Beyond Big Emerging Markets.

BE Green Lights Four Foreign Business Prospects

BY NOW, YOU'VE HEARD OF THE BEMS, BIG EMERGING markets. While some of these countries, which include Turkey, China, South Korea, Taiwan, Hong Kong, Indonesia, India, South Africa, Argentina, Brazil, Mexico and Poland, are now in turmoil, they are generally predicted to offer opportunities for exporting firms because the U.S. Department of Commerce expects them to account for 27% of the world's total imports by 2010. What makes them favorable prospects? They have large populations, expect significant growth in their gross domestic products (GDP) and expect to undertake major economic restructurings. But, even if they do perform as anticipated--and many are already reporting lackluster results--that doesn't mean these countries are the ideal spots for all entrepreneurs, particularly African Americans.

Ideally, entrepreneurs should decide whether a market is right for them after they've assessed the demand for their product. That said, there are still some general things you need to consider when you evaluate a foreign market. Herb Austin, trade finance specialist of the Small Business Administration in Washington, D.C., suggests you initially explore a few questions: How comfortable am I with the country's location? Do the country's citizens have the ability to pay for the products I am selling? Is there a demand for my product? Austin advises that you look for countries with which you have things in common. Language can be a major issue, even if you have access to a good translator. In addition, selecting countries with some cultural similarities can flatten your export learning curve. Austin also warns that you shouldn't "take on a project that's too big for you to handle by having too many unfamiliar variables."

We ran our picks--which emphasized the vast opportunities that lie outside the BEMs--by Awilda Marquez, assistant secretary of commerce and director general of the U.S. and Foreign Commercial Service. Although the Commerce Department doesn't want entrepreneurs to limit their choices to the markets mentioned here, she supported our alternatives. "[Our office] highlighted the BEMs because they showed tremendous potential, but they also have their share of challenges," she contends. "There are so many other markets to tap, and we see a hierarchy of export opportunities for new export companies."

Contrary to the criteria for BEM prospects, our markets clearly demonstrate characteristics that are similar to those in African American culture; have English as the primary language; and are considered friendly toward American imports. Plus, they are also in relatively close proximity. Small businesses, in particular, should find interesting opportunities in these areas. And while there are products needed almost everywhere--telecommunications equipment, tourism-related products and services, and technology systems--we've tried to include places where there could be unique opportunities for African American businesses even if the markets were well developed. Trinidad and Tobago, Ghana, the United Kingdom and Canada were not initially identified as "the places to be" by U.S. experts. Nevertheless, we're suggesting that if you are an African American entrepreneur, they may contain a wealth of opportunities for you.

Trinidad and Tobago

Gain much more than tourism dollars from these two island treasures

Like other Caribbean islands, Trinidad and Tobago are among the favored hot spots for vacationers. For this reason, tourism-based services or products drive the economic activity for much of the Caribbean and these two islands. According to Sandrah Monthieux Pelage, international vice president of the European Federation of Black Business Owners in London, African American entrepreneurs can capitalize on the region's booming tourism industry by offering products that meet the needs of island visitors as well as the companies that service them. "Hotels, whether they are chains or independently run, need seafood--lobster in particular." Contrary to popular belief, Pelage contends that fish aren't as widely available in the Caribbean as people think. She also says the low labor costs should encourage potential exporters to consider manufactured products or investing in locally handcrafted goods. "The majority of Caribbean companies are micro firms, so U.S. firms will only need to make a small investment to develop partnerships."

The islands of Trinidad and Tobago also offer opportunities beyond tourism, especially for companies that can help the government implement infrastructure improvements. In 1998, 25% of public-sector funds were earmarked for construction and repair projects, including airports, schools, libraries and other facilities. The demand for oil and gas extraction and processing equipment is expected to remain high as the country continues exploration and production of resources from its surrounding waters. In addition, the government's efforts to modernize the country's antiquated water delivery and treatment system will offer opportunities to U.S. suppliers of water-resources equipment.

American export firms can also benefit from the many trade agreements between Trinidad and Tobago and the United States. U.S.-based companies receive preferential treatment under these agreements, and that means greater access for African American exporters as well.

Green Lights

* Afro-Trinidadians make up 40% of the population.

