Investment in Developus

Investment in Developus*

Confidential Instructions to the Negotiator for the Financus Development Bank

Capital Partners' recent application to build and operate a hydroelectric power dam and industrial park in Developus is very intriguing, whether we think of ourselves as a Development Bank or as an extension of Financus. We are certainly interested in seeing a hydropower project finally developed in this area. Unfortunately, some of our lower level staff appeared overeager in initial discussions with Capital Partners, and would have gladly committed our entire budget to this venture had my Deputy Secretary not stepped in!

This meeting seems a perfect opportunity to test the strength of Capital Partners' commitment to the project, and to wrangle some concessions in return for funding.

Although Developus's Prime Minister has said she would seek the consensus of all key parties on the project, it is not clear precisely how many parties will need to agree to the proposal in order for her to approve the license.

Scoring

In order to help you plan your negotiating strategy, our analysts have constructed a special 100-point "scoring" scheme to illustrate which negotiable outcomes are of greatest and least importance to us. Under this scheme, the most preferred set of outcomes is worth 100 points to us; the least preferred is worth zero. You can earn up to 100 points depending upon how each of the five issues is resolved.

The use of "points" may seem a bit artificial and awkward. But for the purposes of this negotiation, it enables us to combine our several interests--developing hydropower generation resources, assisting in strengthening the region's private commercial sector, retaining control over important projects, etc. The point scheme combines these interests into a single "currency," and allows us to compare the gains and losses associated with different issues.

Your task is to try to earn as many points as possible in this negotiation. This is not being greedy--it simply means that we want to further our legitimate interests as far as possible. We will support any project worth at least 65 points, but that is the bare minimum we can accept. We certainly hope you will do much better.

Issue A: Industry and Irrigation Mix. This issue is moderately important because of its impact on the environment. While our political mandate requires us to be sensitive to environmental concerns, we need not be overly sensitive. Here we think the demands of Visitus and the environmental community may be a bit extreme. While we agree that the Clean and Dry option would create the least environmental damage, it would also unduly limit the profit potential of Capital Partners' project. We do not need another failed commercial endeavor on the continent. Capital Partners should be free to develop a reasonably diverse industry mix; too narrow a mix would make the industrial park extremely vulnerable to fluctuations in the economy. Moreover, Dusty and Damp industries are much more likely to benefit from access to inexpensive electric power than all-clean industries. With regard to the irrigation, we do not want to see so much water diverted that it affects the flow of the Majestic in Financus, but we think that it unlike to occur anytime soon with a Dusty and Damp scenario. We should be cautious about agreements between Developus and other upstream riparians to the effect that a Dusty and Damp option would set a precedent for more irrigation by all upstream riparians. We have therefore assigned the following points to this issue:

* Option A2: Dusty and Damp = 11 points

* Option A3: Clean and Dry = 5 points

* Option A1: Dirty and Wet = 0 points

Issue B: Ecological Impact. In light of our mandate to promote environmentally responsible development, we cannot accept a project that might do substantial damage to the environment. On the other hand, we do not want to burden Capital Partners with improving the ecology if such improvement threatens the economic viability of the dam or park. We have therefore assigned the following points to this issue:

* Option B3: improve = 25 points

* Option B2: maintain and repair = 20 points

* Option B1: some harm to the ecological setting = 0 points

As you can see, we are not averse to improvements. We can, after all, win some political credibility if improvements take place. But we are far more concerned that Capital Partners be required at least to maintain and repair the setting.

Issue C: Employment Distribution. Compared to the other issues in this negotiation, this is perhaps a minor issue. Confidentially and off the record, we have some qualms about hiring preferences that might jeopardize the economic viability of a business. Officially, we try not to interfere in such matters because it usually provokes a political battle. Our Board of Directors wants us to stay within the role of economic advisors and does not want us venturing political opinions. On an economic basis, we assigned the following points to this issue:

* Option C4: no local preference = 9 points

* Option C3: local employment quota of 1:1 = 4 points

* Option C2: local employment quota of 2:1 = 2 points

* Option C1: unlimited local preference = 0 points

Avoiding a local hiring preference will also allow Capital Partners an opportunity to experiment with labor-saving technologies which have would help