INVITE: “FINANCING FOR BUSINESS” – US EXIM OPEN FOR UKRAINE, EBRD, OPIC ROUND-TABLE
Tuesday, March 12, 2019, 3 p.m to 5 p.m. Law Offices of McCarter & English,
1301 K St., NW, Suite 1000 West Tower, Washington DC 20005
INVITATION: The U.S.-Ukraine Business Council (USUBC), www.USUBC.org, invites you to attend a “FINANCING FOR BUSINESS – US EXIM OPEN FOR UKRAINE, EBRD, OPICROUND-TABLE, on Tuesday, March 12, 2019, from 3 p.m. to 5 p.m., with a light reception, in the offices of USUBC member, McCarter & English, 1301 K St., NW, Suite 1000 West (10th Floor), Washington, DC 20005. The following panel of experts will make presentations followed by a discussion/Q&A session.
PROGRAM: PANELISTS FOR THE ‘FINANCING FOR BUSINESS’ ROUND-TABLE INCLUDE:
(1) Douglas Frye, Senior Business Development and Loan Officer, Global Infrastructure, Export-Import Bank of the United States (EXIM) (2) Alexander Gordin, Managing Director, Broad Street Capital Group, merchant bankers, specialist in US EXIM & OPIC type project transactions
(3) Bruce Drossman, Senior Vice President, Global ECA Advisory and Execution, General Electric, GE Energy Financial Services/Global Capital Advisory (with US EXIM for four years)
(4) Michelle Small, Head of North American Representative Office, European Bank for Reconstruction and Development (EBRD) (5) Kenneth Angell, Managing Director, Project Finance & Tara Blake, Director, International Project Finance, Overseas Private Investment Corporation (OPIC) (6) John Strayhorn, President, Global Insurance Services, EXIM approved insurance broker
(7) Morgan Williams, President, U.S.-Ukraine Business Council (USUBC), Moderator
RSVP: Registration is required for attendance at the USUBC Financing for Business Roundtable. Please register by sending an e-mail to mwilliams@usubc.org. There is no charge for the meeting. Photo ID is required. USUBC thanks McCarter & English law firm, a new member of USUBC, for hosting the USUBC Business Luncheon in Washington.
“FINANCING FOR BUSINESS” – US EXIM OPEN FOR UKRAINE, EBRD, OPIC ROUNDTABLE Tuesday, March 12, 2019, 3 p.m to 5 p.m. Law Offices of McCarter & English,
1301 K St., NW, Suite 1000 West Tower, Washington DC 20005. followed by a light reception
Ethiopian Airlines had to scramble at the last minute this summer when it needed to pay for a plane it ordered from Boeing Co. MMBAMM years ago.
The East African carrier got the aircraft last month but, instead of owning it, the airline is leasing the plane from a bank, said Chief Executive Tewolde Gebremariam. It couldn’t secure a loan for the purchase because it lacked a financing guarantee from the U.S. Export-Import Bank.Amid a clash over spending priorities, congressional Republicans effectively shut down the U.S. Ex-Im Bank by failing to reauthorize the agency at the end of June. That means the bank can’t make new loans or provide loan guarantees to foreign companies so they can buy American products and services. And American companies can’t renew their export-credit insurance policies.
The shutdown was a blow to many companies in the U.S. and abroad that are fighting for revenue in a sluggish global economy. Many foreign companies like Ethiopian Airlines are looking to do business with trusted American suppliers, while U.S. companies are searching abroad for new customers.
A strong dollar and weaker growth hamper those efforts. U.S. exports of goods and services were down 3.5% from a year earlier in the first seven months of 2015. Exports fell 3.2% in August, according to the Commerce Department.Declining exports, combined with a lack of U.S. Ex-Im Bank funding, is “a double-whammy,” said David Ickert, finance chief of Air Tractor Inc., which makes small aircraft for the agriculture industry. Softer prices for crops such as soybeans have growers in places like Brazil and Argentina ordering less equipment, he said.Air Tractor, based in Olney, Texas, typically uses export-credit insurance from the U.S. Ex-Im Bank. Foreign customers typically account for over half of the company’s sales, but Mr. Ickert expects that figure to drop to 30% this year. “There are definitely some multiple headwinds we’re facing right now,” he said.
