Ormita is the world's largest multilateral reciprocal barter exchange system, with subsidiaries that conduct business worldwide and offices in 23 countries.
-Allows a business to swap / exchange their own product or service for things they need
-Reduces the cash outlay of the business
-Every purchase is matched with a new sale
-Purchase of international advertising, trade shows, translation, legal and accounting services etc
-More sales result in more customer feedback and less cost for “give-away” samples
Barter Provides a Mechanism to Improve the Balance Sheet
-Goods acquired using barter are still counted as an increase in the assets of the business.
-Bank capital guarantees reduce available lines of credit - barter capital does not.
-Allows the organisation to meet assets and/or equity ratios for other (cash) subsidies and loans.
-Lets a business obtain future international lines of credit guaranteed by countertrading operations.
The use of networks such as Ormita can help countries to build solid industrial bases, by balancing purchases of foreign goods and services against domestic exports in a simple, but creative manner; while addressing World Bank and IMF concerns of “bilateralism” and anti-competitive behaviour. This form of trade finance has a multiplier effect as it increases overall purchasing power which helps to reduce unemployment, recover potentially depreciating (or lost) value and helps a country’s development.
"International Trade Flows Facing The Global Credit Crunch: The Multilateral Barter Trade System". University of Turin, Italy. Faculty of Economics. March 2012
“Businesses often have excess capacity in their own goods, services or infrastructure, even more so when the financial cycle slows and credit tightens. Business people find that using capacity to source needed goods and services is an attractive alternative proposition to conventional sales and credit if it can increase sales, ease cash flow or reduce reliance on conventional credit.”
"Capacity Trade and Credit: Emerging Architectures for Commerce and Money". City of London Corporation, ESRC, UKTI, BIS joint Report. City of London Corporation. Dec 2011.
http://www.barterforadvertising.com
http://www.barterforprinting.com
http://www.agriculturalbarter.com
http://www.governmentbarter.com
http://www.ormitacorporate.com
http://www.ormita.com
http://www.barterforequity.com
2. 1
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Company Snapshot
Our History
Business Growth
International Presence
Media Recognition
General Statistics
Exporters
Media Outlets
Travel and Tourism
Manufacturers
Other Businesses
Government
Direct Barter vs Ormita
The Role of a Barter Exchange
Third Party Record Keeping
Tax Issues
Business Structure
THE ROLE OF ORMITA
WHY BARTER?
COMPANY OVERVIEW
CONTENTS
3. > Multilateral Barter
> Tolling
> Counter-purchase
> Offsets
> Switch Trading
> Compensation / Buyback
> Venture Capital
COMPANY SNAPSHOT
• Founded in 2001 as a financial services software
provider
• Currently the world's largest non-cash (barter) trade
house in based on annualised figures as of Dec, 31 2011
• Operations across 17 countries (2011)
• Expanding to 23 countries (2013)
• Customers in 54 countries
Government
32%
Manufacturing
41%
Media
8%
Mining
6%
Hospitality
4%
Other
9%
MARKET ACTIVITY
MARKET SEGMENTS BY VOLUME
5. European Union Islamic Development BankCape Verde
“…trade clearing houses are exempted
from rules on financial clearing
houses. I would like to clarify that it
is not our intention to subject entities
such as yours .. to OTC derivatives
and market infrastructure."
“On behalf of His Excellency, Mr
Petro Pires, President of the
Republic...”
“Barter is viewed as a potential means
of enhancing trade and promoting
economic cooperation.”
6. Kuwait
“To achieve a more equitable sharing of these potential long-
term economic benefits, and support Kuwait’s position in the
globalization process, the Government of the State of Kuwait
has decided to establish the Counter-Trade Offset Program
(Offset Program), which is responsible for promoting
collaborative business ventures between Foreign Contractors
and Kuwaiti private sector businesses.”
Seychelles United Kingdom
“On behalf of the Minister of Local
Government, Sports and Culture,
Republic of Seychelles…”
“Businesses often have excess capacity in their own goods,
services or infrastructure, even more so when the financial
cycle slows and credit tightens. Business people find that
using capacity to source needed goods and services is an
attractive alternative proposition to conventional sales and
credit if it can increase sales, ease cash flow or reduce
reliance on conventional credit.”
7. USA World Bank
“When banks are under pressure, the capital needed
for trade finance may be allocated elsewhere on
balance sheets. With no secondary market to offload
loans, balance sheets have been constrained. In
addition, global currency volatility and more rigorous
counterparty risk assessment contribute to higher cost
of trade finance for importers, exporters and financial
intermediaries.”
