When entrepreneurs negotiate contracts with the governments of developing countries, it is important that they consider other points of view.

1. 5 TIPS FOR NEGOTIATING CONTRACTS WITH
GOVERNMENTS IN THE DEVELOPING WORLD
DR. EHSAN BAYAT

2. 5 TIPS FOR NEGOTIATING CONTRACTS WITH GOVERNMENTS IN
THE DEVELOPING WORLD
 Entrepreneurs across the globe are beginning to recognize the potential for growing their businesses
in the developing world. Incredible opportunities exist across Africa, Asia, and Latin America for
professionals who are willing to deal with the idiosyncrasies of these environments. Certainly, working
in developing countries entails unique challenges, but these are not insurmountable. One of the most
common strategies for dealing with these complexities is to negotiate contracts with the governments
of these developing countries. While this strategy can address some of the issues involved in
conducting business in the developing world, it may also open up some new ones, especially with the
emerging nationalism in these counties.
 Sometimes, disagreements that arise in relation to business deals can impact relationships.
Entrepreneurs can prevent this from occurring by learning how to negotiate effectively with the
governments of developing countries. These negotiations involve a unique skill set, not to mention grit
and determination. Some important tips to keep in mind when it comes to successfully negotiating
contracts with the governments of developing countries include:

3. 1. EXPECT TERMS TO CHANGE OVER TIME
 Entrepreneurs who are not accustomed to working in the developing world often expect the
agreements that they make to stand for years. However, as countries grow and change, the terms of
agreements will naturally also need to change. If entrepreneurs remain staunchly entrenched in the
original agreement, they could force a breakdown in negotiations. Entrepreneurs need to understand
that industry structures change and government expectations evolve. When disagreements arise, it is
important to listen to the cause of the issue and work collaboratively to figure out a mutually
beneficial solution. By paying close attention to political pressures, entrepreneurs can come to these
renegotiations informed and with solutions. This extra step will impress government representatives
and help to build trust that leads to a long-lasting relationship.

4. 2. RESEARCH THE POLITICAL AND ECONOMIC MILIEU
 Frequently, entrepreneurs enter into negotiations with foreign governments with little understanding
of the pressures that may be exerted on them. Before launching any sort of business in a foreign
country, entrepreneurs should do due diligence to understand the market, as well as the political and
economic climate. While this information may not seem as directly applicable to the business, it will
become extremely important when speaking to anyone from the developing country, particularly
government officials. By conducting thorough research prior to negotiations, entrepreneurs can
position themselves as partners for growth.

5. 3. UNDERSTAND KEY CULTURAL DIFFERENCES
 When entering negotiations with someone from a foreign culture, the worst mistake that one can
make is to assume that each party will approach the discussion in the same way. Government
representatives often have a good sense of negotiating styles in different cultures, but that does not
mean that they do not come to the table with their own assumptions. Entrepreneurs need to have a
clear understanding of the cultures of developing countries, especially in terms of how business is
conducted. Cultural differences in the developed world have a major bearing on how business is
conducted. Perhaps one of the best examples is Japan, which has a very distinct manner of
negotiating. Entrepreneurs should recognize that cultural differences are just as important in the
developing world and make every effort to work within a country’s own framework. However, it is
equally important to understand that negotiating styles may vary depending on the local culture.

6. 4. AVOID ONE-SIDED CONTRACTUAL LANGUAGE
 One of the trends that international business professionals have noticed when it comes to creating
contracts with foreign governments is one-sided language. Often, entrepreneurs will build in very
specific and comprehensive protections for their own businesses while avoiding any protections for a
foreign government or keeping the language intentionally vague. This strategy does not build good
faith or create the foundation for a lasting relationship.

7. 5. DISTINGUISH BETWEEN STRUCTURE AND SUBSTANCE
 Often, the issue of structure becomes a key part of negotiations between an entrepreneur and a
foreign government. Several options for the business exist, such as joint ventures, service contracts,
and profit sharing. Entrepreneurs sometimes choose not to entertain suggestions about a structure
that they are not familiar with, which can halt productive conversations. Production sharing, fade-out
agreements, service agreements, and similar structures have a lot of appeal in developing countries,
so it is important that entrepreneurs familiarize themselves with these structures and keep an open
mind. Structure does not always dictate substance. If an entrepreneur is hesitant about a specific
structure, especially in terms of ownership control, it can be worthwhile to bring this concern to the
table. Governments will often allow companies to maintain control over certain issues in return for a
structure that they believe to be more favorable.