* Economic reforms have led to four consecutive years of GDP growth.

* Trinidad and Tobago's international debt rating has been upgraded to one of the highest in the hemisphere.

* U.S. products enjoy brand recognition because Trinidadians widely visit the

* U.S.; enjoy American television programs and commercials; and have family residing in the U.S.

* Trinidad and Tobago welcome foreign ownership and investment.

Yellow Lights

* Country suffers from a high incidence of crime, including drug trafficking, and an elevated unemployment rate.

* Some areas still experience water shortages, power failures and drainage problems.

Special Requirements

Companies are only required to obtain an import license for products on the country's "Negative List." According to the country's Commercial Guide, these controlled items include poultry, coconut products, unrefined animal fats, cigarette paper, certain sized boats and some pesticides. Foreign goods are subject to the CARICOM (Caribbean Community) Common External Tariff (CET). This fee may range from 5%-30% of the freight's value. The majority of agricultural products are subject to additional import charges ranging from 5%-45% plus CET.

Resources

Trinidad and Tobago Investment Advantages: ww.investment.com

Taking a Hobby Worldwide

Elaine Robnett-Moore's fascination with African beads started seven years ago when a Senegalese friend asked her why she was wearing them around her neck. "He said beads were to be worn around your waist and under your clothes, more like lingerie," she recalls. She then spoke to a jewelry designer to find out the history of African beads and began developing her own items.

A former owner of a travel agency and a real estate company, rite 54-year-old used her contacts to take her jewelry international. "They liked what I was doing and invited me to teach--I hadn't even submitted a proposal," she contends.

Two years ago, Robnett-Moore helped local Bahamians develop a manufacturing facility so they could get a bigger share of the tourism market by selling high-quality jewelry. Their company, Como Hill Designs, supplies the islands' major resorts and sells to tourists arriving on cruise ships.

The Maryland resident has been invited to Trinidad and St. Kitts/Nevis to tackle a similar project. The decision to teach her craft overseas has been a profitable one, accounting for $30,000 of Robnett-Moore's business--a little less than 300 of her total income. Her ability to combine her two loves is the key to her success and, she says, "Things are great! I have been able to torn an expensive hobby into a profitable business."

Vital Statistics on Trinidad and Tobago

Population: 1.28 million
Population Growth Rate: 1.2%
Afro-Trinidadian: 40%
Currency: Trinidad and Tobago dollar
Official Language: English
Unemployment Rate: 14.5% (1998)
Government System: Parliamentary democracy

Ghana

One of West Africa's many gold mines

"When we start talking about Africa, we enter into a more challenging market but still potentially fruitful," Marquez suggests. "The image is unfairly negative. In fact, there is much business to be had and money to be made in Africa by U.S. exporters." She does warn that African markets are best suited to companies that have substantial experience in exporting because of their challenges. The West African country of Ghana, for example, has excellent potential for food processing and packaging equipment, used clothes and secondhand cars. But it also has infrastructure limitations, and some of Ghana's importing processes can be difficult to overcome. "We encourage someone who is brand new to consider Canada or the U.K. before starting in West Africa for the first time," Marquez advises. "We don't want them to get discouraged in their first effort."

As Ghana continues to redesign its economic policies, there is tremendous potential in the country for an experienced company with a good product. Under its divestiture program, Ghana is moving to privatize state-owned enterprises. In companies where the country does maintain a minority stake, its participation will be minimal. African American entrepreneurs offering products or services that can help the country deal with its recent energy crisis will be in high demand. The government's efforts to remedy problems with the country's hydroelectric plants through the use of gas-fired facilities are expected to stimulate the demand for electrical generation, transmission and distribution equipment. The demand for telecommunications and construction equipment will also increase as the country strives to improve its infrastructure.

Green Lights

* English is the primary language of commerce and government.

* The mining sector has experienced vigorous growth in recent years.

* The U.S. is Ghana's third largest trading partner behind the U.K. and Nigeria.

* The country's service sector grew by 6.2% in 1997.

* Wireless communications services continue to expand.

* Improvements continue to be made in the country's infrastructure.

Yellow Lights

* Exchange-rate depreciation and inflated gas and electricity prices contributed to high inflation.

* There has been a slowdown in GDP growth.

