          
          
          
           THE INTERNATIONAL ADVENTURE:  SOME EXAMPLES AND IDEAS
          
               Sun, sand, and sex.
               A pipe dream.  But reality.
               If nothing else, the formula illustrates what can
          be done in international markets.  Using ingenuity,
          Club Mediterranee, headed by general manager Olivier
          Michel, found a new way to raise OPM when it decided to
          build a "vacation village" at Point Sable, Haiti.
               Here's how Michel did it:
               In the European markets he sold an indexed bond
          that was linked to the profit performance of the
          vacation villas, Club Mediterranee.  "Club Med" thus
          introduced a new form of financial instrument.  The
          bonds bridged the gap between straight debt and equity
          securities while saving up to 400 basis points in
          costs.
               In an inflationary world, that meant Michel had a
          model for many multinational investors seeking
          long-term dollars at low-cost, long-term interest
          rates.
               Club Mediterranee did not do it with mirrors.  In
          a market that would look askance on 12.5 percent
          interest rates on long-term debt instruments, Michel's
          group promised something extra.  That added element was
          the promise of future returns of profits.  Big future
          returns, possibly.  But if those returns did not
          materialize, Club Med would pay a minimum of 8.5
          percent.
               How did Club Mediterranee do it?  It arranged a
          deal of outstanding caliber.  If the Haitian vacation
          village should succeed -- and it was only getting under
          way at the time of the financing -- and reached an 85
          percent occupancy level, bondholders would divide up a
          fund totaling $357,700.  Because 8,000 bonds were
          outstanding, and because each was valued at $1,000,
          each bondholder would then receive $44.70 per bond. 
          The return on each bond would rise from the minimum of
          8.5 percent to nearly 13 percent.
               In the background, of course, is this fact: Club
          Med ventures in other parts of the world have made
          names for themselves.  Phenomenally.  And the records
          of six other vacation villages already operating in the
          Caribbean figured into the payoff picture on Club Med
          bonds.  For every 1 percent increase in the average
          prices of vacations at these other villages, the
          bondholder receives 28 cents per bond held.  Just in
          case: if recession should force Club Med to lower its
          rates to attract vacationers, the bondholders still
          receive their 8.5 percent in all Club Med bonds they
          hold.
               Club Med couldn't print the bonds fast enough. 
          They were oversubscribed.  The current problems in
          Haiti don't change the brilliance of this deal at the
          time it was done.
          