Many foreign companies say they can’t secure financing from commercial banks without some kind of government-backed financing or guarantee, which most developed countries offer through their own Ex-Im banks.Ethiopian Airlines’s Mr. Gebremariam said he hopes to buy more than two dozen planes from Boeing in coming years, but will consider going to European rival Airbus Group SE if the U.S. Ex-Im Bank stays out of business.“There’s definitely an impact on our expansion and growth,” he said. “Some economies in Africa are considered high risk, so banks wouldn’t be able to finance us directly without Ex-Im backing.”
In a letter sent to Boeing officials last week, Comair Ltd., an aviation company based in South Africa, said a continued lack of U.S. Ex-Im Bank support would force the airline to borrow in foreign currency. But doing so, given the volatility of its local currency, the rand, would “expose Comair to too great an exchange-rate risk on its balance sheet,” said CEO Erik Venter.Boeing said such sentiments reflect private conversations it has been having with customers for months. “They want to keep buying American, but the uncertainty over the future of the Export-Import Bank is forcing them to consider other options,” said a company spokesman. Boeing, a strong proponent and major beneficiary of the bank, expects it to reopen. But an extended shutdown would prompt Boeing to consider moving work offshore to compete for contracts that require Ex-Im backing, Chairman Jim McNerney said last month.General Electric Co. MMGEMM is already doing so, to make it easier for its customers to use Ex-Im funding from other countries, such as Canada, France and Hungary. In Hungary, where GE has manufacturing facilities, the export-import bank is providing a loan to Bresson AS Nigeria Ltd., a power-generation company, to buy GE turbines for new plants in Nigeria, said Barakat Balmelli, a financial adviser to Bresson on the deal.
Hungarian officials are looking to increase their level of new export-import-related lending to €1 billion, or about $1.1 billion, by the end of the year. Last month the government expanded agreements between its Ex-Im Bank and local Hungarian commercial banks.
Ms. Balmelli said Bresson chose to work with Hungary’s Ex-Im Bank partly because of the U.S. shutdown. “You have other countries changing their policies to accommodate these new business opportunities while the U.S. is just fiddling about,” she said.
Last week, the U.S. Ex-Im Bank’s Republican supporters moved to bring the bill reauthorizing the bank to a vote. The procedure would force a vote on the bill, which is backed by nearly all Democrats and many Republicans, later this month.
Meanwhile, small U.S. companies, which can’t relocate or move jobs overseas, are feeling the brunt of the bank’s closure. W.S. Darley & Co., a maker of firetrucks and related gear, said the shutdown already has cost it a contract worth about $7 million.
The customer’s loan didn’t get final Ex-Im Bank approval, and since W.S. Darley’s contract was contingent on that financing, “that sale could just be gone,” said Chief Operating Officer Peter Darley.
With projects falling out of the pipeline, employees at the Itasca, Ill., company are worried about their jobs, he said. “It hurts us. We had a lot of good momentum,” he said, referring to building firetrucks for foreign cities and towns.
“We might be losing projects we’re not aware of,” he said. “If a buyer knows that Americans don’t have an open Ex-Im, they might not even knock on the door, or invite us to the bid table.”
Mary Howe, president of Howe Corp. in Chicago, relies on the Export-Import Bank of the United States for credit insurance.
The fate of the Export-Import Bank of the United States, a key lender for many small companies that do business overseas, again hangs in the balance.
The bank’s fund runs out Sept. 30. While the bank’s charter technically expired June 30, it continues to service loans with terms of up to 18 years. Adding to the drama, the U.S. government could potentially shutdown Oct. 1 if a budget agreement is not reached. However, the bank’s reauthorization is not directly tied to the federal budget process.
Known as “Ex-Im” for short, the bank is a financial lifeline and safety net for many small businesses that export goods in foreign markets than can be risky. The bank provides loans and insurance to support exports. President Barack Obama has been a vocal supporter of renewing Ex-Im’s funding, calling the move a “no brainer” over the summer.
For small business owners such as Mary Howe, the potential closure could reduce her access to working capital. Howe’s family business, Howe Corp. in Chicago, exports up to 40 percent of its industrial refrigeration equipment to places including Central America and Canada.
And if the Ex-Im Bank’s funding isn’t renewed? “Our backup plan is to self-fund; it’s going to get tight,” Howe said.
The Senate voted in July to fund Ex-Im as part of a longer-term highway bill, which has since moved to the House for consideration.
