international contracting survey june 2010

7/29/2019 International Contracting Survey June 2010

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International Contracting - market comparisons

June 2010



©IACCM 2010. All rights reserved

Table of Contents

Introduction ............................................................................................................................................ 3

Demographics ......................................................................................................................................... 4Results ..................................................................................................................................................... 6

Overall experience of doing business with customers, suppliers or partners in other countries (1

(very difficult to do business with) 5 (easy to do business with))....................................................... 6

For each country that a respondent identified as ‘difficult’, they were asked to indicate the areas

of business that represent the biggest problems. The following slides show the percentage of

respondents who had both identified a country as ‘difficult’ and had experienced problems the

stated area of business. ...................................................................................................................... 7

Appendix 1; Results by region ............................................................................................................... 12

Appendix 2; Results by Industry ............................................................................................................ 14

Appendix 3; SSON’s interview with Tim Cummins, CEO, IACCM .......................................................... 16




Introduction

The International Contracting Survey was conducted in June 2010 and drew input from 221

participants across a wide range of industries and regions, assessing the relative ease of doing

business in almost 50 of the world’s major markets.

The study asked members with direct experience of negotiating in overseas countries to rate their

experiences on a scale of 1 to 5, where 1 was especially difficult and 5 was positive. IACCM then

asked the participants to identify which of 9 categories of ‘issue’ they had encountered. These

categories were:

Ethics / business culture

Contract or negotiation skills / understanding

Problems with payment

Demands for performance bonds or guarantees

Dealing with licenses Local laws or regulations

Maintaining rights to assets or property

Language

Enforcing contracts

The survey has three major purposes:

1. For the overseas negotiator: the findings will assist in anticipating some of the risks and

issues they need to address or overcome. Of course, it may even mean they decide against a

market entry at all.

2. For the domestic negotiator, the survey offers insight to external perceptions of theircountry and equips them to think about how they may adddress the fears that their

counterpart may have in doing business with them.

3. For government agencies, the findings represent an agenda for improvement.

IACCM plans to dig deeper into the initial results and to capture specific issues. For example, if a

country scores badly on local laws and regulations, what are the precise concerns or experiences

that have generated this rating?

The study has already generated a high level of interest from professionals and the media. It is

anticipated that it will become an annual study to ensure continued awareness for international

negotiators, to provide advice on possible solutions and to monitor progress on improvements.




Demographics

Aerospace /Defense, 8%

Banking /

Insurance /

Financial, 4%

CPG / Retail, 1%

Electronics, 2%

Engineering /

Construction / Real

Estate, 9%

Healthcare /

Pharma /

Chemicals, 2%Legal, 5%

Manufacturing /Processing, 6%

Oil / Gas /

Minerals /

Utilities, 20%

Public Sector /

Government, 4%

Services /

Outsourcing /

Consulting, 13%

Technology /

Software, 14%

Telecommunicatio

ns, 8%

Transportation

/ Logistics, 1%Other, 6%

What industry do you work in?

South/Central

America, 4%

Europe, 31%

Middle

East,

9%

Africa, 3%

Asia, 13%Australasia, 5%

North America,

35%

What geographic region are you based in?




43%

33%

24%

Please indicate the context in which you are answering

this survey

I mostly perform or supportSales Contracting / Commercial

negotiation or contract

management

I mostly perform or support

Procurement / Sourcing

negotiation or contract

management

I perform or support both Buy-

Side and Sell-Side negotiations

or contract management




Results

Overall experience of doing business with customers, suppliers or partners

in other countries (1 (very difficult to do business with) 5 (easy to do

business with))