          
                 The Narrower, Tougher, Bigger Opportunity
          
               The international entrepreneur scene obviously
          places higher demands on individual ingenuity.  Foreign
          laws may have to be considered.  Foreign customs,
          insofar as these relate to business dealings, have
          inevitably to be taken into consideration.  Certainly
          foreign distrust or acceptance of Americans will become
          a factor in many negotiating sessions.
               But the complexities can be mastered.  The green
          overseas fields can deliver paper of the same color.
               How?  At least 10 different roads to the creation
          or protection of wealth in foreign climes can be noted. 
          Each of them involves the completely legal process of
          avoiding U.S. taxes by operating in tax-haven
          countries. 
               1. By establishing holding companies and trusts. 
          In most cases the personal holding company or
          overseas-based trust has a specific purpose: to hold
          foreign currency or currencies or foreign currency
          assets.  That means the trust or holding company may be
          an adjunct to a basic entrepreneurial arrangement.  But
          there are few types of investments that cannot be
          transferred to a trust for preservation.  The trust may
          also provide a guarantee against unnecessary
          dissipation of resources.
               2. By accumulating dividends, interest, and
          capital while conducting banking or financial dealings. 
          Here, a company is usually created; unrestricted fund
          movement becomes possible because withholding taxes are
          not assessed.  The same company can realize big gains
          in Euro-currency dealings.
               3. By amassing unlimited insurance premiums and
          interest income -- again through establishment of a tax
          haven company.  The company, of course, can re-insure,
          co-insure, and perform other insurance functions any
          place in the world.  Entrepreneurs seeking their own
          captive insurance operations have found the tax haven
          company an attractive alternative.
               4. By setting up subsidiary manufacturing
          operations that can sell back or lease products to a
          stateside parent company.  The tax-free operations of
          the subsidiary may involve assumption of commissions,
          discounts, and management income on the foreign sales
          of the parent group or organization.  Thus taxes on the
          foreign sales are minimized.
               5. By engaging in sales and international
          commodity trading.  The entrepreneur with the
          appropriate background can establish an export trade
          company or commodity brokerage operation.  Working out
          of a tax haven, the company serves as a conduit for
          international sales activity and financing.  Trade
          discounts, commissions, and advertising allowances can
          be accumulated tax free.  The parent operation in the
          United States can claim tax deductions by assuming
          administrative and sales expenses.
               6. By expanding corporate or company operations
          into international markets to achieve growth and to
          provide a hedge against swings of the domestic economic
          pendulum.  The tax haven operation with these or
          related purposes can accumulate revenue tax free.  If
          the company is engaged in industrial activities that
          create local jobs, the host tax haven usually offers
          tax, statutory, and other incentives and guarantees.
               7. By engaging in international shipping and air
          transport operations -- for such purposes as
          transportation, hiring, leasing, bunkering, and others. 
          Again, the revenues from such operations can be
          accumulated tax free.  Beyond that, many tax haven
          countries offer flag-of-convenience privileges.  That
          means foreign shipowners can register under the tax
          haven flag and in this way escape home country
          restrictions and regulations.  The latter apply to
          taxes, competitive ground rules, and labor
          requirements, among other things.
               8. By setting up a tax haven intermediary company
          to conduct world-wide sub-licensing operations.  The
          operations can, as needed, extend into such areas as
          royalties, payments in connection with patents,
          copyrights, inventions, models, designs, and secret
          formulas or processes.  Caution should be exercised in
          establishing this kind of operation so that
          tax-at-source requirements are considered and accounted
          for.  Where double taxation agreements exist, these
          would also be important.
               9. By establishing mutual funds, investment
          trusts, and similar enterprises.  Where such groups or
          companies exist, overseas investors can buy directly
          into securities in their respective countries.  They
          escape domestic tax liabilities, of course.
               10. By providing consulting services through a
          company or individual qualified to render technical,
          managerial, engineering, architectural, scientific,
          industrial, commercial, or other aid.  Where such
          services are provided across international boundaries,
          the foreign service fees can be channeled through the
          tax haven company.
          
          
                          Where to Look for What
          
               The tax haven approach makes possible so many
          different types of enterprises, and these can appear in
          so many different forms, that a full enumeration is
          impossible.  The form that each effort finally takes
          depends on the legal situation in the host country.  So
          do the formulas governing shareholding, capitalization,
          and so on.  Equally important is the nationality of the
          person doing the overseas dealing.  The structure of a
          tax haven operation established by a U.S. citizen would
          differ basically from an operation set up by a Japanese
          citizen.
               For the entrepreneur interested in exploring tax
          haven possibilities, various alternatives lie open. 
          The entrepreneur can plunge in, obtaining experience as
          he goes.  Or he can ascertain where local tax laws
          favor tax haven operations by contacting a tax haven
          consulting company.  Such a firm can structure an
          entire proposal describing the best way to take the
          plunge, get your feet wet, conduct the operation -- and
          accomplish your goals.
               The entrepreneur would normally have such a
          proposal double-checked by his own attorney.
               Still a third and a fourth avenue to venturing in
          international arenas might be named.  The third would
          involve taking a partner in a foreign country.
          
