In an era of trade deficits and a falling dollar, is it too late for U.S. companies to secure a foothold in the highly coveted foreign marketplace? Not so if one carefully reviews the development bank business, according to a new study published by the Washington-based Development Bank Associates.
The consulting group's report, Development Bank Irrigation Market, 1986-1990, recounts the unique ins and outs of an $11 billion market earmarked by major regional and multilateral banks over the course of the next five years for the 100 (plus) irrigation projects envisaged.Demand by Third World countries for equipment and technical expertise is mounting as the gap between rich and poor nations widens. According to an executive from Caterpillar Inc. of Peoria, Ill., foreign sales demand was the highest in the 1960s and 1970s, when our company could not even satisfy demand. However, competition and resources created a formidable industry problem in the 1980s: product lines have been cut back and dealer inventories are swollen.
Major suppliers voice their concern about the cumulative effect of Third World debt, which has ballooned in recent years. Outstanding obligations to Western creditors on hard terms erode foreign exchange reserves, leaving little cash for capital investments such as equipment purchases.
The DBA report forecasts, however, developing countries' demands for major earth-moving equipment over the next five years in a more optimistic light: $700 million (tractors), $650 million (vehicles), $500 million (earth- moving equipment) and $555 million (irrigation equipment).
If equipment suppliers, consultants and engineers are willing to be patient with lengthy bidding procedures and inherent delays in project preparation, substantial sales can be made, according to the report.
Historically, U.S. companies are notorious for their complaints about overseas competition and lack of information on development bank business.
Although procurement information is dispersed among offices in a labyrinth of public buildings within and outside the United States, it is not any easier for foreign suppliers who do not have the advantage of two major bank sources, the Inter-American Development Bank and World Bank Group, on their soil.
Worldwide competition remains keen for these Third World markets and intensifies each year as the dollar volume increases steadily and more foreign exchange components are required.
Each creditor bank carefully reviews the public sector budgets of the country requesting the loan, which is one main reason why commercial banks agree to share more of the risk.
This practical reference guide is an example of an effort to consolidate relevant information for industry experts.
Although it is not a primer for a company just starting out in the international marketplace, most suppliers will be able to probe the report for many helpful hints, states Bob Sears, member of the Irrigation Association.
The 350-page document features numerous charts and tables indexed by product, country, creditor bank and sub-sectors.
Sample prequalification and bidding documents reveal what type of information governments and banks require. In-country names and addresses of implementing agencies for the 61 countries covered by the report are included.