Nov 15 2005
Follow up on International Marketing Risks
I first touched upon the risks and difficulties of International Business in an earlier article.
It was a paper based on the case study of Rolls-Royce. My argument was because RR is doing “infrastructure-class” business, the vendor-customer relationship is inherently “asymmetric”.
Just read an article in NYT that further illustrate my point.
The article mainly discussed corruption and the mess it created after the original corrupt regime was replaced with a new one that is now demanding U.S. to compensate for the State’s lost revenues. This is only made more interesting because after lossing its Uzbek bases, Kyrgyzstan is becoming more important to the U.S.
Some highlights:
Soon after the American invasion of Afghanistan in late 2001, the Pentagon opened an air base in neighboring Kyrgyzstan and made a deal to get jet fuel from the only two suppliers in the country. The companies just happened to be linked to relatives of the country’s president.
Mr. Akayev’s abrupt departure in March has put the Pentagon in an awkward bind. It needs continued access to the base, but the $207 million spent on fuel contracts has created resentment among the country’s new leaders, some of whom contend that the United States knew where the proceeds were going.
The current president, Kurmanbek Bakiyev, is insisting that the United States make retroactive lease payments of $80 million and help recover the contract money …
But Pentagon officials say the demand amounts to asking them to pay twice for use of the base for the last four years. “Any possible misappropriation of funds is an internal Kyrgyz matter,” a Pentagon spokesman, Bryan Whitman, said in a statement.
The fuel deals have become a liability with Kyrgyzstan’s new leaders at a time when the American military needs the base more than ever.