          The Tax Haven Countries
          
               Experts on international business and finance say
          the tax haven countries house more millionaires per
          square inch than Wall Street.  These tax haven nations
          have deliberately courted the interest and favor of
          multinational companies and operations.  They have,
          essentially, passed flexible legislation that permits
          whatever form of organization is required to conduct
          tax-free or tax-almost-free operations.
               Normally, the entrepreneur makes the choice of a
          tax haven on the basis of geographical convenience. 
          But other factors should weigh in the balance:
               ** The haven's physical resources and legal
          situation 
               ** The haven country's political stability 
               ** The quality, in a potential host country, of
               the specific services required
               ** In some cases the availability and reliability
               of
          labor
               ** Existing personal and other relationships,
               including those with lawyers, partners, bankers,
               special contacts, and so on.
               Just as importantly, of course, the entrepreneur
          has to know what he wants to do from the outset.  He
          may research heavily before deciding that question. 
          Immediately afterward, he may want to establish in his
          or her own mind how the profits are going to be
          distributed and to whom -- if more than one person is
          involved.  If he is a citizen of the United States, he
          will want to ascertain what his citizenship will
          require of him.  He will find, for one thing, that he
          stands at a slight legal disadvantage visa vis his
          foreign counterpart.  The latter may become a
          non-resident for tax purposes if he simply moves to a
          tax haven and takes up residence there, but Americans
          are subject to worldwide tax regardless of where they
          live.
               Kinds of Havens.  Tax havens are classified
          according to type.  There are at least five basic
          categories.
               1. Those that levy no income tax.  These countries
          include the Bahamas, Bermuda, the Cayman Islands, and
          the Turks and Caicos islands.
               2. Those that do not tax foreign-source income. 
          Countries or territories in this group include Hong
          Kong and Panama. 
               3. Countries that, like those in group 2, do not
          tax the foreign-source income of companies that are
          owned by non-residents.  The countries or geographic
          entities that fall into this category include Barbados,
          Guernsey, Jamaica, The Isle of Man, Jersey, Liberia,
          and Gibraltar.
               4. Those havens that make special concessions for
          holding companies, among them Austria, Liechtenstein,
          Luxembourg, the Netherlands, the Netherlands Antilles,
          and Switzerland.
               5. Havens whose tax laws make them ideal for
          special uses and purposes.  These include Andorra, the
          British Virgin Islands, Cyprus, Nauru, and Macau.
               Combining Tax Havens.  The possibility that tax
          havens may be combined should never be discounted.  In
          a typical case, a combination may make it possible to
          avoid withholding taxes on royalties.
               How does this work?  The tax haven company first
          sets up a Dutch subsidiary -- for example.  The company
          then licenses its patents to a Dutch subsidiary.  In
          its turn, the latter sub-licenses to an American
          manufacturer.  The royalty payments go tax free to the
          Dutch company.
               The Dutch company then avoids Dutch withholding
          tax on dividends by paying the tax haven company -- the
          patent owner -- a royalty equal to those that it
          received.
               The Dutch company would not be taxed in The
          Netherlands because its expenses equal its income.  The
          tax haven company has acquired a royalty tax free. 
          That royalty would under other circumstances have been
          subject to a 30 percent U.S. withholding tax.
               The entrepreneuer or multinational company
          desiring to incorporate in a tax haven country or area
          does not necessarily have to locate a headquarters
          there.  Administrative offices may remain in another
          country offering greater geographical convenience.  A
          Bahamian corporation could have its offices in Belgium. 
          The company would in this case be subject to taxation
          on its Belgian-source income.  But it would at the same
          time be appropriately located to conduct business in Europe.
          
          The Mutual Funds
          
               Tax haven utilization has produced a kind of
          euphoria in some company managements.  The offshore
          mutual funds industry provides a long list of examples.
               Typically, these companies were not subject to
          either British or American requirements regarding the
          length of time securities had to be held to qualify for
          lower capital-gains tax rates.  Nor were the companies
          taxed at all on their securities trades and deals. 
          Thus they engaged all too easily in short-term
          profit-taking and speculation.
               International mutual funds like Fund of Funds and
          Gramco could invest in high-tax countries. 
          Unfortunately, most of them suffered from poor
          management.  They went under after their managements
          became involved with excessively speculative sales
          campaigns.  The campaigns dried up liquid capital; but
          collapse occurred when the mutual funds invested in
          funds that guaranteed to redeem their own shares at
          prices based on inflated book values.
               The funds stand as object-lessons in how not to do
          business internationally.
          
          
                         Get the Overseas Picture
          
               As in any other phase of entrepreneurship,
          preliminary research will ensure that an overseas
          venture will not only stand on its feet but will make
          big dollars.  The reasoning behind this rubric is
          simple.  Statistically, the United States has less than
          10 percent of the world's population.  That means that
          90 percent of the world's population lives outside the
          water or land boundaries of the United States.  That
          makes a rather large market.  The preliminary study
          that the experts see as essential will indicate where
          penetration of that market is possible -- and with what
          kinds of products or money-making ideas.
          
