Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: FRIDAY, March 15, 1991 TAG: 9103150144
SECTION: BUSINESS PAGE: A7 EDITION: METRO
SOURCE: Associated Press
DATELINE: WASHINGTON LENGTH: Medium
Kuwait's laws, religious codes and business and social customs are all potential pitfalls.
"Small companies have to be very careful or they'll lose everything over there," said Donn E. Hancher, a professor of construction engineering at Texas A&M University who has worked in Persian Gulf countries.
"There's going to be a lot of people who will go over there and spend a lot of money and get nothing," he said. "Anybody who's looking to get rich quick had better think twice . . . they'd better stay home unless they have a connection."
A vital strategy for small businesses, Hancher said, is to subcontract with big companies with experience and connections in Kuwait.
Companies and unemployed workers across the United States are rushing to get in on what could become the biggest rebuilding effort since the Marshall Plan reconstruction of Europe after World War II. As today's filing deadline approached, scores of companies applied to the U.S. Army Corps of Engineers to participate in the Kuwait rebuilding, expected to cost as much as $100 billion.
The Corps, which is overseeing engineering work and damage assessment for the Kuwaiti government, already has hired eight big companies for the initial phase of the project. They are Raytheon Co., Blount International, American Dredging Co. and Brown & Root International, all of the United States; Al Harbi Trading and Contracting Co. Ltd. and Khudair Group, both of Saudi Arabia; Mohamed A. Kharafi of the United Arab Emirates and Shand Construction Ltd. of Britain.
Other companies, including some smaller firms such as oil field specialists, have signed contracts directly with the Kuwaitis. But none of the small companies that applied to the Corps to work in the initial phase has received a contract.
The Corps got a $46 million contract from the Kuwaitis just before the Gulf War started in mid-January; it recently was increased to $100 million as estimates rose for the costs of emergency repairs.
Some experts believe the contract could go higher still, as could the overall estimate of $100 billion for Kuwait's reconstruction.
Opportunities for small businesses will come mainly in the later phases of the rebuilding, following the three-month emergency period, Army logistics official Michael W. Owen told a congressional committee this week.
As in many foreign countries, the complexities of doing business in Kuwait can lead to misunderstandings.
"The culture is so radically different," said Roy S. Mitchell, a Washington attorney who specializes in international contracts and who has worked on construction contracts in Kuwait, Saudi Arabia, Egypt and other Arab countries.
In Kuwait, contracts are regulated by complex civil, commercial, tax and labor codes that co-exist with Islamic law, called the Shariah, based on the Koran. Foreign companies can lose contracts if they fail to comply, Mitchell noted.
A number of U.S. companies are expected to form joint ventures with Kuwaiti contractors to rebuild homes and offices, Commerce Department officials say. The Kuwaiti companies normally would own 51 percent of each joint venture.
Outsiders need to hire reliable local agents with business and government connections, Mitchell advised. The emphasis is on reliable. Hancher warned that some local agents "can succeed in getting you lost."
Under the U.S. Foreign Corrupt Practices Act, companies doing business abroad are allowed to make "grease payments" to low-level government bureaucrats for functions such as expediting visas. But U.S. businessmen can be slapped with fines of several million dollars if they pay bribes to high-ranking officials of foreign governments - to get contracts, for example.
by CNB