1. Opportunities For Development
In The Current Global Economic
Crisis
The Potential of Rapidly Developing
Emerging Economies
Author: Daniel Evans, Co-Founder & Principal, Ormita Commerce Network

2. Current Situation
Liquidity for many businesses (and governments) worldwide is
still an issue
Interbank market has still not recovered yet
Refinancing is harder to assure
There is a danger of postponement, reduction or cancellation
of existing sales
Pressure on profitability of every transaction in a declining
market
Highly developed countries are coming under pressure from
those with lower cost labour
Traditionally profitable markets may be “drying up” as credit
becomes harder to acquire
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3. A Changing Sales Environment
This was the biggest, but not the first, crisis
The World Bank has identified 96 banking crises and 176 monetary
crises in recent 20 year period
Such crisis are a remarkably perennial
Financial crisis in developing countries continue to happen despite
very different regulatory systems, different governments, different
development levels; and at very different times…
Developed countries are finding it increasingly difficult to
compete against lower-cost models from rapidly emerging
markets
There continues to be shortage of money in highly-developed
countries
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4. Import Growth = Export Decline
?
US is the world’s leader in gross domestic product (GDP), which is
the monetary value of all goods and services produced in a
country during one year.
US % share of world exports has shifted downward over the past
25 years, while its % share of world imports has increased.
Since 1975 imports to the US have significantly exceeded exports
each year.
Rapidly Emerging Markets (China, India etc) account for about
half of the total US trade deficit.
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5. The Challenge For Business
The major challenge for businesses in a world characterised by
growing financial imbalances and increasingly economic crisis is to
find a balance between…
a prudent and finding new business
responsible approach opportunities in a
with existing capital changing market
continuing with existing accepting risks despite
relationships during global economic
difficult times turbulence
Businesses who do not change run the risk of market erosion
and eventual financial collapse!
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6. Other Macroeconomic Issues
The severe debt problems of a number of countries, along with
the increasing fragility of the international financial system.
The increasing use of barter and countertrade to support
international transactions.
The move toward market economies in formerly socialist
countries along with rapid privatization of publicly owned
companies.
The rapid dissemination of global lifestyles.
The gradual opening of major new markets, namely China, India,
eastern Europe, the Arab countries, and Latin America.
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7. Porters “Diamond” of National
Competitive Advantage
Company strategy
structure and rivalry
•Number of companies in
an industry
•Intensity of competition
•Public or private
owner
Factor conditions Demand conditions
•Natural resources •Size of market
•Education and skill levels •Sophistication of consumers
•Wage rates •Media exposure of products
Related and
supporting industries
•Existence of supplier clusters
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8. We Are Living In A Changing
World
Changes
Changes
in Income
in Income
Economic
Economic
Development
Development
Inflation
Inflation Labour Costs
Labour Costs
and
and
Recession
Recession
Regulatory
Changing
Changing
Consumer
Consumer
Spending
Spending
Patterns
Patterns
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9. Finding (New) Foreign
Customers
Firms that do not export and/or seek foreign
customers loose out on huge opportunities for
growth and cost reduction
Large firms are often more pro-active in
seeking foreign opportunities
Medium and small-sized firms are often slow
to respond
Too busy with local side of business
Ignorance of potential opportunities
Lack of understanding of foreign trade
mechanisms
Intimidated by mechanics of exporting to a
foreign country
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10. Market Types
International Consumer
Markets Markets
Government Business
Markets Markets
Reseller
Markets
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11. The Trade Feedback Effect
As a country’s exports increase, its national
output and income increase, which leads to
a increase in the demand for imports.
Hence, imports affect exports and vice
versa
This Trade Feedback Effect is one argument
for free trade among nations
Emerging Markets are rapidly gaining more
of the worlds wealth and can not be ignored
Images: Shenzhen (China) 20 years ago and today
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12. Strategic Market Entry
Increasing global levels of Foreign Direct Investment (FDI) &
Increasingly competitive world markets
Critical Markets:
Markets that are profit
sanctuaries for
competitors
Markets with volume
Markets that are growing
in size
Markets with good
margins
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13. What Is An Emerging Market?