0.00 0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

Angola

Nigeria

Congo

Ukraine

Russia

Kazakhstan

Venezuela

ChinaSaudi Arabia

Indonesia

Israel

Kenya

Turkey

India

Egypt

Vietnam

Mozambique

Brazil

Argentina

France

PolandTaiwan

Mexico

United Arab Emirates

South Africa

Thailand

Japan

Italy

South Korea

Philippines

Czech Republic

Malaysia

Spain

Germany

Norway

Finland

Denmark

Switzerland

Sweden

United States

United Kingdom

Netherlands

Australia

Singapore

Canada

Rating Average




For each country that a respondent identified as ‘difficult’, they were asked

to indicate the areas of business that represent the biggest problems. The

following slides show the percentage of respondents who had both

identified a country as ‘difficult’ and had experienced problems the stated

area of business.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

S i n g a p o r e

U n i t e d S t a t e s

U n i t e d K i n g d o m

D e n m a r k

C a n a d a

A u s t r a l i a

N o r w a y

T h a i l a n d

S a u d i A r a b i a

J a p a n

F i n l a n d

S w e d e n

S o u t h K o r e a

S w i t z e r l a n d

M a l a y s i a

G e r m a n y

I s r a e l

N e t h e r l a n d s

F r a n c e

U n i t e d A r a b E m i r a t e s

S o u t h A f r i c a

T a i w a n

M e x i c o

S p a i n

K a z a k h s t a n

P o l a n d

T u r k e y

C z e c h R e p u b l i c

I t a l y

C h i n a

V i e t n a m

K e n y a

E g y p t

A r g e n t i n a

R u s s i a

I n d o n e s i a

N i g e r i a

B r a z i l

I n d i a

M o z a m b i q u e

U k r a i n e

P h i l i p p i n e s

A n g o l a

V e n e z u e l a

C o n g o

Ethics / business culture

0%

10%

20%

30%

40%

50%

60%

70%

S i n g a p o r e



D e n m a r k

C a n a d a

A u s t r a l i a

N o r w a y

T h a i l a n d


J a p a n

F i n l a n d

S w e d e n

S o u t h K o r e a


M a l a y s i a

G e r m a n y

I s r a e l


F r a n c e



T a i w a n

M e x i c o

S p a i n

K a z a k h s t a n

P o l a n d

T u r k e y


I t a l y

C h i n a

V i e t n a m

K e n y a

E g y p t

A r g e n t i n a

R u s s i a

I n d o n e s i a

N i g e r i a

B r a z i l

I n d i a

M o z a m b i q u e

U k r a i n e


A n g o l a

V e n e z u e l a

C o n g o

Contract or negotiation skills / understanding




0%

10%

20%

30%

40%

50%

60%

S i n g

a p o r e

U n i t e d S

t a t e s

U n i t e d K i n

g d o m

D e n m a r k

C a n a d a

A u s t r a l i a

N o r w a y

T h a i l a n d

S a u d i A

r a b i a

J a p a n

F i n l a n d

S w

e d e n

S o u t h K o r e a


M a

l a y s i a

G e r m a n y

I s r a e l


F

r a n c e

U n i t e d A r a b E m

i r a t e s

S o u t h

A f r i c a

T

a i w a n

M

e x i c o

S p a i n

K a z a k

h s t a n

P

o l a n d

T

u r k e y


I t a l y

C h i n a

V i e t n a m

K

e n y a

E g y p t

A r g e n t i n a

R

u s s i a

I n d o

n e s i a

N

i g e r i a

B r a z i l

I n d i a

M o z a m

b i q u e

U k r a i n e

P h i l i p

p i n e s

A

n g o l a

V e n e

z u e l a

C

o n g o

Problems with payment

0%

5%

10%

15%

20%

25%

30%

35%40%

45%

50%

S i n g a p o r e

U n i t e d S

t a t e s


D e n

m a r k

C a

n a d a

A u s

t r a l i a

N o

r w a y

T h a

i l a n d

S a u d i A

r a b i a

J

a p a n

F i n l a n d

S w

e d e n

S o u t h K

o r e a

S w i t z e

r l a n d

M a l

a y s i a

G e r m a n y

I s r a e l


F r a n c e


S o u t h A

f r i c a

T a

i w a n

M

e x i c o

S

p a i n

K a z a k h s t a n

P o l a n d

T u r k e y

C z e c h R e p

u b l i c

I t a l y

C

h i n a

V i e

t n a m

K

e n y a

E g y p t

A r g e

n t i n a

R

u s s i a

I n d o n e s i a

N i g e r i a

B r a z i l

I n d i a

M o z a m b i q u e

U k

r a i n e


A n g o l a

V e n e z u e l a

C

o n g o

Demands for performance bonds or guarantees




0%

10%

20%

30%

40%

50%

60%

S

i n g a p o r e


U n i t e d

K i n g d o m

D e n m a r k

C a n a d a

A u s t r a l i a

N o r w a y

T h a i l a n d

S a u

d i A r a b i a

J a p a n

F i n l a n d

S w e d e n

S o u

t h K o r e a

S w

i t z e r l a n d

M a l a y s i a

G e r m a n y

I s r a e l


F r a n c e

U n i t e d A r a b

E m i r a t e s


T a i w a n

M e x i c o

S p a i n

K a

z a k h s t a n

P o l a n d

T u r k e y

C z e c h

R e p u b l i c

I t a l y

