International Business Festival 2018

LIVERPOOL 12-28 JUNE

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TRADING ACROSS BORDERS: A CHANGING WORLD

Contributed by DWF Law
17 April 2018

When considering international expansion, businesses must overcome many obstacles. But different regions pose different challenges. So what should you bear in mind?

Brexit in the UK and economic tensions around the world have brought international trade into sharp focus, prompting many businesses to assess how their plans for international expansion will be affected and to consider alternative markets overseas.

However, businesses may be wary about expanding into another country in this climate. Whether its mastering a new regulatory regime or securing finance, there is plenty to think about.A Union Flag surrounded by EU flags

DWF recognises this and understands that what may be a challenge in Asia may not be an issue in Europe. So what are the areas to consider?

Policy and Regulatory Context

All businesses will be required to obtain relevant permits and licenses, as well as ensuring compliance with applicable policy and regulation. This may include environmental licences, construction permits or complying with financial regulations (eg taxation, VAT and accounting). Navigating these new regulatory regimes can be a long and complex process, often hindered further by a language barrier and different hours of work.

The TMF Group's Financial Complexity Index 2017 identified the most complex jurisdictions for accounting and tax compliance as Turkey, Brazil and Italy. As such, businesses may think twice about expanding into these countries. To combat this, it's worth seeking the advice of skilled overseas lawyers, such as those at DWF's international offices, who are experienced in ensuring compliance with foreign policy and regulation. Seeking expertise will reduce the risk of delay and exposure to penalty or fines.

Financial Risks and Project Funding

Any business will assume a degree of financial risk when setting up abroad. However, that risk is likely to vary between countries. For example, the World Bank has ranked countries based on the performance of the economy and the difficulty of starting a business in that country; the higher the score, the more efficient it is to start a business. France is currently rated 93.28, whilst India is 75.40 and Philippines is at 68.88. This index serves as a good indicator of the financial risk associated with certain regions.

Additionally, the cost of starting a business can vary greatly. According to the TMF Group, when starting a business in India: "There are 12 procedures to complete in the initial set up of a business costing 49.8% of income per capita. It takes almost a month (27 days) to complete the tasks on average, which is well above the OECD average of 12 days." Businesses should be aware of these costs and the timeframe involved, and carefully consider whether law firms such as DWF can assist in securing finance and minimising risk.

Infrastructure, Logistics and Technology

Businesses must consider shipping, logistics and whether there is the skill set required to start up the business. However, perhaps most pressing of these issues is technology and the ever-changing technological landscape.

A woman sends funds to pay for healthcare for her ill mother via M-Pesa's mobile payment system [IMAGE: M-PESA]The Global Competitiveness Report 2015 – 2016 looked at "Technological Readiness"; Luxembourg, Switzerland and the UK were ranked the best, whereas Chad and Burundi were the worst.

However, where some technologies may increase the gap between established and emerging markets, others can enable emerging markets to use a lack of existing infrastructure as an opportunity to adopt the most advanced methods. This 'leapfrogging' may be realised through a wide range of developing technologies such as off-grid renewable energy or blockchain. One of today’s most celebrated examples of leapfrogging is the M-Pesa mobile payment system in Kenya and Tanzania, which lets people bank in their national currency using only their phones, leapfrogging traditional banking practices and creating a mobile banking revolution.  

Conclusion

In-depth analysis is required to assess the specific challenges in different countries. In May, DWF will publish a report that assesses the challenges facing the renewables sector in Africa, looking at development in Egypt, Morroco, Kenya, Tanzania, South Africa, Zambia, Ghana and Senegal. To request a copy, email [email protected]

Authors: Catherine Haslam, Partner; Christian Hellmund, Partner; Elinor Webster, Trainee

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