Businesses considering potential investments in the Third World can get financing for feasibility studies from the Overseas Private Investment Corporation (OPIC), a self-supporting federal agency that promotes U.S. private investment in developing countries.

Feasibility assistance provides 60% reimbursement of study costs, with a maximum OPIC contribution of $100,000, for examination of the economic and market conditions that a proposed project would face. Eligible for reimbursement are living expenses of about $100 a day; a fee allowance (salary) of roughly $250; and economy airline tickets. Under a related but separate assistance program, OPIC will reimburse travel costs up to $5,000 for a visit to explore business opportunities. This grant is limited to small businesses, defined by OPIC as those with annual revenues of less than $120 million.

Ottenberg's Bakers Inc., a $15-million wholesale bakery in Washington, D.C., won a $39,000 feasibility study grant in 1983 to investigate the possibility of establishing a subsidiary to lease baking equipment to bakeries in the Far East. So far, the company has spent about $25,000 -- most of it eligible for 60% reimbursement -- on three different trips, averaging 21 days, to the Philippines, Malaysia, Singapore, Indonesia, Hong Kong, and Taiwan. One of the trips was made by an outside financial adviser to conduct preliminary market research; another was made by an outside trade expert to study government policies and regulations that would affect the project. The third trip was made by president Ray Ottenberg, who toured bakeries and gauged the reactions of their managers toward his plan. One of the grant's stipulations is that Ottenberg submit a final report of his findings to OPIC.

"We've learned a great deal about the potential market for our idea," says Ottenberg. "We plan to make more trips, and we'll know in about six months whether it's feasible to pursue the enterprise we've hypothesized. Whatever we eventually decide, the feasibility study will make our decision a well-explored one."

Proposals to obtain feasibility or reconnaissance assistance must be submitted to OPIC, which evaluates an applicant's financial and managerial ability to conduct the project. "Applying is not a complicated thing," says Ottenberg. "OPIC asked for some general data on my company, checked to see if there was, in fact, a developing baking industry in the Far East, and scrutinized my idea to make sure it wasn't a complete boondoggle. I got approval back in less than a month."

For more information, contact Burton Bostwick, OPIC director of investment identification services, at (202) 653-2881.

Published on: Feb 1, 1984