C h i n a

V i e t n a m

K e n y a

E g y p t

A r g e n t i n a

R u s s i a

I

n d o n e s i a

N i g e r i a

B r a z i l

I n d i a

M o z

a m b i q u e

U k r a i n e


A n g o l a

V

e n e z u e l a

C o n g o

Dealing with licenses

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Local laws or regulations




0%

10%

20%

30%

40%

50%

60%

70%

S i n

g a p o r e

U n i t e d

S t a t e s


D e n m a r k

C

a n a d a

A u s t r a l i a

N o r w a y

T h a i l a n d


J a p a n

F i n l a n d

S

w e d e n

S o u t h

K o r e a


M

a l a y s i a

G e r m a n y

I s r a e l


F r a n c e



T a i w a n

M e x i c o

S p a i n

K a z a

k h s t a n

P o l a n d

T u r k e y

C z e c h R

e p u b l i c

I t a l y

C h i n a

V

i e t n a m

K e n y a

E g y p t

A r g e n t i n a

R u s s i a

I n d

o n e s i a

N i g e r i a

B r a z i l

I n d i a

M o z a m b i q u e

U

k r a i n e

P h i l

i p p i n e s

A n g o l a

V e n

e z u e l a

C o n g o

Maintaining rights to assets or property

0%

10%

20%

30%

40%

50%

60%

70%

80%

S i n g

a p o r e


U n i t e d K i n

g d o m

D e

n m a r k

C

a n a d a

A u

s t r a l i a

N

o r w a y

T h

a i l a n d


J a p a n

F

i n l a n d

S w e d e n

S o u t h

K o r e a

S w i t z

e r l a n d

M a

l a y s i a

G e

r m a n y

I s r a e l

N e t h e

r l a n d s

F

r a n c e


i r a t e s

S o u t h

A f r i c a

T

a i w a n

M

e x i c o

S p a i n

K a z a k h s t a n

P

o l a n d

T

u r k e y

C z e c h R e

p u b l i c

I t a l y

C h i n a

V i

e t n a m

K e n y a

E g y p t

A r g

e n t i n a

R

u s s i a

I n d o n e s i a

N

i g e r i a

B r a z i l

I n d i a

M o z a m

b i q u e

U

k r a i n e


A

n g o l a

V e n e z u e l a

C o n g o

Language




0%

10%

20%

30%

40%

50%

60%

70%

80%

S i n g

a p o r e


U n i t e d K i n

g d o m

D e

n m a r k

C

a n a d a

A u

s t r a l i a

N

o r w a y

T h

a i l a n d


J a p a n

F

i n l a n d

S w e d e n

S o u t h

K o r e a

S w i t z

e r l a n d

M a

l a y s i a

G e

r m a n y

I s r a e l

N e t h e

r l a n d s

F

r a n c e


i r a t e s

S o u t h

A f r i c a

T

a i w a n

M

e x i c o

S p a i n

K a z a k h s t a n

P

o l a n d

T

u r k e y

C z e c h R e

p u b l i c

I t a l y

C h i n a

V i

e t n a m

K e n y a

E g y p t

A r g

e n t i n a

R

u s s i a

I n d o n e s i a

N

i g e r i a

B r a z i l

I n d i a

M o z a m

b i q u e

U

k r a i n e


A

n g o l a

V e n e z u e l a

C o n g o

Enforcing contracts



Appendix 1; Results by region

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00

Overall experience of doing business with customers, suppliers or partners in other countries (1 (very difficult to do

business with) 5 (easy to do business with)) Regional Results

Europe

Middle East

Africa

Asia

North America




0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00


business with) 5 (easy to do business with)) Regional Results

Europe

Middle East

Africa

Asia

North America




Appendix 2; Results by Industry

0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00


business with) 5 (easy to do business with)) Industry Results

Engineering / Construction /

Real EstateOil / Gas / Minerals /

UtilitiesServices / Outsourcing /

ConsultingTechnology / Software

Telecommunications




0.00

0.50

1.00

1.50

2.00

2.50

3.00

3.50

4.00

4.50

5.00


business with) 5 (easy to do business with)) Industry Results

Engineering / Construction /

Real Estate

Oil / Gas / Minerals / Utilities

Services / Outsourcing /

Consulting

Technology / Software

Telecommunications



Appendix 3; SSON’s interview with Tim Cummins, CEO, IACCM

SSON: IACCM recently conducted a worldwide study, where Canada emerged as ‘Top Dog’ when it

comes to world trade offering 'the most positive experience of doing business with customers,

suppliers or partners'. Can you tell us how the study was conducted?

Tim: The goal of this study was to look at the relative ease of doing business - broadly from a

contracting and negotiations perspective. We were trying to understand the primary risk

characteristics associated with doing business in major trading nations. We undertook the study by

going out to our members who are engaged in international negotiations and contract management.