The vote in the U.S. Senate on the bill was a strong signal of bipartisan support for the Ex-Im bank and “businesses and workers that we have empowered in the past to grow their exports,” the bank’s Chairman Fred P. Hochberg said in an email statement to CNBC. Ex-Im Bank has been funded for some 80 years.
Since Ex-Im’s charter expired in June, it has not been able to make or guarantee any new loans, or extend insurance, partly due to congressional disagreement over who receives funding from the bank. The financial institution did $20.5 billion in financing last year.
Ex-Im Bank’s small-business authorizations in fiscal year 2014 were more than $5 billion, as measured by total dollar volume, which is nearly 25 percent of the total-dollar volume of overall authorizations.
The bank approved more than 3,300 small-business authorizations, nearly 90 percent of the total number of Ex-Im Bank authorizations.
The remaining $15.5 billion supports exports at other big corporations—including General Electric, which announced last week it would move about 500 U.S. jobs overseas to avoid losing business to foreign competitors, due to uncertainty about the bank’s charter. GE says 400 of the 500 positions will now be based at its facility in France, dependent on the company’s winning bids. The additional 100 jobs currently are in Texas, but will move to Hungary and China.
“Our customers rely on export credit agencies, like U.S. Ex-Im, to finance their critical power projects,” said Jeff Connelly, vice president of supply chain at GE Power & Water, in prepared remarks.
But critics, including House Financial Services Committee Chair Jeb Hensarling, Republican of Texas, see the bank as a form of corporate welfare. “Most of this goes to very successful, well-heeled companies that don’t need the help in the first place,” Hensarling told CNBC over the summer.
Andrew Harrer | Bloomberg | Getty Images
Still, the future of the bank is a “huge issue” for small companies, according to Morrison Textile Machinery Co. in Fort Lawn, South Carolina. President Jay White says Ex-Im allows the company, which designs, manufactures and installs textile machinery globally, to insure its overseas business on a rolling basis.
“If I can’t get Ex-Im insurance, I am taking on credit risk myself—the profit on my job would be eaten up if I get commercial credit insurance,” White says. “This overseas credit support is very important to my business,” he says.
And while Ex-Im Bank’s charter technically has expired, it will remain operational through the end of the month and continues to service existing loans. The bank’s funding lapse coincides with a potential government shutdown if a congressional continuing resolution is not passed to keep the government operational.
You know things are bad, when I have to cite a left leaning newspaper such as the NY Times, as an information source bashing Republican Party. Yet, the author of the OP-ED below, does make some valid points. Rather than go into additional explanations on this issue, I simply would like to pose a few questions to let the readers think and decide for themselves. These questions will address both pros and cons of the issue. Answers will be published in the next post.
There are overwhelming votes in both the House and the Senate to pass the Ex-Im reauthorization, yet a hand-full of congressmen from the Tea Party is blocking the reauthorization bill in the committee. What does this say about our Democratic process?
Whose interests are these Tea partiers serving?
Why can’t large companies such as Boeing and GE finance exports themselves rather than lose orders?
What would be an estimated annual impact of the Ex-Im shutdown?
Since US Ex-Im financing represents less than two percent of annual US exports, why do we care if the Bank goes away?
“At a time when we want to compete around the world, it is hard to believe what is happening in the U.S. Congress,” said Jeff Immelt, the chief executive of General Electric.
“The ultimate irony is that we are on the verge of an American manufacturing renaissance,” bemoaned Jim McNerney, the chairman of Boeing. “Yet this action is causing companies to start looking outside the U.S. instead.”
“People complain that the bank only helps big companies,” said Doug Oberhelman, the chairman and C.E.O. of Caterpillar. “A lot of our suppliers are small. They don’t export, but we do. And if we aren’t exporting, they aren’t selling to us.” He added, “I find it staggering that we would put highly paid export-oriented jobs at risk.”
What Oberhelman finds “staggering,” Immelt finds “hard to believe” and McNerney finds ironic is the refusal of Republican extremists — led by the House Financial Services Committee’s chairman, Jeb Hensarling — to allow a vote on the reauthorization of the Export-Import Bank of the United States, a vote that would pass in a landslide. The Ex-Im Bank, which insures and sometimes finances export sales, had to stop making deals at the end of June, when its reauthorization deadline came and went.