* Agriculture is the primary source of income, representing 45% of GDP.

* Poor rainfall caused a decline in the country's cocoa production.

Special Requirements

Fortunately, Ghana has no quota for imported items, and the import license system was eliminated in 1989. However, some imported items--drugs, communications equipment, mercury, arms, ammunition, handcuffs, gambling machines, animals and live plants--still require a permit or a certificate.

Resources

west-africa.com

A Winning Team Effort Overseas

Kennon Brennen, president and CEO of Phyto-Riker Pharmaceuticals, helped coordinate a six-member team that successfully acquired the largest generic pharmaceutical manufacturing plant in West, East and Central Africa from the government of Ghana. The plant, which cost more than $9 million, will manufacture and distribute generic medicines at affordable prices. Brennen, 44, estimates sales will generate $10 million in revenue in just one year and more than $250 million in five years.

"Over 90% of Africa's pharmaceutical medicines are imported. Many of them are substandard and overpriced. This presented a significant business opportunity for us," Brennen insists.

Although the Phyto-Riker team had to get used to the long hours of traveling, inadequate telephone systems and bureaucratic red tape, he says perseverance is key. "You need a lot of `stick-to-itness,'" he contends. "Unfortunately, the stigma attached to the word Africa can still serve as a barrier." Nevertheless, Brennen and his team expect a quick return and are looking forward to taking the company public.

Vital Statistics on Ghana

Population: 18.8 million (1998)
Population Growth Rate: 3.0%
Black African: 99.8%
Currency: 1 new cedi
Official Language(s): English
but there are approximately 75 other
languages and dialects spoken.
Unemployment Rate: 20% (1998)
Inflation: 18% (1998)
Government System: Based on
U.S. system, but has only
one legislation arm

The United Kingdom

Opportunities throughout the area still abound

"The U.K. is a very natural trading partner after Canada," Marquez admits. "We would then see Europe as being the best place for looking for market opportunities for a new export company." Why?

The United Kingdom--which consists of England, Scotland, Wales and Northern Ireland--and the United States are based on similar traditions, political systems and cultures.

The U.K.'s commitment to free markets, relatively low taxes and inflation and receptiveness toward American-made products and services make it particularly attractive. In addition, legislation regarding pollution, industrial privatization, private-public partnerships and healthcare improvements have created a demand for the products needed to address these concerns. Competitive U.S. exporters can capitalize on these commercial opportunities by offering items to fill these niches. The U.K. governments' purchases are based on value, not national origin, so foreign-developed goods face few restrictions or impediments. In addition, 70% of the U.K.'s GDP comes from the service sector. This point should be particularly interesting to African American entrepreneurs, since the majority of their businesses are service based. Also, opportunities are emerging in the U.K.'s healthcare market as the state-funded National Health Service restructures. U.S.-based firms that offer competitively priced healthcare supplies and services will fare well in this marketplace.

Green Lights

* The U.K. remains the U.S.'s largest European market.

* The U.K is very receptive to American-made goods, services and products.

* Unemployment has been declining steadily over the past three years.

* In an effort to contain costs and increase quality, the U.K. leans toward outsourcing public services.

Yellow lights

* GDP is expected to decline throughout 1999.

* A higher minimum wage of 3.60 [pounds sterling] per hour for most workers was implemented on April 1. * Additional importing costs can undermine profit margins.

* Since the U.K. is a smaller market than the U.S., it may be difficult for American-based firms to achieve the benefits of economies of scale.

Special Requirements

A European Union (EU) external tariff is applied to all non-EU imports. Foreign products must be priced to cover a duty, a value-added tax of 17.5%, freight and insurance charges, and customs-clearance fees.

Resources

The Bank of England:

www.bankofengland.co.uk/press.htm

A Lesson Learned

Freda Thomas, 44, was on the scene with her line of African American greeting cards long before other firms. Her 10-year-old company, FLT Designs, creates images that reflect the positive lifestyle of African Americans. In 1990, FLT began dabbling in international business by exporting cards to Japan and London.

Thomas says participation in trade shows was key to successfully penetrating these markets. Initially, Thomas found it difficult to offer competitively priced products that could recover the costs of exporting, but says, "We plan to combat this by exporting a larger-ticket item--like our art posters, for example. These pieces are sold in galleries and retail for $20 each, much higher than the cost of our greeting cards."