All the members approached had direct contracting and negotiations experience and the study was

based upon their experiences - not their prejudices or ideas. We approached 4000 negotiation and

contract members of the association through sending out a web based survey. We weren’t only

looking at the general ranking of a country’s relative ease or difficulty to trade with, we also required

them to benchmark against nine specific criteria - such as business culture, problems with payment

and challenges with legal systems or regulations.

SSON: Where did the idea for the study come from and how did you select the criteria which

decided their ranking?

Tim: The idea originated from conversations I had with a senior Russian diplomat about the

challenges of doing business in Russia and the current political interest in making Russia a more

business-friendly environment for overseas companies. We compiled the nine criteria based on

follow-on conversations with IACCM members who deal with Russia - from the point of view of

commercial risk in terms of negotiation, culture and behaviors, but also based upon the integrity and

reliability of the underlying system. We also looked at local laws and regulations and the ability to

enforce contracts etc. The criteria form a series of very real and significant risk factors, which you

should be aware of if you seek to do business overseas.

SSON: Do you have any interesting examples or anecdotes you can share around the complexity

that sometimes exists when doing business with countries like Russia.

Tim: Some of the conclusions of the study were no great shock to people. These days countries

where you encounter problems like corruption and bribery are more visible and well-known. But the

scale of corruption and bribery can be dramatically different – in some places there may be a majorproblem with government officials; in others there could be corruption at lower level. Corruption

can be significantly cleaned up when it comes to senior levels, but there can still be an underlying

problem. For example - challenges of getting things through customs - if you don’t pay someone $50

your shipment will be delayed.

With other countries it has been surprising just how successful they have been in changing local

business culture. Belarus for example is a country which is autocratic; one would assume from many

of its facets and features that it would be rife with corruption, but in fact by presidential leadership,

corruption has been outlawed.




Stories about Russia did not relate to bribery; they are more based on negotiators’ experiences that

may have resulted from the history of the country. For example, they perceive a fundamental lack of

trust, which can lead to quite erratic behaviors within negotiations - where you feel you have

established a good relationship and then suddenly it just plummets for no evident reason. A lack of

basic understanding of the principles behind contracting is another real challenge.

Another interesting story came from one of our members in the insurance industry. He explained

that regulation requires an insurance company to issue policies on watermarked paper, which you

can only get from a government supplier and is often in short supply! In addition to that, the physical

policy must be hand delivered to the policy owner and payment must be made in cash. These types

of local regulations represent quite significant barriers to getting business done. Cash payments also

lead to all sorts of problems when money needs to get to the bank.

SSON: Tim, who came last and were you surprised by the overall result -considering a lot of

organizations are currently moving East when it comes to reducing costs and adding value back

into business?

Tim: The list was made up of 50 countries. At the bottom of the list were three African countries,

with significant issues like bribery and corruption, ethics and a complex business culture. Contract

enforcement was another major issue in each of these.

Many countries in that region impose requirements on incoming Western companies, in order to

ensure a high level of local content. These Western companies are then forced to contract with local

companies, who may not have any particular competence and – in extreme cases - may just be a

front which funds money to government officials. These are the real barriers and obstacles that a

number of countries are wrestling to overcome.

To answer your question about surprise: no, nothing in particular shocked me in these results. But

we did find some interesting facts. For example, the US is struggling in some respects with people’s

perceptions in terms of local law and regulation. The litigious nature of US society, the no-win, no-

fee culture of the legal community, the highly publicized mega settlements – these make outsiders

very nervous and they question whether they want to be subjected to such a system.

I read an interesting article about how the UK has become the location of choice for governing law.

Apparently American companies are now increasingly using the English courts and their trading

partners are pushing them to do so, due to the unpredictability of jury judgments in the US. The

general perception is that the US is a higher risk place in which to reach a resolution on legal cases.

But let’s not exaggerate the problem – they still came in 6th place overall.

The study certainly should cause many who are ‘moving east’ to pause and question whether the

superficial costs are the real costs. Some countries in Asia are excellent choices – Singapore came

second in the survey. But others clearly do have hidden minefields for the unwary. This study helps

to expose some of those minefields and may help companies avoid them.

One of the challenges for the SSON community generally is that the typical driver for outsourcing

tends to be headline cost reductions. What this illustrates is: yes, you might have a dramatic drop in

the cost of transaction, but what is the cost of the relationship and the cost of the added




management time? How much did the problem and resolution cost as a result of those outsourcing

decisions? These costs are often ongoing hidden costs. This can cause the relationship to lead to

disappointment and sometimes to fracture and even fail.

