusively a secular state where religion is under the control of secular forces to one where religious values prevail within the state.
It hurts to listen to people describe what is going on here. In Ukraine. Corruption is out in the open. The government does not even bother to hide its practices or outcomes.
Here is what some bankers told me.
An Italian bank bought a local bank for over a billion dollars. Invested another billion. Gave loans to corporations, but cannot collect those loans because the court system is corrupt. Disgusted, the Italians are selling the bank at five cents on the dollar. Almost a two billion dollar loss. And who is buying the bank? A member of the Ukraine President’s family.
Another story. Government deposits money in a bank. The bank gives loans to companies owned by government officials. The companies refuse to pay back the loans. The bank goes bankrupt. Government money ends up in those companies free and clear.
How do you like that?
Anyone who can, is trying to get his or her assets out of the country. Whoever can leave, tries to find a way out.
It is most unfortunate that the country of my birth is actually going bankrupt. I read in the newspapers that the government is planning to lease Vojvodina, a part of the country that has very productive agriculture, to the Arab Gulf states. The country needs money so leasing a whole region is one way to generate funds. It would be equivalent to the US leasing Mississippi.
Obviously the people of Vojvodina are not too happy about this development. Add to it that Vojvodina is populated by people who also speak Hungarian because the region borders on Hungary and historically it was part of the Austro-Hungarian Empire. I would not be surprised if the people of Vojvodina start requesting a separation from Serbia, much like Kosovo in the 1990’s. If Serbia is not committed to Vojvodina, why should Vojvodina be committed to Serbia?
Another part of Serbia, the Sandjak, populated by Moslems, is making its own noises. It wants more autonomy. This could be a prelude to separation too. The end result is that Serbia might end up being mainly one large city-state called Belgrade.
If I am asked how did Serbia fall to its knees, what in short led to its downfall, my answer is that sadly beyond rampant corruption the cause dates back to KOSOVO. It takes an enormous amount of governmental energy to deal with this separation. Initially it required great financial resources to keep Kosovo as part of Serbia. But the government was insistent on supporting Kosovo…and of course holding onto it. In 1991 I called Kosovo the Serbian gangrene and urged Serbia’s Prime Minister to let it go its separate, ethnic way. The sooner Serbia cuts it off from the main body of the State, I argued, the quicker Serbia will be able to redirect its energies and solve its own problems.
Today Serbia seems ready to surrender a great deal, including many national heritage symbols. The government is in the process of negotiating to sell its sports team Crvena Zvezda (the Red Star) and Partisan to the Arabs. (Imagine USA selling the Giants or the Patriots to the Chinese.)
True it has been done before. Chelsea, the English soccer team, was sold to a Russian oligarch. The world is becoming multi-national in more ways than one…
What a surprise. I had not visited Macedonia in five years, after having a public disagreement with the Prime Minister over a dispute with Greece (I had been consulting with both countries) I decided to keep away from Macedonia. Until things cooled down, I told myself.
What a surprise awaited me.
Billions of dollars, taken as a loan, have been invested in renewing the city of Skopje, the capitol. That means art in the form of sculpture every few yards. Buildings in baroque style all over the center of the city. Large and wide boulevards criss-cross the main avenues. No traffic. And for a reason: taxis are abundant and for two euros one can actually go from one end of the city to another. No reason to drive on your own.
I was impressed with the fiscal policies. The taxes are low. Ten percent on dividends. If profits are reinvested, zero taxes. And personal taxes on salaries is 15 percent, but only on those with a certain upper income. Those with lower salaries, no taxes whatsoever.
Every store must take your money via a credit card. Or if you pay in cash, must provide a receipt. If caught not giving a receipt, the penalties are prohibitive: One month’s average salary for the first offense. Double or triple that for the second offense; and the store is closed for a period of time for a third offense.
No one dares to circumvent the tax system. The penalties are high whereas compliance is not too expensive. The result: no gray economy i.e., people do not avoid paying their taxes (which is not the case in Greece). Tax collection is not an issue.
But the results of this fiscal policy are much more profound than that. Since there is no corruption, and there is law and order, the population feels quite safe and content. The economy is growing. People are satisfied, voting predominantly for the ruling party. In a safe environment, investments pour in from abroad. Macedonia is the most advanced country in the region.
