Steps to offshore investment

Other barriers are simply regulatory, and may depend on your individual business, so your investment may need to take a different tack. For example, it is notoriously difficult to set up a retail operation in India, says Skinner, “so you might set up a distribution business and rely on the local partners to hold the physical retail shop”.

Political obstacles tend to be well publicised, particularly when investing in utilities or infrastructure. Many countries, especially those with communist governments, are against foreign companies taking whole ownership of an organisation.

“Obviously they don’t want to lose control of key industries. You might not be able to own more than 20 percent [of an organisation], for example. There's caps,” says Skinner. “Each country has those depending on how open their economy is, so that's a very significant issue and barrier for many people.”

Where to Begin When Investing Offshore
The construction industry serves as a good model for exporters evolving into offshore investors. Many construction companies supplied their services internationally for a number of projects over several years before opening a permanent office on location. This allowed them to understand the culture and government of the country and acquire a feel for the market before outlaying anything. Thus advanced exporters are in a good position to examine their options in existing markets.

Due diligence should be the first initial cost, says Aranha. “That due diligence should be done by well-known, well established legal or accounting firms. Once you have feasibility done by one of those guys, you’ll find it easier to get money because people are ready to back a plan that has been written by people who have professional indemnity for their advice.”

Following due diligence, educate yourself on any issues particular to the location. This may be intellectual property concerns in Asia for example, says Aranha. Then build a network of trustworthy contacts or partners to develop base before establishing physical operations.

On the whole, an offshore investment strategy should not cut corners, advises Aranha. “If you partnered with the wrong person or if you got the market wrong or you aimed only at cutting costs and not at improving quality, you could end up losing a lot of money. It boils down to the fact that one needs to get their due diligence done, and possibly have experience in that market in some form without having invested in anything in the first instance.”

Offshore Investment Help
Advanced exporters will already have a good idea about whether to invest in their offshore markets, but you may need some help with the actual set up.

Government organisations such as EFIC can assist with finance and risk information, while Austrade can provide education. Also look for government resources at the destination country.

Multinational institutions, particularly financial and legal firms, are great sources of contacts and can help you set up an account or a legal framework for your offshore business.

Trade associations, such as the Australian Institute of Export, can provide investors with contacts and information. Again, there may be an equivalent organisation at your destination.