Although the amount generated from these countries currently represents a small part of the firm's gross sales of more than $300,000, she looks forward to building her business on these fronts. Thomas encourages other entrepreneurs to explore international opportunities but she cautions that "whatever you sell, make sure the price of your product covers the cost of exporting."

Vital Statistics on United Kingdom

Population: 58.3 million (1998)
Population Growth Rate: 0.3%
Currency: Pound
Official Language(s): English; Welsh
and Scottish are secondary languages
Unemployment Rate: 4.8% (1998)
Inflation: 3.3%
Government System: Constitutional monarchy

Canada

A flourishing market close to home

"Canada would rank the highest in terms of the first market to investigate," Marquez contends. As proof, the Department of Commerce is coordinating a six-month training program called "The Global Diversity Initiative" to help minority firms become export-ready. At the end of the program, the DOC leads trade missions to Canada and Mexico to assist these companies in their first export negotiations. And with good reason.

The North American Free Trade Agreement (NAFTA) was developed so that companies in each of the three North American countries--Canada, the United States and Mexico--would choose the home front first when considering entering the arena of international trade. Under NAFTA, U.S.-made goods enter Canada duty-free. Now, North American companies have some of the same advantages given to companies covered under other trade agreements. Marquez also says companies shouldn't forget the obvious benefits: "There are no language barriers, they're close by and there are lower costs to getting there."

African American entrepreneurs should especially turn to our neighbor up north. Canada is the largest trading partner of the United States. In fact, the U.S. makes up about 74% of Canada's imports. American-based firms will find opportunities in computers and their peripherals, computer software, the automotive parts and service-equipment industries, and building products. The technology boom is responding to the increase in corporate profits, declining interest rates, an upswing in Internet use and networking programs. The increased demand for automotive supplies mirrors the country's increased purchase of new cars. Demand for another prospect, telecommunications equipment, is expected to grow 8%-12% through 2001.

Green Lights

* Canada's proximity enables American firms to better manage their time and expenses as they explore business opportunities there.

* "The absence of tariffs under NAFTA provides U.S. firms with a competitive advantage over exporters from Europe, Asia and elsewhere. U.S. exporters are predicted to make up nearly three-quarters (71.6%) of the Canadian automotive parts market due to the preferential treatment American firms will receive under the U.S.-Canada Auto Pact.

Special Requirements

NAFTA requires extensive labeling in English, French and Spanish for the packaging of all consumer products.

Yellow Lights

* Canada's own software developers are achieving national recognition as product leaders.

* Third World technology companies are also competing on price. These firms have a particular advantage in labor-intensive products or where domestic U.S. industries are less competitive.

* There are some cultural and linguistic differences throughout Canada's five distinct regional markets.

* Canadians will favor their own domestic products, especially if they are competitive in quality and cost, over U.S.-made goods.

* Although the first referendum on sovereignty for Quebec was narrowly defeated, Quebec might vote to separate from Canada in an upcoming election.

Resources The U.S. Commercial Service in Canada: www.ita.doc.gov/cscanada

Test Your Export Idea

Are you read to spread your wings internationally? Well, before you book your flight, start your exploration of foreign markets from home. As a first step, call the Trade Information Center (TIC)/U.S. Department of Commerce (800-USA-TRADE) to get a free copy of the Export Programs Guide for a full outline of federal export assistance programs.

The TIC can tell you which government programs can support your export efforts, assist you with the export process, provide you with market research data, inform you about relevant national and international programs, and turn you on to public and private financing alternatives. The organization also maintains an export promotion calendar that lists trade events throughout the globe. The calendar indexes events by geographical location and industry.

To review or download the trade events scheduled for the remainder of the year, visit the International Trade Administration's Website at www.ita.doc.gov.

Try showcasing your products or services at one of these exhibits to see if foreign clientele will take the bait.

Vital Statistics on Canada

Population: 28 million (1997)
Population Growth Rate: 1.3%
African 6%
Currency: Canadian dollar
Official Language(s): English
and French
Unemployment Rate: 8.5% (1998)
Inflation: 1.4%
Government System: Confederation
with parliamentary democracy