If we look at the behaviors of companies there is a tendency to move first and learn later. Hopefully

our findings will help to change that.

SSON: How did you select the countries which were in the study? I noticed that some of the most

obvious Eastern European countries for trade didn’t feature on the list.

Tim: We started off with a list of 202 countries. Some of the countries are so remote the chances are

that nobody has really had much experience of doing business with them. So we chose the countries

which we knew had a significant volume of international trade. To take an example, Hungary is one

of the countries that didn’t make the list, because the volume and diversity of its role in world trade

is too small. Obviously Hungary has become a significant place in terms of outsourcing, but isn’t that

significant in terms of other international business. We were looking for countries that featureheavily in terms of their import and export activity. Of course, if anyone has specific interest in a

country that was not on our list, the chances are we can establish a similar set of data for it.

SSON: Tim, did you see a big variation on the overall performance of individual states in the US?

Tim: A more detailed research study would probably reveal that to be true, but it was not something

we asked in this survey. I’m sure many people will have very strong preferences and they are

probably right to do so. New York is typically the state people tend to choose for international

contracting because it has more experience with international trade.

There was a very interesting study three or four years ago by a US university, which concluded that aforeign litigant is 30 percent less likely to have the court rule in its favor than a domestic litigant.

SSON: Tim, does this result really matter? Will people take this study seriously and think right I’ll

go to Canada now instead of Singapore?

Tim: The results matter because they generate an additional awareness and additional management

questions. Taking the nine criteria as part of your risk assessment when you’re looking to do

business will help you considerably. For the negotiator the study is an excellent checklist that they

should consider if they look at the commercial risk, opportunity and options of doing business in

different countries. If I was sitting in China and I wanted to do business with countries outside China,

I would certainly be interested in that list, as it reflects the perceptions and experiences that the

counter party may have already experienced.

The question is to what extent can each negotiator or each country address and overcome those

issues? There is real potential in the negotiation space. If you understand and anticipate the issue,

you can generally find a solution. But this survey will be of interest to quite a number of government

agencies as well as corporate management; yes, you can try and address this within a negotiations

context, or try to look at this as a more embedded list for capability change. The list will probably

gain some reasonable levels of attention in those countries which are serious about raising their

level of competitiveness.




SSON: If government agencies within the countries which did not make it into the top 10 are

serious about improving their status, what can they do ?

Tim: Well, they’ll have to understand the issue in a bit more depth. This isn’t an in-depth study in its

current form. The next stage for any government interested in increasing their international business

trade status is to determine what specific issues and local regulations outsiders are encounteringwhich make them feel doing business with that particular country might be difficult or risky.

We are very happy to provide an in-depth study for any government should they be interested.

Governments generally understand that they are increasingly in competition with each other,

particularly at this time of economic uncertainty. Governments all over are recognizing that they

have got to be better at attracting internal investment and increased trade if they want to be

successful. This information was noted by the Foreign and Commonwealth Office in the UK. They are

now looking at re-emphasizing the role of the ambassador to drive British business. They also want

to recruit people from the business world into ambassadorial roles, in order to promote British

trade. The UK came number five; the government’s interest in loosening bureaucracy could push it

higher in the table.

Countries are seeking to address a lot of these points. We are trying to give people data and

information, that can take them beyond just talking and provide them with specific factual insights

on the specific issues that people find make trade difficult. India has been trying to tackle this and

the South African government is taking all the data seriously. The Central Reserve Bank in Brazil is

trying to improve their competitiveness. Not only will we see an interest, but continued action

because countries have to raise their competitiveness.

SSON: Finally Tim, which countries do you predict will increase their status over the next five

years?

Tim: Everyone will improve. But the differentiating factor will be; which countries are extremely

serious about increasing their status? I suspect there will be a lot of well established outsourcing

countries trying to up their game even more. But I’m sure a number of other countries will also be

eager and anxious to move forward.

Next week I’m going to the Czech Business Institute in Prague, because they were very interested in

improving the Czech international business trading status. They are currently number 15 on the list,

but want to raise that level even further. It’s going to be very interesting to see how different

organizations and countries react to this comprehensive table. There are other sources like

Transparency International who look at league tables from a corruption and bribery point of view, or

the WTO that explores legal integrity, but I know of no other that offers such a holistic and

integrated view of the commercial factors that impact business results.

What differentiates this study is that it does take a much wider range (nine commercial factors) into

account and builds them all into one specialist study as opposed to one specialist study focusing on

one subject.

SSON: Great, thanks Tim.

international contracting survey june 2010

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