• High-growth, high-potential
markets
• … in East Asia, Eastern Europe,
Latin America; … China, India,
South Africa, Turkey … etc
• Engaged in rapid
industrialization, market
liberalization, privatization,
modernization
• An artefact of past three
decades of global economic
realignment
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14. The Economic Effects of Being an Early Mover
High Possible Returns
High Possible Returns High Uncertainty/Cost
High Uncertainty/Cost
(Advantage)
(Advantage) (Disadvantage)
(Disadvantage)
Market Power: Uncertainty:
Barriers to followers Regulatory environment
Technical leadership Low government experience
Product positioning New industry
Operational Risks:
Pre-emptive opportunities:
Lack of supply inputs
Marketing Lack of support infrastructure
Early access to resources Unknown market structure
Brand Recognition Extra Cost:
Strategic Opportunities: Learning Curve
Location selection Training cost
Low competition Localisation
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15. The Promise of Emerging
Markets
Dynamic, rapidly transforming…
Young demographics
Middle class coming into its own
Engaged in technological leapfrogging
Low competitive intensity
Less regulated
Serve as export markets, investment destinations,
and sourcing locations
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16. Continuum of Entry Modes
Risk & FDI Related
Return •Joint Ventures, Subsidiaries
Transfer Related
•Leasing, Licensing, Franchising, BOT
Trade Related
•Export, Subcontracting, Countertrade
Organisational control and resource commitment
Continuum of Cooperation
Non-equity
Technical Patent co-operative Equity Joint
Training Licensing Franchising agreements Venture
Extent of Interorganisational Dependence
Negligible Moderate High
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17. Developing an Export Strategy
Risks can be decreased by taking few steps:
Work with an experienced export consultant to identify
opportunities and deal with red tape
Focus on a few markets to learn what is needed to succeed
Enter on a small scale to reduce costs of any failure
Invest time and managerial commitment in building export sales
Build strong and enduring relationships with local distributors and
customers
Hire local personnel
Keep option of local production open
Cost-efficient economies of scale
Greater market acceptance
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18. Collaboration With
Competitors
Horizontal co-operation a window on each others
capabilities:
Opportunity to acquire other’s skills and technologies
Strategic Alliances:
Competition in another form
Limited life span
Learning from partners of paramount importance
Mutual Gain is Possible
Where strategic goals converge but competitive goals
diverge
Size & market power of both is modest compared with
industry leaders
each partner believes it can learn from the others whilst
protecting its own skills
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19. The Ormita Commerce
Network
Free Export Management Advice
Provides assistance to a clients export marketing department
Helps identify opportunities and avoid common pitfalls
Helps develop reasonable start-up budget and matching new
sales as offset methodologies to meet these costs
Cashless Procurement of Essential Services
Allows a business to swap / exchange their own product or
service for things they need
Reduces the cash outlay of the business
Every purchase is matched with a new sale
More sales result in more customer feedback and less cost for
“give-away” samples
Improves the balance-sheet of the company
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20. Helping Get Through The
Layers
Demographic
Company
Cultural Economic
Publics Suppliers
Customer
Customer
Competitors Customers
Political Natural
Intermediaries
Technological
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21. Available Products and
Services
Ormita can offer the following services on a no-cash
(barter/swap) basis:
Accommodations (Hotels etc)
Advertising (Expos, Internet, Print, Out-of-Home, Radio, Television, Mobile)
Equipment Purchase & Rental
Fixed Asset Purchase
Graphic Design
Incorporation, Accounting & Audit Services
IT Support
Legal Advice, Contract Negotiation
Localisation of Materials
Marketing Advice
Public Relations, Media Liaison, Strategic Negotiations
Taxation Advice
Telecommunication (Video Conference, VPN etc)
Translation
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22. Types of Media Availabilities
Internet
Blogs • Email Blasts • Localisation • Newsletters • Online Advertising • Search Engine Placement •
Social Media • Translation • Video • Website Design
Print
Campus • In-flight • Journals • Magazines • Newspapers • Trade Publications
Out-Of-Home
Airport • Billboards • Bus • Cinema • Digital • Elevator • Expos • Kiosks • Mall Branding • Mass Transit •
Metro Rail • Point of Sale Advertising • Signboards • Street Signs • Taxi
Radio
Network • Satellite • Spot Radio • Shadow/Metro Traffic • Talk Show
Television
Cable • DTV • Network • Satellite • Spot TV • Spot Cable