          What to Sell?
          
               Your research may guide your intuition into the
          exact area where offshore dollars are lying around
          ready to be picked up.  But initially it may be wiser
          to keep an open mind.  Just running through
          international trade magazines and newsletters looking
          at the listings may spark ideas.  Those listings may or
          may not be the be-all and end-all of making a start in
          international trade.  But they include the names of
          hundreds of overseas firms that want to buy
          American-made products, sell their own products to U.S.
          firms, or represent U.S. companies overseas.
               Do international business from your home?  Why
          not?  The listings in the publications suggest at least
          three ways to go:
               -- Locate overseas firms looking for American-made
          products and bring them together with U.S. firms making
          the desired products.  You take a 5 to 10 percent (or
          higher) commission on all completed deals.
               -- Find overseas sales reps for U.S. companies,
               -- Become the international sales contact for a
          U.S. manufacturer, and take a commission on all
          completed deals.
               -- Locate U.S. buyers of imports and overseas
          sellers.  Bring them together, and again cut yourself
          in for a commission on the resulting transactions.
               Has it been done?  Of course.  In one case
          entrepreneur Mike Johnson started an overseas product
          search and licensing firm on a grubstake of $300.  Mike
          had no special secret.  He used books and his own
          stationery.  Once he got going, he found that he had to
          travel.
               In four years Mike achieved two fundamental
          ambitions.  He made more than 30 trips overseas and he
          made more than $1 million.
               He sold anything; he brought overseas firms
          together with American firms that manufactured almost
          anything; he represented American firms overseas in
          almost any kind of import-export deal.
          
          The Nitty-Gritty
          
               Whatever you decide to undertake in foreign
          markets, some nitty-gritty facts stare you in the face. 
          For the exporter of finished products in particular,
          the facts loom large, demanding attention.  The
          entrepreneur considering entry into foreign markets via
          manufacturing should look at least at three specifics
          of an overseas or across-boundary operation . . .
               Cost.  Where a U.S. company wants to compete with
          foreign producers of similar or identical products,
          cost becomes a controlling factor.  To compete
          successfully, overseas production may become essential. 
          In a typical case, higher labor costs in the United
          States plus shipping expenses and import duties may
          raise the price of the American-made product well above
          the competitive level.
               The Need for Proximity to Customers.  A variety of
          considerations may dictate a need to manufacture near
          the locus of the major market.  Products may have to be
          designed or redesigned to meet rigid customer
          specifications, for example.  Where a foreign
          government is buying American-made products, the
          entrepreneur may encounter resistance to the idea of
          importing products that might be obtained locally.
               Convenience, of course, goes with proximity.
          manufacturing close to the target market obviously
          offers both advantages.
               Alternatives to Exporting.  Few companies can
          afford simply to pick up stakes and start over in a
          foreign country.  Nor do many want to build a
          manufacturing plant in the foreign country of choice
          without exploring other alternatives.  Nearly everyone
          in business knows of electronics firms that attempted
          to launch assembly-line operations in the current
          offshore assembly haven -- only to surrender in
          ignominious defeat a year or two or three later when
          Quality Control had clearly become an impossible dream.
          
