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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

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