Mobile
Direct Response Campaigns • SMS Advertising
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23. www.ormita.com

24. Emerging Market – Ormita India
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25. Emerging Market – Ormita
China
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26. Other Countries Where Ormita Is Present
Sweden
Canada
United Kingdom Poland
Germany
United States of Greece
America Turkey
Iran
Egypt India China
Mexico Hong Kong
Australia
South Africa
New Zealand
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27. Some Media
Acknowledgement
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28. Country Experience
Argentina El Salvador Kenya Portugal
Armenia Estonia Kosovo Puerto Rico
Australia Fiji Latvia Romania
Austria Finland Lithuania Russia
Bahrain France Luxembourg Samoa
Bangladesh Georgia Macau Seychelles
Belarus Germany Malaysia Singapore
Belgium Ghana Maldives Slovakia
Bosnia-Herzegovina Greece Malta Slovenia
Brazil Guatemala Mexico South Africa
Brunei Hong Kong Nepal Spain
Bulgaria Hungary Netherlands Sri Lanka
Canada India New Zealand Sweden
Cape Verde Indonesia Norway Switzerland
Chile Iraq Norway Thailand
Croatia Ireland Pakistan Turkey
Cyprus Israel Panama: UK
Denmark Italy Peru Uzbekistan
Dubai Japan Poland USA
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29. Entry To Restrictive Markets
One of the major obstacles facing western companies is that
customers in the new markets may not have any valuable
currency to exchange for goods and services.
Various countries place restrictions on currency exchange for:
the protection of the currency
balance requirements between imports and exports
statistical purposes
combating financing of crime and money laundering
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30. Countertrade
Countertrade is an alternative means of structuring an
international sale when conventional means of payment are
difficult, costly, or nonexistent
Payment for goods (or services) with other goods (or services)
The exporter usually receives the goods first and sells them for cash
or exchanges them for something else of use
May also involve switch trading, offset, tolling, counter-purchase,
buyback or compensation
The counter-trade agreement is a framework contract setting out
matters such as
which goods are suitable for counter-trade
valuation of the goods (determination of price)
modalities of payment of the balance (time, currency) (often
through a clearing account)
restriction on further sale
credit security, etc.
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31. Why Countertrade?
Advantages Disadvantages
Avoidance of debt and May not totally eliminate
exchange rate volatility all commercial risk
Covert reduction of May mask dumping
prices activities
Circumvention of price Does not allow for
and exchange controls multilateral settlements
Increasing popularity of Trade is restricted to two
bilateralism concept parties, each with
A method of market entry specific goods to trade
Stability for long-term May be seen as non-
sales competitive
Improves quality of
transaction
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32. Managing Payment Risk
Countertrade offers a unique (and immediate) form of
collateralization for payments to the supplier
It is well-known that that one means of managing payment risk in
purchase and sale transactions is through taking security on
property.
Barter or countertrade, depending on how the transaction is
structured legally and financially, can serve the function of
collateralization.
The buyer acquires not a security interest or mortgage on the
seller’s inventory but an actual property right in the inventory as
the payment in the transaction.
This may be cheaper than third-party financing as a bank has
costs to verify the existence of the goods, establish risks of
damage and deterioration, ascertain its market value etc.
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33. Preservation of Buyer & Seller
Cash
Countertrade preserves scarce hard currency and
improves the balance of trade in the importing country.
Lesser developed countries can take advantage of the
distribution and marketing networks of the companies
they countertrade with to distribute their products.
Countertrade often results in a significant transfer of
technology and know how from seller to buyer which
upgrades the buyer's manufacturing capabilities. For
example, in a countertrade involving cola syrup for
vodka, PepsiCo taught a German vodka maker how to
make their vodka bottles more marketable through the
use of screw caps and different labels.
Global currency volatility and more rigorous counterparty
risk assessment contribute to higher cost of trade finance
for importers, exporters and financial intermediaries
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34. Building Relationships
Countertrade gives unique benefits and advantages
to the seller of goods. A company willing to engage in
countertrade can penetrate new markets and
expand sales potential in existing markets.
