11.30.08
Posted in Economic Analysis, Government Resources, Strategies at 8:10 pm by Administrator
I ran a roundtable discussion on international markets at the Fifth North Bay Growth in Innovation Forum in Santa Rosa on November 13. (I organized these in conjunction with the City of Santa Rosa — Nancy Mancester — and some great Chamber member volunteers, this time led by Mike Adler) As usual there were lots of companies with great ideas — computer architecture to combat viruses and spyware, web 2.0 social networking, green building, etc. One of the entrepreneurs told me that he wasn’t participating in my roundtable discussion because he had to concentrate on domestic markets. I said that this was exactly the best time to renew your international efforts.
Why?
– Markets that were previously very competitive may have shrunk, but this is the time where customers will be rethinking costs and traditional relationships. If you concentrate domestically, you will be fighting on a limited market.
– Competitors may now be willing to look for partnerships with the weaker ecoomy. This opens the potential to create new product lines and markets. Again, you have the entire globe, instead of a shrinking domestic market.
– Suppliers around the world are hungry for new customers — you can cut deals now that were unattainable even two months ago.
One theme that emerged from the Fifth Growth & Innovation Forum was that there are incredible resources available. Nowhere is that more true than with international markets. Yes, there is greater risk but there is greater support. So get out there!
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08.28.08
Posted in China, Economic Analysis, Government Resources at 9:23 pm by Administrator
This year’s Olympics were a triumph for China and awakened considerable interest in this rising power. Here are a couple of great resources for you to check out on doing business in China.
Song White, who has incredible experience in doing business in China, has developed Beijing Show and Go which provides a translation aid for in Mandarin and English especially for Beijing. While you’re there, check out her regular site, White Song Books, which also has telephone cards for China. It’s certainly much cheaper than paying for the international rate for phone call from your mobile phone when you’re just calling around the corner.
“The Little Red Book of Doing Business in China” is a great book which takes sayings from Chairman Mao to understand the how and why of doing business in contemporary China. The author, Sheila Melvin, spent seven years working in China, including for the Shanghai chapter of the US-China Chamber of Commerce. This is far and away the best guide for understanding the business culture of China that I’ve come across.
Another great book to help you understand the culture and thought processes of China is “China Road, A Journey into the Future of a Rising Power” by Rob Gifford. Rob, for many years the NPR correspondent in Beijing, writes about a trip he took from Shanghai to the Kazakhstan border on one of China’s national roads. Much like the US Route 66, parts of the road have been replaced by superhighway, but like Route 66, the trip to the cities and small towns reveals the soul of the country. One of the features of the books is that it takes face on the strengths and the problems of contemporary China, including pollution, ethnic minorities and human rights. This is a great read that I recommend highly.
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08.27.08
Posted in Economic Analysis, Exchange Rates, Finance, Government Resources at 3:43 am by Administrator
If you ever lived through a period of hyper-inflation, you know the effects on an economy. Savings are lost, basic necessities become scarce and credit disappears. Ending a period of high inflation always requires major contractionary policies, policies that inevitably hit the poor and weakest members of society the hardest.
I remember one time visiting in Brazil when the prices changed from the morning to afternoon. I was completely dumfounded by the currency — there were several varieties floating around and in one case the government just added six zeros to the old currency. One curious fact that I realized is that in high inflation economies, there are no coins. The metal in the coins rapidly becomes more valuable than the currency and bad money (cheap paper bills) drives out the good (copper or even aluminum).
The New York times reported this week about the crippling effects that inflation has had on Vietnam.
The country’s fledgling stock market, which had been booming a year ago, has fallen in volume by 95 percent and is at a virtual standstill.Squeezed on all sides, people are cutting back on food, limiting travel, looking for second jobs, delaying major purchases and waiting for the cost of a wedding to go down before marrying.
More importantly, the downturn has crushed hopes for a better life.
The mood in Vietnam, after years of upward mobility, is tense, said Kim N. B. Ninh, the Asia Foundation’s country representative. “I think people are pessimistic,” she said. “You sense a tougher environment, a more restricted environment, a more pessimistic environment. It’s a moment of turmoil, I think.”
So how does the international businessperson cope with the highly inflationary atmosphere? The answer to remember that “Cash is King.”
You certainly cannot extend credit in the local currency. You also have to check that your banks will continue to extend trade finance — if conditions worsen, even respected guarantee agencies like EXIMBANK will go off cover for a country.
