Chemonics: A For-Profit Organization

Ms. Keiser and I in her office at Chemonics

“Chemonics is an international development consulting firm,” said Kathleen Keiser, the New Business Development Manager for the Middle East.

Chemonics is a for-profit organization that performs international development work with the stated goal of promoting “social and economic change around the world.”  When the Chemonics gets a contract from a donor like USAID, theoretically the donor has specific goals for the contract given, and the organization decides how it want to achieve those goals.  In other words, the donor has big ideas, and Chemonics makes a plan for execution, then makes the plan happen.  

What makes for-profit organizations like Chemonics different from non-profit organizations is that if the goals are achieved the way USAID has requested, the donor will pay the organization a fee, which is the profit.  A donor like USAID pays the organizations for the activities, employees, and expenses done by the organization. Chemonics gets their funding from USAID only.

As the New Business Development Manager for the Middle East, Jordan, West Bank, Iraq, and Lebanon, for Chemonics, Ms. Keiser’s job consist of making sure that the organization’s proposal for upcoming events are well written. “Whenever USAID release a Request For Proposals (RFP), Chemonics responds to it,” says Ms. Keiser.  She said it is always a competition to win the funding of a project offered by USAID.

Accounting

Ms. Asha Dursun is an accountant at the Washington D.C. office of the commercial real estate company Tishman Speyer.  Her company owns Rockefeller Center in New York City.  Ms. Dursun got her CMA (Certified Manager Accountant) from Saskatchewan University in Saskatchewan province in Canada, where she comes from.
During our meeting Ms. Dursun was able to explain what the numbers that I found on Madagascar’s export and import meant to the country’s economy. I noticed that Madagascar and other countries like Mauritius spend more money importing than they gain from exporting. This is what’s called in finance world as a “trade deficit.” When a country’s economy falls under this category, their economy is usually not very strong.
At the end of our meeting, Ms. Dursun’s advice to me was, if I was interested in the international aspect of finance, I should look into the IFRS (International Financial Reporting Standards).  Ms. Dursun told me although each country has their own accounting rules, most countries around the world base those rules on IFRS.  Ms. Dursun did mention, however, that the United States has its own set of accounting rules different of IFRS.

Investing in Emerging Markets



57 Starts has its headquarters in Washington DC's Chinatown.

This Friday afternoon, I met with 57 Stars’ vice president Carl Balit. According to Mr. Balit, the role of the company 57 Stars is to “manage people’s capital”, which means that the company takes money and puts it in investing opportunities around the world. However, 57 Stars’ focus is investing in private companies. By the term “private companies” Mr. Balit means that the ownership of the companies 57 Stars invests in is held amongst small groups of people.

57 Stars mostly invests in countries outside of North America and Europe. The major countries that 57 Stars is investing in right now are the BRICs (Brazil, Russia, India, and China). According to Mr. Balit the reason they chose those countries is because it is more likely that those will “dominate the world” financially in the future. As Mr. Balit said, “we invest really for the long term.” Besides the BRICs, 57 Stars also invests in other developing nations, including Nigeria, Egypt, South Africa, Columbia and Peru.

Mr. Balit has lots of concerns about starting businesses in third world countries for a number of reasons. The difficulty of starting a business in poorer countries “really depends on case by case basis, ” he said. For instance, in some countries it is “literally is impossible to start a business.” Mr. Balit said this is because of what they call “red tape,” meaning procedures that have to be followed despite being a waste of time. Also, in a lot of these countries, the infrastructure is not reliable. In a nutshell, many of the things that define the term ‘third world’ are the obstacles to successfully creating businesses in these countries.

Building Business in Developing Countries (Especially Madagascar)

Sanjiv Teelock and Asha Dursun at home in Arlington.

This week, I spoke with the finance director of an international global consulting firm, Sanjiv Teelock. As a native of Mauritius, he had a lot of ideas and perspectives about business in emerging economies like Madagascar, and its neighbor Mauritius. He shared some of those ideas with me.

Mr. Teelock told me when the economy in mature marketing countries are facing an economic crisis, the rest of the world suffer with them, especially the third world countries. For instance, one of the major sources of income for Mauritius is tourism. The fact that Europeans have less money to spend means they are going to take less vacation. Therefore, Mauritius’ economy suffers because their tourism business from European visitors slowed down. However, as Mr. Teelock, said, “It depends where you are in the world, but generally, when the big the economies get hit, the small ones suffer as well.”

There are a lot of issues that could confront a local business owner in Madagascar, according to Mr. Teelock. The majority of the population in Madagascar tends to think that everything imported from outside of the country is better than anything made locally. That attitude makes things difficult for a local producer. Mr. Teelock said, “it’s all perception,” but it has a real affect on demand for local manufactured goods. If a product has a French or English name, Malagasy consumers tend to think the product is automatically better. Mr. Teelock said that this kind of perception problem happens in other third worlds countries, too.

There are many business opportunities in Madagascar because “basic stuff does not exist,” Mr. Teelock said, The Malagasy economy suffers because many people lack access to some basics that are taken for granted in developed nations. The electric power is not reliable, the roads are horrible (it is an hour flight from Sambava to Antananarivo, but it takes two days on a bus), and many homes don’t have running water. But, these problems can also open up opportunities for business people, Mr. Teelock said. Business owners don’t have to create a new iPad or come up with the latest technology to be successful, the just need to be able to deliver the basics.

How Does Madagascar Make Money?

As a first step to learning about the Malagasy economy, I wanted to find out what my country imports and exports.  Even though I am from Madagascar, I can't say that I am fully aware of what my country makes and what it sends to the rest of the world.


I used a couple of different sources to find out the answers to my questions. The most helpful ones were: World Bank, the IMF, the CIA World Factbook. I found the information provided by these websites on Madagascar's economy turned out to be very similar.

In my research, I found out that Madagascar's top three export commodities are: coffee (45%), Vanilla (20%), and shellfish (15%). Coming from a region where vanilla grows the most in Madagascar, it was no surprise to see that vanilla made the list, because I have seen how busy it gets when it's vanilla season. From exporting these goods, Madagascar makes up to $ 1.407 billion a year, according to the CIA Factbook.

When I got this information, I was wondering which countries Madagascar sells its product to. Madagascar's top export partners are: France 26.3%, US 9.2%, China 8.5%, Netherlands 6.4%, Germany 5.6%, Canada 4.4%, and Spain 4.3%.

Compared to its export, Madagascar imports a lot more goods that it exports. Madagascar's top import commodities are: Boilers, machinery, nuclear reactors (14.9%); Mineral fuels, oils, distillation products (13.3%); Electrical and electronic equipment (7.9%); Articles of iron and steel (7.9%); and Vehicles other than railway (6.2%). The amount of money that Madagascar spends on import a year is twice as much as the amount of money gained from exporting, which is $ 3.653 billion.

Madagascar's export and import have some partners in common such as China 14.6% and France 11.4%. However, the country also imports from other countries like South Africa 6.4%, India 5.4%, Bahrain 4.6%, and Singapore 4.1%.

Raison d'etre

This is a blog about the Malagasy economy and where it fits in with the rest of the world's markets.  Over the next two weeks I will be spending time with people involved in international business and international non-governmental organizations to better understand what the current economic conditions are in my country and perhaps what the future may look like.