Business relationships can be created and
strengthened by the willingness to accept the
purchaser's domestically produced goods as
payment.
Countertrade can be used to obtain a steady, long-
term supply of raw materials. For example Occidental
Petroleum obtained a reliable, low cost, twenty year
supply of ammonia by entering into a countertrade
agreement with the Soviet Union
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35. Lowering Opportunity Cost
During difficult economic times a seller may face high finance
costs and slow movement of product - leading to surpluses
and/or the need to reduce staff numbers and/or inventory
holdings.
There may be a lack of immediate opportunities to sell for cash.
Where liquidity is a challenge, goods can be sold "in kind" and
this credit applied to fixed operational costs of the business
(offsetting real cash expenses)
Finding a new cash-paying customer for goods involves a new
investment in marketing, versus a low cost for countertrade
(especially where marketing and entry costs are offset against
new sales via bartering)
Countertrade represents an extremely low opportunity cost to
generate new sales
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36. Helping Manage Price
Volatility
The government of an importing country contemplating using its foreign
exchange to buy additional imports may worry that it will not be able to
generate sufficient exports to earn the needed foreign exchange.
One way to shift the risk to others is to make imports contingent on
offsetting exports.
Hedging currency risks through countertrade rather than financial
instruments may be desirable because purchasing financial instruments
requires an upfront financial payment and thus drains liquidity.
Financial instruments cannot hedge real exposures effectively because
financial value changes with nominal exchange rates, not real exchange
rates, and is based on interest earnings not inflation. A countertrade deal
can help solve the real price problem.
Because counter-trade involves the exchange of real goods, not
financial instruments for real goods, it can solve the inflation risk involved
in foreign currency procurements. Thus, it can sometimes provide a
superior hedge to financial instruments.
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37. Improves The Balance Sheet
Goods acquired through countertrade are still counted as an
increase in the assets of the business.
Bank capital guarantees reduce available lines of credit - barter
capital does not.
Allows the organisation to meet assets and/or equity ratios for
other (cash) subsidies and loans.
Lets a business obtain future international lines of credit
guaranteed by countertrading operations.
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38. Countertrade May Be
Mandatory
EXAMPLES
Philippines
Executive Order 120 directs all government
agencies to adopt countertrade (C/T) as a
supplemental tool to the importation of foreign
capital equipment, machinery products, and
goods and services over a certain dollar value.
Kuwait
Decision No. 694 which stipulates that all Foreign
Contractors who meet certain criteria, should
participate in the Counter-Trade Offset Program.
The GATT, World Bank and DOC claim that countertrade
represents between 25% - 30% of all world financial activity
and is growing.
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39. Classification of Countertrade
Does the transaction involve reciprocal commitments Straight Sales
(other than cash payments)? No (cash or credit)
Does the transaction extend over
Does the transaction involve the Barter type long periods and involve a basket
Yes use of money? No No
of goods?
Counterpurchase,
Yes Clearing Simple
buyback or offset Yes Arrangement barter
Is the reciprocal commitment Does the transaction
limited to the purchase of goods? No involve debt? Are third parties
involved? No
Yes
Yes No
Yes
Counterpurchase and
buyback Swaps Offsets
Switch Clearing
Trading Arrangements
Are the goods taken back by the Yes Buyback
exporter the resultant output of the
equipment sold?
No Counterpurchase
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40. Compensation
The seller accepts goods as part payment, the rest is
paid in cash.
Example:
A British computer firm sells computers to a Russian mining firm.
The Russsian firm can only pay part of the price in money, but
wants to pay the rest with titanium.
The British firm does not need titanium so it contacts a metal
trader in London who promises to buy the from the Russian
mining firm titanium and pay the British computer firm.
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41. Counterpurchase
Two linked contracts
simple exchange of goods
reverse reciprocity grants access to resources
Trading parties maintain restricted-purpose drawing
accounts for the deposits of their countertrade activities.
Example:
The Finnish airforce buys F18 fighter jets from McDonald Douglas
Corp. For 2,5 b. The air force pays in dollars. In another but linked
contact McDonald promises in return to buy Finnish goods for 2,5
b. dollars.
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42. Product Buyback
A long term contract made between a firm which
builds and runs a factory to buy the products made in
the factory.
