March 25, 2000

Dr. Jambo Ngambo
Minister, Ministry of the Interior
Suite 405
Government Administration Building
Mambo
Mazingira

Subject: Negotiations on the tourism project with Holdev

Dear Mr. Nambo:

First, I'd like to thank you for the best service you have provided us with in this hotel. Everything is so perfect here that we can fully relax to get enough energy to go back to the next meeting with Holdev. Also, I appreciate your kind guidance during the whole meeting session. We've learned a lot from you and truly enjoyed working with you. On your request, here I report how the negotiations with Holdev have been going so far, and I hope that the following will satisfy you.

The general focus of the negotiations has been on Mazingira's proposals for minimizing the possible economic and environmental side effects of introducing tourism, with specific focus on substantial employment of Mazingirans, and establishing solid infrastructure and environment protection facilities. It is our team's opinion that Mazingira has legitimate concerns, and that Holdev should support the government's proposals. Even though Holdev and we have roughly agreed on executing environment protection, infrastructure and education projects, we still have tons of details of each project which need further discussions.

Some background information on the negotiations will help you understand more clearly how they have developed. In preliminary planning for negotiations, we were considering how to minimize the economic and environmental disadvantages of introducing tourism and to establish solid base for other industries. And so we agreed that we should persuade Holdev to allocate 10 % of their investment to building roads, several more power plants, and environment protection facilities. We also planned to ask them to hire Mazingirans for 30% of upper management positions and 80% of lower status jobs. The 30% of upper management part was also from our concerns about holding control over future projects that Holdev will take in Mazingira. We expected Holdev to object that Mazingira does not have enough human resources eligible for management positions. On the contrary to the expectation, Holdev was willing to accept that only if the applicants successfully finish the education that Holdev requires, and instead wanted to discuss tax favor on their profits. As you might see here, I'd like to point out that Holdev's attitudes towards the negotiations were rather favorable from the beginning.

Currently negotiations have been developing in a positive way. Holdev has accepted our proposal to hire Mazingirans for 30% of higher management positions and 80% of lower status jobs on condition that we offer 30% tax reduction on their whole profit, which Holdev estimates would be approximately $90,000 each month. We found it reasonable and we have accepted it. In addition, concerning our initial proposal to allocate 10% of their total investment, which is about $8,000,000, to establishing infrastructure and environment protection facilities, Holdev and our team have agreed that Holdev would allocate 9%, some $7,200,000, to building roads, power plants, and environment protection facilities and 1%, about $800,000, to educating future Mazingiran management position employees. We agreed that the 1% contribution will be in the form of scholarship for the students who would have been selected to study abroad to get management positions of the Holdev-Mazingira tourism company. As for details on this education project and for the point of time when the contribution will be made, we haven't discussed them yet. In return for the 1% contribution to education project, we have agreed to give monopoly on tourism industry in Mazingira to Holdev for the next 10 years. Since we didn't have enough time to discuss several more points such as details for infrastructure development, types of environment protection facilities, and employment as well as the proposal that Holdev purchase our products for goods for the hotels, we have agreed to have another meeting next Wednesday.

Our assessment of the present state of negotiations is neutral. We believe that our concerns over the natural environment would be relieved to substantial extent through building environment protection facilities and that a solid infrastructure will certainly boost other industries, which, along with high employment of Mazingirans in tourism, will create many more job openings for local people. On the contrary, we cannot be necessarily optimistic about the result of the negotiations, since we still have a bunch of details that need to be discussed for each of the environment protection, infrastructure, and employment issue. In addition, we feel that we'll have to renegotiate the 10-year monopoly problem. We admit that we made a hasty decision on this issue. We will have one more preliminary meeting before next negotiation with Holdev, and in the meeting, we will discuss how to tactfully withdraw the monopoly proposal and which alternative return we will offer.

Our team recommends that it should be profitable for Mazingira to allow Holdev to invest in this project on the condition that Holdev be in favor of the government's proposals to minimize the impact on Mazingira's natural environment and economy caused by introducing tourism, when Holdev and we come to the details of environmental and economical issues. And I also recommend that a visit by vice-minister of Agriculture would be certainly helpful for the next meeting with Holdev where we will try to persuade them to buy our products.

In conclusion, we feel that the negotiations have come in the way that both Holdev and our team have been generally satisfied. Holdev will get 30% tax reduction, and they will probably get either monopoly on tourism in Mazingira for the next 10 years or any other alternative offer equivalent to that. Mazingira will be guaranteed a big boast in employment, stimulus of development in other industries, and environment protection. Still, I would like to remind you of the point that sucess of the negotiations will quite depend on further negotiation.

Everyone on the team hopes that you are doing well, and that you fully recover from your recent poor health. And we once again would like to express our gratitude for your kind guidance. With the lessons we learned from our mistakes in the last negotiation, we will do our best to make the most out of the next negotiation. If you have any questions or suggestions, please do not hesitate to call me. We will stay at this hotel until Friday.

Sincerely,

Yoo Jeong-Min
Member
Mazingira National Tourism Development Board

Enclosure: Present state of developing countries that introduced tourism last decade