The only complaint I heard is that freedom of speech is limited. The government is harsh and vindictive when it comes to criticism.
I felt that this perceived problem is not a problem at this point in time. To make a transition like this a country needs a strong hand, a hand which is not corrupt and which has a vision. And that is the government of Nikola Gruevski.
The problem is that “a strong hand” which is functional during the transition today, often resists giving up power tomorrow. The result? It becomes dysfunctional. As to Macedonia, we will see.
The interesting point for me was the issue of an earlier name dispute with Greece.
In the years past when consulting for the Prime Minister, I pressed the government to compromise with Greece on the name Macedonia (which the Greeks resented, claiming the name was part of their history and heritage). If Macedonia would agree to a name change, Greece would remove its opposition and its veto of Macedonia to gain admission to NATO and to the European Union. I thought that it was imperative for Macedonia to join EU because of its Albanian minority.
This minority kept to itself. Had its educational institutions in the Albanian language from nursery to University level. And had its own enterprises which were not co-owned with Macedonians. Moreover they were located in Western Macedonia, where most native Macedonians do not live or visit..It was like a state within a state.
My concern in the past was that if and when Albania joined EU or even started negotiations to join, the Macedonian Albanian minority might request separation from Macedonia and seek to affiliate itself with Albania to which they, by language and ethnic affiliation, belong. I thought they would prefer to be in the EU than be in an isolated Macedonia.
This is not the case anymore as I observed in this last visit.
It seems clear (and remarkable) that today Macedonia is doing well. Everywhere you look the big cranes are at work constructing high rise buildings. People look content. And the tax rules are not enforced on the Albanian population, which might have led to friction. Albanians living in Macedonia can still engage in commerce in cash and avoid paying taxes. Moreover, if they want to, they probably can get a second passport from Albania. Many Macedonians (about 40, 000 I was told) did just that by taking out a second citizenship in neighboring Bulgaria. By doing so these Macedonians are now members of the EU.
Thus, the Albanian minority population can have their cake and eat it: the benefits of Macedonia as well as the benefits of Albania and of the EU indirectly. The pressure on Macedonia to join the EU to resolve the nationalistic problem of an Albanian minority has evaporated.
Thus, the pressure to resolve the name issue is becoming a mute point.
Major change. Major release of pressure and stress.
I believe Macedonia will become the regional hub of the Balkans and beyond (A total market of 650 million people).
Such a hub is needed. At one time it was Athens; and before that Beirut. Neither is functioning well today for separate reasons. So global corporations are looking for a city in which to base their regional head- quarters in the Balkans. Skopje is working on providing just that. The whole city is covered by wi fi. Local transportation is easy. Government bureaucracy minimal. Corruption non-existent. Air communication is easy. Skopje airport received the award as the best European airport for a city with two million travelers a year. It is large, modern and very efficient. Because the government subsidizes air transport, many airlines are starting to fly to and from Skopje (One can fly for 50 dollars to London from Skopje).
The government has also invested large sums of money in the arts: there is a national theater and a symphonic hall. In short, Skopje does not feel like a rustic village anymore. It has become a modern, developed European city.
I was impressed and remain so.
I was there for a lecture and did not spend much time in Kazakhstan What I saw impressed me though. A rich country. You can see it from the cars that speed across the roads. Modern, expensive cars. Lots of late model Mercedes. High rises with modern architecture wherever you look.
It is a rich country, rich in oil with a stable, although dictatorial, government.
If there is any correlation, my observation is that the countries that are doing well are countries where a strong leader (somewhat dictatorial) runs the government, but is not corrupt. Like Singapore. And Kazakhstan and Macedonia.
My assumption is derived from the way people behave, dress, and respond to my questions.
Where I noticed apathy, pollution, a frustrated and depressed population, was in the so called democratic, but corrupt, countries like Ukraine and Serbia.
I do not believe Democracy is the most desirable system for a country in the beginning of its life cycle. Benevolent leadership works better and is more desirable, as long as it is not corrupt and as long as it will eventually let go of power. This follows my theory that the best leadership for any system depends on the location of the system on the life cycle.
This has been a long report. But a very fruitful trip.
Dr. Ichak Kalderon Adizes