Ensuring fair play in global business

"How do you compete in this environment full of corruption? You need to be creative," said Izek Frank, Chief executive of Baran International.

Construction of a water supply system from the Tekezé River, Ethiopia  (photo credit: BARAM GROUP)
Construction of a water supply system from the Tekezé River, Ethiopia
(photo credit: BARAM GROUP)
The role of foreign construction companies in building Israeli infrastructure has been the topic of much discussion in recent years.
Far less attention has been paid, however, to Israeli engineering companies playing important roles in Europe, North and South America, Africa and Southeast Asia. Among them is the Tel Aviv-listed Baran Group, founded in 1979 and employing over 1,000 employees in 12 countries through its Baran International segment. To date, the company has completed energy, transportation infrastructure and telecommunications projects in more than 40 countries worldwide.
Chief executive of Baran International, Izek Frank, started at the company while a student at Tel Aviv University. During his 15 years at the company, he worked hands on with activities in Eastern Europe, Southeast Asia and, in recent years, increasingly in Africa, giving him a broad understanding of all the topics related to Baran’s core business and, critically, an in-depth understanding of how best to work in different regions.
“Baran has operated abroad for the last 20 years as the Israeli market is quite small, especially in the industrial sector – and we’re not a powerhouse in manufacturing,” Frank told The Jerusalem Post. “We went out to the world. Wherever we go, we always find the local capabilities. Whether it’s engineers, consultants, contractors or suppliers, trying to use local people and local partners is one of the key factors for success.”
Izek Frank, Chief executive of Baran International (credit: Baran Group)Izek Frank, Chief executive of Baran International (credit: Baran Group)
In order to deliver projects successfully abroad, Frank emphasizes understanding local norms, languages and business protocols. “Boots on the ground,” he says, are critical for choosing the right partners and appreciating the nuances of each country’s business culture.
“There is no such thing as working in Africa. It’s very important to remember that Africa is a continent, just like Europe and Asia,” said Frank. “There is a huge difference between Kenya and Angola, not only in the language but also in the culture. Inside Kenya, there’s a huge difference between those coming from Mount Kenya and those living in Nairobi. It’s the same in developed countries, too, where doing business in Bavaria is different from doing business in Leipzig.”
One of the key challenges to recognize, Frank added, is the level of corruption in some African and developing nations, where tenders are often far from fair.
Last month, Israel Police’s Lahav 433 crime-fighting unit recommended indicting the country’s wealthiest woman, Shari Arison, and senior officials from the Shikun & Binui construction company over allegations of bribing foreign government officials in various African countries, including Kenya.
“How do you compete in this environment full of corruption? You need to be creative,” said Frank, highlighting the “almost unlimited” demand in some African states for energy, water, food and telecommunications infrastructure. “We have experience and capabilities in all three sectors. The only thing missing is the money. They want a lot and we can give them a lot, but they don’t have real funds to execute the projects.”
One creative solution, Frank says, is long-term project financing where debt and equity are paid back from cash flow generated after construction is completed. The project’s assets, rights and other interests are held as secondary security should repayments based on cash flow fail at a later date.
Funding comes from a series of international banks, foreign institutions, insurance companies and bilateral institutions, enabling Baran – after receiving Finance Ministry approval – to conduct direct negotiations without a tender.
Another solution is to work as a subcontractor of other Israeli companies working abroad, Frank added, highlighting a $90m. deal signed with Netafim for an irrigation project in Ethiopia.
“Israeli hi-tech companies might understand technology but they don’t understand projects. While excellent in their core business, executing projects is an occupation,” said Frank.
Also important, he says, is sending the right employees abroad. Understanding where they came from and the standards of the company is critical, he believes, to conducting fair business in foreign surroundings.
“When I send people abroad, I try to recruit people who grew up inside the company,” said Frank. “People who didn’t grow inside the company simply don’t have the sense of belonging to Baran. When the person has grown up in the parent company, there’s a much greater feeling of responsibility.”