Although the Ex-Im Bank still exists, it has been reduced these days to managing its portfolio, rather than underwriting or insuring new deals. According to Boeing, its foreign rival Airbus, which can tap not one but three export credit agencies, is spreading the word to potential aircraft customers that Boeing can no longer compete when bids require sovereign insurance. That is hardly the only such example.
The damage this is doing to our economy is starting to become clear. In recent weeks, Boeing, America’s largest exporter in dollar volume, made two sobering announcements: first, that Asia Broadcast Satellite canceled an $85 million satellite contract expressly because there was no Ex-Im support. (Boeing is hoping to renegotiate.) More recently, Kacific, a Singapore-based satellite company, told Boeing not to bother bidding on a satellite contract, again because of a lack of Ex-Im financing.
As a result, McNerney told me, “layoffs in the hundreds” have taken place in Boeing’s satellite division.
This week, it was G.E.’s turn to make Ex-Im-related news. First, it said it would move 400 jobs to France to manufacture — and export — gas turbines, and 100 final assembly jobs to Hungary and China. Then it said it would create a new turboprop center in Europe that would employ up to 1,000 people. In both cases, G.E. said the moves would allow the company to take advantage of European export credit agencies.
When I spoke to Immelt, McNerney and Oberhelman, whose company also uses the agency, they all sounded astonished that this important tool, which they need to compete with companies abroad, was being taken away for purely ideological reasons.
“If no other country had export financing, that would be one thing,” said Immelt. “But that’s not where the world is. What you are really doing is helping Siemens and China Rail” — companies that rely heavily on their countries’ export financing. Immelt told me that G.E. currently has $11 billion in potential deals that require export credit agency financing. That’s real money, even for General Electric.
McNerney pointed out that many big deals require export financing for the bid to even be considered. He also noted, ominously, that 10 to 15 percent of Boeing’s aircraft exports are dependent on Ex-Im support. Losing that business would be devastating for the company, and its employees.
When asked about the accusation from the right that the Ex-Im Bank is a classic case of government picking winners and losers, Oberhelman said that “if this doesn’t change, we’re all going to be losers.”
The anti-Ex-Im Bank faction is having a glorious time mocking the G.E. and Boeing announcements. A spokesman for Heritage Action for America, the conservative think tank leading the charge, described G.E.’s moves as “multinational crony capitalism.” Hensarling issued a statement claiming Boeing could finance the satellite deals itself to prevent layoffs; “it just chooses not to.”
And an unidentified financial services committee staffer told Politico that the loss of 500 G.E. jobs was a drop in the bucket for a company that employs 136,000 people in the U.S.
That heartless quote reminded me of an anecdote in “Confidence Men,” Ron Suskind’s book about the Obama administration’s financial team during the president’s first term. Some of Obama’s top advisers wanted to let Chrysler fail. But in a critical meeting, Ron Bloom, a former adviser to the United Steelworkers who was a member of Obama’s Auto Task Force, said, “Mr. President, these are the reasons we can’t kill this company. The damage to these communities and people will never be undone.”
Chrysler was ultimately saved because the president’s advisers suddenly understood that it was their role to save jobs, not to sacrifice them on the altar of economic purity. What will it take for the Republicans to come to the same realization.
WASHINGTON — It’s tempting to celebrate the demise of the Export-Import Bank, whose authority expired last week. The bank, which subsidizes American exports, is held up by its congressional critics as an example of crony capitalism.
Among the companies lobbying to keep it going were General Electric, whose revenue was almost $150 billion last year, with a profit of $15 billion. Why, opponents ask, does it need government help? Yet the odds are that the bank will rise from its death bed and be reauthorized. The congressional politics are intense — the political right has a lot vested in killing the bank — and could affect future congressional leadership. The process will be messy.
The theoretical case against Ex-Im is compelling: Corporate welfare isn’t among the more pressing claims for government assistance. In practice, the argument breaks down: The bank is a job creator at no cost to the taxpayers.
Started by Franklin D. Roosevelt, it provides direct loans and loan guarantees at low interest rates to foreign entities to buy American products.
Many countries require this kind of support as a condition for importing American goods, and in many cases these are transactions that private banks won’t undertake.
Most other nations have export credit agencies and some, especially China, are much more aggressive about selling abroad than the United States.
Last year, the bank returned $675 million to the United States Treasury, mostly from the fees and interest it charges on loans. The deals it underwrote helped create more than 160,000 jobs. The default rate was less than 1 percent.