One party purchases the output of another party that is
derived from technology or equipment supplied by the
purchasing party.
Example:
A German firm builds and runs a factory in an African country.
The factory is owned by the local government but it has no
money to pay for it and not skilled staff to run it. Part of the
factories output goes to the firm that built and runs it at
predetermined price as payment for the factory and as
compensation for running it.
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43. Offsets
Purchases by a governmental buyer are matched
(offset) to investments by the seller in non-related
industries in the buyer’s country.
Example:
The Spanish government buys fighter jest from a foreign
corporation. The corporation promises in a separate but linked
contract to manufacture the wings in Spain.
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44. Switch Trading
Two Contracts
Example:
A British firm sells machine tools to a Polish firm. The Poles wanted
to pay in goods only. The Brits did not need Polish goods but
French goods. They find a French firm that needs Polish goods.
The French firm receives the Polish goods and sends its own
goods to the British firm as payment.
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45. Debt Swaps
Debt swaps
debt-for-debt swap
debt-for-equity swap
debt-for-purchase swap
debt-for-nature swap
debt-for-education swap
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46. Countertrade Usage - By Type
Barter/Swaps
6%
Buyback
28%
Counter-
purchase
56%
Offset
10%
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47. Ormita: Business Assistance
Four types of business-centric free services :
Assistance in selection of export markets
Provide analysis on various modes of market entry
Work within budgetary constraints to create a broad-scale
market entry plan which is offset against guaranteed new sales
Develop media plans which are offset against guaranteed new
sales
Fee-based services :
Implementation of export strategy and budgetary expense
offsets
Implementation of media and PR campaigns in new markets
Consulting on countertrade issues
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48. Ormita: Countertrade Services
Provides financial services to exporters and/or banks, allowing
them the ability to offer their products on commercially
attractive terms
Offers a solution for insurance against the risk of debt losses for
commercial and political reasons
Allows governmental support of exports into various countries
enabling:
access to global markets
business development in riskier, emerging markets
Contributes to business competitiveness in a rapidly changing
environment
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49. General Acceptance Criteria
Eligibility for promotion
Is the business particularly deserving of promotion?
Is the product or service useful for the target market?
Is the entry part of a long-term strategy?
Justifiability of Risk
Reasonable prospect for the smooth execution of sales by the
supplier without the occurrence of a claim
Terms of Contract
Terms of payment in accordance with international rules and
basic agreements for export business
Budget
Is the budget suitable?
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50. Examples of Barter
A major restaurant chain was faced with disposing $1 million
worth of flavoured ground beef that had tested well but didn't
sell well. The chain traded the meat in exchange for spot TV,
while the barter shop sold the meat for cash, at a discount, to a
state prison system.
A beer company needed to destroy product that was past its
sell-by date. It ended up selling the bottles to a barter shop,
which then recycled the glass, in exchange for media credits.
Excess guava puree was swapped for media credits through a
barter company. The company eventually sold the puree to a
beverage company that used it to make orange soda.
Log-home kits, aircraft skeleton frames and poultry have all been
swapped for a wide-range of media, including TV, digital, print
and radio ads, in the U.S. and abroad.
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51. Examples of Government Countertrade
The Philippine Government is embarking on a program to carry out a
barter system for its coffee products with the products of lucrative
markets. This will help them promote the exports of their coffee and in turn
get defense equipments from former U.S.S.R. member nations like
Romania.
In 2009 Saudi Arabia agreed with Pakistan to swap oil for food.
Israel barters Calcium Carbonate, Talc and Dolomite and other raw
materials with the USA, UK and many European Union countries.
The Thai Government recently traded fruits for Chinese-made
locomotives, passenger buses, and armoured cars.
Malaysia is currently supplying India with palm oil (from six state-owned
companies) worth $121 million in exchange for a contract awarded to
the Indian Railway Construction International Company. They will lay 31.5
km. of tracks in the southern Malaysian state of Johor.
The Democratic Republic of the Congo and the China Railway
Engineering Corporation (CREC) have entered barter. According to this
barter the Chinese company will provide Congo the desperately needed
infrastructure in exchange for a slice of Congo’s precious natural
resources to feed its booming industries.
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