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38 Infrastructure 1 (1998-1999)

handle is hein.journals/infrastr38 and id is 1 raw text is: A AS C IONO B I UTLIY 60 MMIIA IN A I) TR N *RA A Importance of Local Partnering in Foreign Projects Are Local Partners a Necessity for American Investors? By Mark J. Riedy any American investors in foreign projects, and particularly in infrastructure transactions, will not proceed in a foreign country without a local partner. However, on the other hand, some American investors refuse to partner with a local company for a foreign project unless mandated by local laws. Similarly, some American investors that earlier had entered into a foreign partnership later determined that they should never have done so.These divergent positions demon- strate the need for careful consideration of the local partner objectives, due dili- gence on the local partner and a clearly defined partnering relationship. Considerations in the Decision of Selecting a Local Partner General Considerations In entering a foreign country, one of the first considerations of an American com- pany is how to ensure financial success in an unfamiliar market. Local partners are often sought to assist in this pursuit, and particularly for maneuvering around the inherent pitfalls lurking In these countries. Oftentimes, foreign Investors, such as American companies, are not fully appreciated, or are openly challenged, by the gen- eral population of a foreign country. A local face can be helpful, if not necessary, in overcoming this perception, particularly when the local partner is projected as the lead developer on the project within the host country. A local partner is often sought from local companies on the basis of its: working knowledge of the particular industry's business practices and the governing statutes and regulations thereto; its ability to work with the appropriate central, state and local governments within that country to obtain permits, decisions and other items necessary for the development of a project; and its standing within the local commu- nit' surrounding the particular project in that country. Furthermore, American com- panies may select a local partner to share in the risk and invest in a project. (Often, however, and particularly in developing countries, local partners have little money to invest in a project.) A local company that is strong in each of these areas can ensure the success of a project. Other considerations with respect to selecting a local partner are as follows: 0 Does the foreign country require a local partner under existing laws? In this regard, many foreign countries, by statute, will not permit 100% foreign owner- ship in certain or any local industries and have express foreign ownership per- (Continued on page 13) infrasr Hildt' ABA 2000 Annual Meeting in New York and London July612 NewYork July 15-20 London' 0 U.S. Tax Impediments to Bidders in Inter- national Projects N Control Issues of International Joint Ventures * SPT TELECOM: A Case Study * Section Profiles 0 People Watch VOL. 38, NO. I FALL 1998 ; uri w w

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