Critics contend that a big chunk of Ex-Im’s lending goes to a few large companies such as Boeing and G.E. There is some truth to that claim, though Commerce Secretary Penny Pritzker says, “They’re forgetting about the supply chains, the thousands of small- and medium-size companies that benefit.” G.E. gets Ex-Im Bank assistance for projects such as locomotives for Angola or a water project for Cameroon, which are among the dozens of countries that require export credit funding, and where private financing wouldn’t be available.
Nonetheless, killing the bank has become a cause célèbre for conservative policy institutions and some politicians, who oppose a government program that benefits big business and is supported by President Obama.
The presidential candidate Ted Cruz and other Republican leaders are making defunding the bank a conservative litmus test. Last year, Gov. Rick Perry of Texas was a big promoter of the bank, which he called a job creator in his state. In May of this year, as a presidential candidate, he came out against reauthorization.
The congressional politics are byzantine. A solid majority in both houses of Congress supports the bank. In a procedural vote last month, it was backed by 65 senators, enough to overcome any filibuster; opposition came from mainly conservative Republicans and Bernie Sanders, the independent Socialist from Vermont who is running for president.
In the House, opponents, led by the Financial Services Committee chairman, Jeb Hensarling, don’t want a floor vote, arguing that a majority of the Republican caucus wouldn’t stand with Ex-Im.
Mr. Hensarling has leadership ambitions and, hearing his footsteps, other party leaders have flipped and now oppose defunding; The House speaker, John A. Boehner, is waffling. Associates say he doesn’t relish a fight with his caucus’s right wing, especially as similar battles are likely later over issues such as raising the debt ceiling.
Senate supporters of the bank will meet with the president this week to map strategy and what changes in the authorization would be acceptable. The most likely course is to attach Ex-Im to a “must pass” bill, likely the highway authorization, and send it to the House where there are enough votes to pass it.
If that succeeds, the critics of crony capitalism can easily find new targets. The United States tax code is a gold mine of corporate welfare.
Senator Maria Cantwell, Democrat of Washington, tied a vote on trade to a vote on extending the Export-Import Bank.CreditAndrew Harnik/Associated Press
WASHINGTON — In 2013, the impoverished African nation Cameroon teamed with General Electric and the Environmental Chemical Corporation, which is based in Burlingame, Calif., to begin work on a $668 million drinking water project for its thirsty capital, financed with loan guarantees from the Export-Import Bank of the United States.
But as the project moves toward its larger second phase, the threatened demise of the Export-Import Bank, a 70-year-old federal export credit agency, is rippling across Cameroon. The water project is a potential victim of an effort by conservative Republicans to kill the bank.
The Ex-Im Bank reaches a critical moment on Friday: Congress must be notified 35 days in advance of all projects of more than $100 million, and with powerful Republicans bent on letting the bank die when its authorization expires on June 30, all the projects frozen over that review period would die with the bank.
While the bulk of the Ex-Im Bank’s financing is used to support the sale of things like Boeing jetliners to companies abroad, projects like Cameroon’s are also animating a dispute in Congress that is reaching a critical juncture this week.
Senators Maria Cantwell, Democrat of Washington; Heidi Heitkamp, Democrat of North Dakota; and Lindsey Graham, Republican of South Carolina, halted Senate consideration of a major trade bill Wednesday, saying they would try to block a final vote on granting President Obama expanded trade negotiation power until they secured a vote on extending authorization for the Ex-Im Bank beyond June.
Their stand threatens the trade bill. Ms. Cantwell and Ms. Heitkamp are among fewer than a dozen Democrats supporting trade promotion authority. Mr. Obama needs their votes to break a filibuster supported by most Senate Democrats.
Ms. Cantwell and the other senators in her group accuse conservatives of sacrificing American jobs on the altar of what they portray as an ideological crusade.
“I don’t plan to start moving ahead until we stop catering to this minority group that doesn’t support the basic tools that the American people want,” Ms. Cantwell pledged.
She faces an uphill fight. Senator Mitch McConnell, Republican of Kentucky and the majority leader, said he personally opposed Ex-Im’s reauthorization, but he has promised a vote on the matter, which would pass if it comes to a vote in the Senate.
In the House, though, conservatives say a majority of Republicans now oppose reauthorizing the bank. On Thursday, the 170-member Republican Study Committee — a conservative House group — will come out formally in favor of its extinction.
