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GLOBAL—Encino Firm has Worldly View on Terrorism

EurOrient’s CEO Is Looking Closely at What It Will Take to Conduct Business on a Global Basis Now Life used to be easy for Ron Nechemia, at least as easy as it can be when you run a global company involved in financing $10 million to $1 billion transactions all over the world. To be sure, EurOrient Financial Group, a company that helps businesses and governments secure debt and equity financing for infrastructure projects like power plants and roadways in emerging countries, deals with a complex network of governments, corporations and ventures. But from where Nechemia, the company’s co-founder, chairman and CEO, sits, the world was relatively predictable. That changed on September 11, 2001. The catastrophic attack on the World Trade Center that day raised questions and issues about multinational businesses that even Nechemia, used to working in the global arena, had not considered before. It will take months, if not years, to answer many of them, Nechemia believes. “This is a new era of world terrorism,” Nechemia said in an interview at EurOrient’s Encino headquarters. “I don’t think we can see precedent for this type of event.” In the near term, EurOrient has already moved to make some operations more secure for its employees. Travel arrangements now must go through the company’s security department, an effort designed both to keep better track of a staff that operates from locations as far flung as China or Bolivia, and keep workers out of harm’s way. The company is taking a closer look at the way it backs up computer data, reviewing its health insurance coverage outside the U.S., revising its liability coverage and giving thought to carrying insurance against kidnapping. But even these steps don’t begin to address the issues businesses are likely to grapple with in coming months and even years. “There have been, for time immemorial, obstacles to international investment,” said Mehran Kamrava, associate professor of political science at Cal State Northridge. “The business environment, the government environment, problems of cross-cultural communication, and this adds another element. I don’t think we’ve seen the full consequences by any means.” Will the attack hasten a recession that many think was already underway? Will investors back away from projects in emerging countries fearful not only of the financial risks but the potential danger to employees charged with overseeing the projects? “I think it’s going to be very hard to funnel new money to exotic places, and I think (investors) are going to spend more time watching the money they have out there, seeing if it’s safe and seeing if they can get some of it out,” said Jonathan Aronson, professor of international relations and communications at the University of Southern California. Ironically, many of the obstacles to globalization were just beginning to clear for investors and companies like EurOrient in recent years. When the firm was founded in 1988, few governments in emerging nations were willing to accept private investments from foreign companies. But by the mid-1990s, many of these governments, facing staggering debt, began to embrace privatization. “After 1997 the company got a huge volume of work,” said Nechemia. “Emerging companies found out their debt to equity was so high they were insolvent, so they came to us and asked us to bail them out.” EurOrient’s debt financing projects, once numbering a handful a year, grew dramatically as a result, and in 2000, EurOrient launched its first private equity fund. Today, the company’s financial transactions involve infrastructure projects totaling more than $15 billion. In addition to power plants and roadways, the company is involved in oil and gas, telecommunications and mining and minerals in 50 countries spanning Asia, Latin America, Central and Eastern Europe and Africa. Nechemia and some 115 financial professionals around the globe have learned to navigate the political, cultural, economic and bureaucratic idiosyncrasies of each of the countries in which they are involved, often establishing close relationships with the governments and becoming intimately familiar with danger zones. Shortly after the murder of the Nepalese King Birendra and other members of the Royal Family, high cabinet officials were on the phone directly to Nechemia. ” ‘Don’t worry, everything will be OK,’ they told me,” Nechemia recalled of the events this summer. When EurOrient employees travel to the Philippines, they are not permitted to take taxis from the airport because of the risk of kidnappers and their intelligence-gathering expertise. “They know how much is in your bank accounts,” said Nechemia of the kidnappers. “If you tell them you have no money, they will laugh at you.” But the events of Sept. 11 have tested even his expertise. “We were of the belief that these terrorists could not go to the Western world and live as part of the society because (their beliefs) would deteriorate,” said Nechemia. “In the West Bank, blowing yourself up is holy. But if they lived among us and became an educated part of society (we thought) it would be different. They have education and they still can do it.” Some wonder whether the enthusiasm for global investments will be dampened now that terrorism has moved from being a local threat to the international stage. The Mideast, which has been slow to integrate into the world economy, has never accounted for a great deal of foreign investment – $5 billion in comparison to $64 billion in a segment of Asia and the Pacific according to Kamrava. But even areas like China could see a slowdown. “So much of the world economy does depend on the U.S. economy, and it’s looking like there is a recession, so that is causing hesitation,” said John Odell, professor of international relations at USC. “But I don’t know. I think it’s a temporary problem because of the uncertainty.” Nechemia insists that global investment will continue unabated, even in countries like China which are still grappling with political problems, in part because the opportunities there are too great to overlook. Other emerging nations with rich mineral reserves like Africa with its petroleum fields will also prove an opportunity too lucrative to pass up, Nechemia said. “Petroleum fields, to the best of my knowledge, are not in Beverly Hills,” Nechemia said. “Petroleum can take you to places not very desirable, but people will go there.” But even if global terrorism does not deter investment, it will make investors, and companies like EurOrient who assist them, more vigilant, Nechemia said. EurOrient employees had not, in past years, been permitted to fly single-engine airplanes or local airlines because the company believed they were not safe. Now, all flight arrangements are being routed through the security department, so that risks can be evaluated on a case-by-case basis, taking into account not only the conditions in the country in question but also the passport under which the employee is traveling. The company has gone back to the drawing board to consider new ways to back up computer data in the event that a server is wiped out. And perhaps most daunting, Nechemia wonders about how to protect the company’s human resources. As many as 100 people may have perished at Fiduciary Trust Limited, a company located at the World Trade Center with which EurOrient does business. “Do you know what it’s like to recruit 100 people? I don’t even want to think about recruiting a VP,” said Nechemia. “We’re talking about such a huge amount of people serving the backbone of the U.S. economy. To me, I can say that’s the biggest loss of all.” Although many companies have established single, flagship offices to promote operating efficiencies along with the firm’s image, Nechemia has resolved never to do so. “I’m not comfortable having all our employees in one giant building,” he said.

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