          The Alternatives
          
               The alternatives to straightforward overseas
          manufacturing in leased or wholly owned premises
          include three that have proven extremely useful.  The
          first, contract manufacture, involves production by a
          foreign firm of the U.S. firm's products to the
          American company's specifications and under its label.
               Large firms have turned in numbers to contract
          manufacture because the technique makes it possible to
          gain a foothold in a foreign market while maintaining
          domestic market penetration.  Entrepreneurs have also
          used the technique.  Establishment of a wholly owned
          subsidiary and plant may follow after a period of
          several successful years of overseas production.
               A second method, licensing, presents large-caliber
          complexities.  But done properly, licensing offers a
          way to tap the potential of foreign markets without
          risking a direct investment.
               Some words to the wise may save the entrepreneur
          contemplating an overseas licensing arrangement a
          bundle of headaches.  The licensing plan should be
          worked out in every detail over whatever period of time
          is required -- and it can be considerable.  Potential
          returns should be assessed carefully in advance to make
          sure they will make the venture worth the effort. 
          Also:
               -- The licensee should be carefully selected and
          investigated.  The first candidate that appears,
          whether reputable or not, may not be the right one.
               -- The licensing arrangement should be drafted in
          such a way as to make it possible for the U.S. firm to
          control the licensee's activities.  What you don't
          control, you can't trust.  The U.S. entrepreneur will
          thus want to make certain he ensures adherence to
          agreements on product quality, on royalty payments, on
          the market area, and on the use of the brand name. 
          Provision should also be made for protection of the
          U.S. parent firm's interests -- by manufacturing one or
          more components in the United States, registration in
          the foreign country of patents and trademarks,
          including protocols on new products and improvements in
          existing ones, or all of the above.
               -- If possible, U.S. management should obtain an
          equity position in the licensee from the beginning. 
          Later, if and when the enterprise succeeds, obtaining
          agreement on such a maneuver may be difficult or
          impossible.
               A final method of penetrating a foreign market
          involves creation of a joint venture.  In this type of
          operation the U.S. firm not only holds a major equity
          position but can generally take part in management
          decisions to which it would not even be privy under a
          licensing arrangement.
               The participants in a joint venture should
          carefully study one another's methods and philosophy
          before even signing an agreement.  Each participant
          should understand clearly the other's management
          approach.  Understandings should be reached on such
          areas of common interest as potential market position,
          financial policies, growth, and product development.
               Where a foreign firm is privately owned, don't
          forget to investigate the attitudes of the owner's
          family.  They may have, or think they have, a loud and
          powerful voice in the firm's activities.
               Entrepreneurs slavering over foreign markets
          should also remember the incentives that many
          governments offer to attract American or other
          investment.  These governments may provide tax
          concessions.  They sometimes make long-term loans at
          favorable rates.  They have even been known to
          construct plants for foreign investors -- and then to
          assist in recruiting employees.
          
          
                         The Endless Opportunities
          
               Let your imagination wander.
               Think of Club Med.  Sun, sex, and sand.
               Think franchise.  You can list 100 kinds of fast
          foods, junk foods, superfoods, takeout foods, trick
          foods, fad foods, foolish foods.  Is there one that
          isn't sold by someone holding a franchise?  In Japan,
          is there one man holding an All-Japan Franchise under
          which he controls the books on every hamburger sold
          under the Big Yellow M?
               Why not you?
               The bloom is off the franchise rose, you say. 
          True.  But franchising still provides a way to get into
          international as well as domestic business.
               Think of a big way to do it.  A Seven Wonders of
          the World Way.
               Fact: With some consistency foreign stock markets
          have outpaced those of the United States.  Some of the
          foreign markets have the NYSE eating Paris, Tokyo, or
          Roman dust.  An idea?
               Fact: The U.S. firm setting up a regional office
          in various countries bordering the Mediterranean can
          enjoy substantial tax savings on foreign-source income. 
          Among the countries that offer such advantages: Greece,
          Jordan, Tunisia, Malta, Cyprus.  
               Fact: China -- the Peoples Republic of China --
          has been fingered as the big hope for many U.S. firms
          (and, undoubtedly, individuals) in the 21st Century. 
          That, of course, posits the need for continuing good
          relations with the Far Eastern colossus.
          
               Speak any Mandarin?
          
               But turn the telescope around for just a second. 
          Maybe you don't want to go overseas.  You want to
          accommodate people who want to buy in the United
          States.
               Buy what?  Well, many things, as noted.  One of
          which is land.
               The story of William A. Stiles, former Marine
          Corps brigadier general, adds a dimension to the
          entrepreneurial sagas already noted.  Stiles' firm was
          involved in the sale of $60 million worth of American
          farmland to overseas purchasers -- in three years!. 
               Stiles got into that aspect of the real estate
          business when he saw opportunity in it.  Big
          opportunity.  He was thinking, searching.  He didn't
          circumscribe his research efforts, one could wager, or
          stop after scratching the surface.  Some would call him
          lucky.  The entrepreneur would call him the man who
          found an international niche.
               As someone said, the price of folly can't be
          described as ill fortune.  Just as truly, the rewards
          of shrewd common sense cannot be dismissed as pure
          luck.
          
          
          
          