“All we have to do is nothing,” said Representative Raúl Labrador, Republican of Idaho. “I feel pretty good about our prospects.”
Conservative groups such as the Koch brothers’ Freedom Partners, the Heritage Foundation and Club for Growth have demanded an end to the Ex-Im Bank, deploring it as crony capitalism that mostly serves the interest in big exporters like Boeing, General Electric and Caterpillar. They point to studies that contend that the bank does not create jobs, but merely moves them from unfavored companies to favored ones.
Virtually every Republican presidential candidate has been pulled into the campaign to kill the bank.
Representative Justin Amash, Republican of Michigan, said House Speaker John A. Boehner of Ohio could join Democrats to save the bank, but, Mr. Amash warned, “he does so at his own peril.”
Supporters of the Ex-Im Bank say the toll of that campaign is beginning to come into focus. G.E. said this week that a $350 million deal to build locomotives for Angola in Erie, Pa., is about to be lost, with 1,800 jobs.
Boeing says that it will be forced to cede deals in Asia to its only competitor in the wide-body passenger jet business, Airbus, which is based in France.
The looming cutoff of money could compel Cameroon to turn to China, which has already made a competing $850 million bid complete with financing from Beijing’s export credit agency. Executives at G.E. are scrambling for a Plan B, moving the work from its water technology facility in Minnesota to Canada or Hungary, where the company has other plants supported by those countries’ credit agencies.
“You’re talking about a country in sub-Saharan Africa,” said Heiner Markhoff, president and chief executive of G.E.’s water and process technology unit. Commercial banks “aren’t willing to take the risk without an export credit agency. It’s almost contingent on getting to the table.”
The Cameroon project shows the complexity of the issue. Ex-Im opponents say companies as large and powerful as G.E. and Boeing do not need a federal backstop to persuade private banks to finance export projects.
Mr. Markhoff said to some degree that was true — but that conservatives were missing the consequences for American companies that lack G.E.’s deep pockets and connections around the world.
The Environmental Chemical Corporation, with G.E.’s help and Ex-Im loan guarantees, struck the $668 million, three-phase deal with Cameroon’s government, which wanted an American government entity involved as well in what is a public water project.
The first phase — 10 mobile water treatment plants installed in Yaoundé, the capital, as an emergency measure — is done.
Phase 2 — a $532 million effort to move the mobile facilities to where they are needed in southwestern Cameroon while building permanent water plants in the capital — was scheduled to begin soon.
The competing Chinese proposal is part of an effort by Beijing to gain strategic influence in Africa. Its $850 million bid was substantially higher than the cost of the American project, but its financing is not in doubt.
Cameroon’s prime minister, Philémon Yang, has asked the Chinese and American teams to present side-by-side studies of the remaining work, Mr. Eber said. Environmental Chemical Corporation officials have tried to play down the Ex-Im developments in Washington, but he noted that the American study was now delayed pending the showdown.
G.E. officials said that without the support of the Ex-Im Bank, the company could still leverage its global operations to attract government financial backing elsewhere, probably in Hungary or Canada. But that would lead to moving work to the countries where that financing is available.
That could mean leaving a midsize company like the Environmental Chemical Corporation and much smaller suppliers behind. “We have 43 different suppliers in different states for this project,” Mr. Markhoff of G.E. said. “This is not about ‘big corporate welfare.’ ”
Most big corporations follow global development trends. Where there is economic growth, there is opportunity, and the companies that can predict where growth will take place are better positioned to take advantage of it. That is the reactive approach to economic development.
In the last few years, a more powerful dynamic has gained traction. CEOs are proactively engaging with emerging market government to spur economic development and create opportunities for their companies. In the fast growth markets of Asia, Africa and Latin America, national governments are responding to a more empowered citizenship, and looking for corporate partners to achieve their development goals. Companies that fill that need effectively are doing more than reacting to development. They are playing development to win.