All transactions have to be in a stable international reserve currency — usually the US dollar. Obviously a currency hedging strategy is useless with such volatility. But even be careful of contracts in dollars backed by dollar deposits from within the country. Argentines woke up in 2002 to find that their dollar deposits were frozen –even to pay for international contracts.
Lastly, rely on your customers to figure out how to handle the inflation and resulting foreign exchange problems. Frankly in the 1990s and early 2000’s the average taxi cab driver in Buenos Aires or Sao Paulo knew more about foreign exchange strategies that all but a handful of traders in London or New York. If you work with your established customers during the down times, they will remember you when the market stabilizes again. It always does return — the question is just how long until “again” arrives.
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05.19.08
Posted in Economic Analysis, Government Resources, Strategies, Taxes & Tariffs at 5:12 am by Administrator
I was speaking with the site manager for a large corporation that has a significant R&D component. The Company has steadily off-shored manufacturing of its sophisticated product and little traditional manufacturing is left in the US. What is new is that the company is being tempted to offshore its R&D jobs as well. In this case Ireland is offering incentives of € 20,000 per research worker. I remarked to him that that was “real money” — the incentive being in Euros instead of dollars. Another factor was that Ireland has a low corporate income tax rate and that in particular moved decisions at the US headquarters
There is an on-going discussion about whether offering incentives produces real long-term economic growth. There are certainly lots of examples where the jobs never materialized or the industry hit hard times later on and the new plant shut down. On the other hand there are examples like the German and Japanese automakers who opened sites in the US South, bringing jobs and prosperity to those regions.
There are several issues to be addressed — does the industry fit the development strategy of the region? Putting a heavy polluting plant in Northern California would be a non-starter. Trying to develop a Web 2.0 cluster in an area of the country where few such companies exist may not result in lots of jobs.
Another issue is the net effect on government revenues – i.e. taxes. Some countries and localities have given such large concessions that the result is that the government unit has greater costs with a permanently lower income level (look at some of the oil drilling concessions). On the other hand, a good project will produce not only more jobs in the long run but also greater prosperity for the community and a larger tax base. With the aid of economic models, those contributions can be quantified.
Do incentives work? There are lots of examples where they have made an impact but the government authorities must carefully craft a package appropriate to the economic development strategy.
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01.19.08
Posted in Clean Technology, Government Resources at 10:17 pm by Administrator
Clean technology will certainly be one of the fastest growing international markets over the next five years. Both governments and consumers are demanding reductions in emissions and more environmentally friendly products. New products will be created around the globe and good ideas created in one place will quickly migrate worldwide. One good example of the flow of ideas and technology is between the United States and Germany due to a common effort of governments, associations and private sector producers.
Germany recognized early on that it needed to lessen dependence on imported oil and gas, not only for national security reasons but also for environmental health. The country started a research program through its research laboratory system in the late 1970’s. With reunification, ordinary Germans were confronted in the former East Germany with the consequences of governments ignoring environmental impacts. The research programs continued producing number of interesting advances in both wind and solar generation, but the costs were still far above conventional generation. When the SPD came into power in 1998, the government instituted subsidies for solar and wind installation and set up a system that allowed producers to sell back to the grid.
Having demonstrated that renewables could be competitive given the right regulatory framework, the German companies turned toward the US market as a way to allow greater efficiencies of production. I accompanied Sigmar Gabriel, then Minister-President of Lower Saxony and current Environment Minister of Germany on a visit in 2000 to Boston, San Francisco and Silicon Valley. Accompanying him were the manufacturers of solar and wind generation equipment. In addition, German companies started their own marketing efforts.
When I came to live in the Bay Area in 2002, I joined the fledgling German American Business Association of California. GABA early on focused on clean tech, providing a platform for German companies to meet US customers and to understand the regulatory environment. It is not surprising that the leading international companies in renewable energy are German.
The takeaway from this discussion: To develop international clean tech markets, we need to put together coalitions of governments, associations and producers. Those efforts will only be successful in so far as technologies are price competitive, given the right incentives from the regulatory structure.
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10.25.07
Posted in Export Controls, Government Resources at 11:53 pm by Administrator
Most products, except for certain very high tech products and munitions, don’t require any special license. Here’s a ink to a general discussion of the issue: http://export.gov/regulation/exp_reg_home.asp. There are a dizzying list of US agencies involved: http://www.bis.doc.gov/about/reslinks.htm, but again few products are actually affected. Read over the referenced information but IF IN DOUBT, contact the closest US Commercial Service office (http://www.buyusa.gov/home/us.html). They can get a definitive ruling for you and if there is a point of contention, they can act as your advocates through the process. Use them as an ally.
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