Choice of partners

When you have decided to establish a manufacturing facility or to invest in resource development in a foreign country, you face the task of choosing a partner. We at Canada Wire believe this to be the most important consideration in the establishment of a joint venture. Since our company has a policy of taking a minority interest in overseas partnerships, you will understand the importance we place in choosing a partner.

Finding an appropriate partner requires a careful identification and selection process. The key to making the right choice is identifying a common interest on both the short and long term. Complementary characteristics and complete mutual trust are also crucial. Our company's experience indicates that a period of one year or understanding or the absence of common interest can be identified during the course of an extendive and extended evaluation process. It may happen, for example, that while partners share common short-term goals, their long-term goals conflict. Differences can either be resolved or be the basis for withdrawal from proposed partnership.

Local management

Our company believes that the joint venture should be managed by local people. They are more sensitive to the political, social and economic conditions in which the company must operate and they are better able to represent the company to the customers, the government and the people. While our company may provide short-term expertise in some aspects of the business, reliance is placed on local management. It is therefore important that partners possess first-class management skills.

Partnership

No partnership agreement can be drafted by lawyers and accountants and be made to work without a firm commitment from the people involved. There must be a consensus between the partners and they must be able to resolve differences as they arise.

People from different cultures can work together in our Nigerian joint venture, the partners are Nigerians, Hong Kong Chinese and Canadians. The venture works well, one reason being that the partners continue to need each other. This is a necessary characteristic of all joint ventures.

We expect a partner to be an participant in the business, not merely a businessman interested in investing money alone.

You will, of course, need your own lawyer in the host country and you should ensure that your interests are represented in the company's Board of Directors.

Financial considerations

Before making a foreign investment, you ensure that your domestic finances are in order. The foreign investment, particularly in the early years, may require more funds than initially anticipated. The partner should therefore have a strong financial position also.

It is important for you and your partner to agree on the action plan for the early years of operating performance.

You must respect the foreign exchange policy and regulations of the host country and have them in mind when raising a portion of the equity in local currency. Using a portion of local currency reduces your foreign exchange risk. Canadian banks are valuable advisers on the matter of financing.

Attention also should be given to the host country tax laws and regulations. Advice should be sought on corporate tax rates, withholding taxes, sales taxes, the taxing of export income, tax incentives for new business and tax treaties between Canada and the host country so that your return on investment does not suffer from double taxation.