General Electric is a good example. Four years ago, GE initiated a strategy to compete more effectively in Africa, one of the fastest growing regions in the world in terms of GDP. GE did more than take advantage of growth as it came. The company’s leadership moved proactively to accelerate it and shape it. “If we see a country where reward outweighs the risk, we want to invest,” CEO Jeff Immelt says in Success in Africa. GE spent months understanding the development priorities of countries where it planned to invest. Partnering with those governments, the company sought out discussions at the ministerial and head-of-state level to identify and work on the country’s most significant infrastructure challenges. The results are encapsulated in a “Country-Company MOU,” which describe key challenges the country faces and the role GE will play in helping meet them. For example, the two parties identified the challenge of national electrification and committed to work together to bring $10 billion of investment and 10,000 megawatts of new power online, along with local manufacturing and training. Emerging market infrastructure is a segment many Western companies have ceded to China, but GE is winning contracts because it is playing development to win.
IBM is doing something similar in data analytics. CEO Ginni Rometty took the top job in 2012, and identified Africa as a locus of technological growth early in her tenure. IBM identified a set of “Grand Challenges” facing the continent that could be addressed through superior data analytics, including water and sanitation, energy management, financial services, transportation, public safety, healthcare, and agriculture. Last month, IBM launched a dialogue with the government of Nigeria. It was co-hosted by the Minister of Technology and included ministers from the cabinet charged with meeting the Grand Challenges IBM identified. Rometty, on her second trip to the region in three months, led the session for the company. IBM is speeding the region’s growth, and helping shape its direction. That is playing development to win.
I recently spent some time with Bob Diamond, the former CEO of Barclays. Now head of Atlas Mara, he’s positioning the investment company to play development to win. Earlier this year, they raised $325 million in the public markets and this month acquired BancABC, a bank with operations in Botswana, Mozambique, Tanzania, Zambia and Zimbabwe. “Governments want banks who will lend to businesses and homeowners,” Bob explains, “That’s what we intend to do. The private sector is growing in Africa and we plan to enable that in multiple countries.”
Playing development to win does have costs. It requires an up-front investment of money and time to understand the growth challenges within each host country or region and to establish the government and civil society relationships needed to act on those challenges. It also demands senior management and board involvement. Companies playing development to win have CEOs traveling to the region 2-3 times per year, supported by engagement of the full management team. Furthermore, the returns on investment are long term. For a large company, it’s common to invest for a decade or more before shareholders see material earnings. The anticipated scale of new business has to be large enough to warrant that.
Playing development to win should not be mistaken for corporate social responsibility (CSR). Sustainability and core values support any great company, but expanding long-term earnings by meeting big development challenges takes more. At a company that’s playing development to win, business units are leading the effort, enabled by sales, marketing, finance, supply chain management, CSR, and social investment.
Some might see playing development to win as cynical or undermining the cause of inclusive growth. It’s neither. Cynicism would be to bet against development. The companies playing development to win need the institutions and policies with which they are engaging to yield tangible results. If the government of Nigeria fails to deliver widespread, low-cost power, the fallout for GE will be significant.
Playing development to win will be the hallmark of great companies operating in emerging markets. Over the next decade, they will be the companies addressing the most pressing challenges in countries where the potential for growth is ripe. As a result, they will shape the landscape in which they compete, attract and retain superior talent, build stronger brands and enjoy stronger relationships with customers in the fastest growing global markets.
MoMBIT (Museum of Merchant Banking & International Trade)May 18, 2023
"Shrouded in secrecy, steeped in legend, they are the most fascinating and enigmatic of all aristocracy. They are the merchant bankers - the fabulous financiers whose family decisions have shaped the fates of kings and nations." Joseph Wechsberg, Merchant Bankers 1966
Having extensively studied international trade and its finance, we have realized the enormity of the impact this subject has had on development of humanity. Yet very little has been done to focus the attention of ordinary members of our society on the truly fascinating history of the subject.
Thus we thought a comprehensive, world-class museum may be a good start. We hope that once open, this museum will educate, inform and empower the visitors to strive and create additional economic impact through trade and finances, two pillars on which our society has been built and which will carry it into the future.
What's more, our museum will be state-of-the-art and will utilize latest advances in virtual reality, remote access information technologies and interactive engagement. Using MoMBIT's exhibits and archives as a platform, we will also launch educational centers to help samll and medium size companies seeking to expand their international trade operations and to attract students to the amazing fields of trade and finance.
International Project and Trade Financing
international Merchant Bankers providing Project and Export Finance services to private enterprises and government-owned companies
Tuesday, March 12, 2019, 3 p.m to 5 p.m. Law Offices of McCarter & English,
Alexander Gordin
Valerie Antoinette
Fluent In Foreign Business 