“U.S. prime contractors generally see barter as a
reality of the marketplace for companies
competing for international sales. Several U.S.
prime contractors have informed BIS that
offsets are usually necessary in order to make
these sales - sales which help support the U.S.
industrial base.”
United Nations
“…transactions covered by the Legal Guide are
those transactions in which one party supplies
goods, services, technology or other economic
value to the second party, and, in return, the
first party purchases from the second party an
agreed amount of goods, services, technology or
other economic value.”
11. 70% of all fortune 500 companies 2
Eight out of ten media companies 3
65% of all New York Stock Exchange listed firms 4
More than 129 governments 5
Nearly 400,000 businesses in the USA 6
1.8 billion Swiss Francs each year in Switzerland 7
18% of the Argentina economy in 1995 8
Most start-ups boot-strap themselves with barter
Frequent-flyer points
1. (2004)., Department of Commerce Fact Sheet. USA DOC.
2. Schmiddgall, R.S., Damitio, J.W. (1999)., Bartering activities of the Fortune 500 and hospitality lodging firms., International Journal of Hospitality Management
3. American Association of Advertising Agencies. (2003).
4. (2004)., Annual Report, National Association of Trade Exchanges. Fact Sheet, International Reciprocal Trade Association.
5. United Nations Commission on International Trade Law. Vol XIX. (Yearbook). A/CN.9/302
6. Stodder, J. (2007)., Residual Barter Networks and Macro-Economic Stability. Renselaer Polytechnic Institute at Hartford, Hartford CT.
7. Studer, T (1998)., WIR and the Swiss National Economy
8. Pearson, R. (2003)., Argentina's Barter Network: New Currency for New Times., Bulletin of Latin American Research
MORE THAN 30% OF THE WORLDS TRADE IS
NON-CASH BASED1
12. Raymond O. Estioko
CENTRAL BANK OF THE
PHILIPPINES
Reciprocal trade has allowed
the country not only to recoup
and preserve its foreign
exchange but also enabled
key industry sectors to develop
and expand new markets and
products for export, acquire
sophisticated technology,
obtain foreign direct
investments, and avail of
specialized
technical/specialized training.
“
”"Countertrade Program of the Philippines",
Philippine Government, 2002
13. BARTER FOR GOVERNMENTS
Financially sound practice
• Preserves scarce hard currency
• Improves the balance of trade in the importing country
• Channel back of recoup foreign exchange spent on imported
goods or services
• Reduces foreign currency exchange risks
Expands international appetite for developing countries products
• Lesser developed countries can take advantage of the
distribution and marketing networks of the companies they
countertrade with to distribute their products.
Technology transfer between buyer and seller
• Gain access to advanced technology and training, new foreign
investments, research and development and related support for
national development and modernization programs
• Promote mutually beneficial collaborative business ventures
between local industry sectors and their foreign counterparts
through joint ventures and industrial cooperation
• Promote export products and markets
14. Ahmad Mohamed Ali Al-Madani
President
ISLAMIC DEVELOPMENT BANK
Barter is viewed as a potential
means of enhancing trade and
promoting economic cooperation.
“
”
"Countertrade: Policies and Practices in OIC Member
Countries", Islamic Development Bank, Seminar
Proceedings No. 24, 2002
15. Recieve the highest rate of return
• By bypassing importers and wholesalers a manufacturer can
recieve a higher profit margin for each item sold
Provides an outlet to sell problem stock
• Returned stock
• Surplus items
• Improperly packaged stock / incorrectly branded stock
Seasonal stock can be sold at retail market prices
• Opens new channels for direct sales
Recieve immediate payment rather than 90 days credit
Use barter to acquire needed goods and services
• Advertising
• Customer and/or staff rewards
• Uniforms, stationery, printing
• Equipment / equipment maintenance and repairs
• Lifestyle enhancing products or services
BARTER FOR MANUFACTURERS
17. Robert A. Zoellick
President
WORLD BANK
When banks are under
pressure, the capital needed
for trade finance may be
allocated elsewhere on
balance sheets. With no
secondary market to offload
loans, balance sheets have
been constrained. In addition,
global currency volatility and
more rigorous counterparty
risk assessment contribute to
higher cost of trade finance
for importers, exporters and
financial intermediaries.
“
”
"Trade Finance in Crisis: Market Adjustment or
Market Failures?", Policy Research Working Paper
5003, World Bank, July 2009
18. Low Risk / Inexpensive Market Entry
• Allows a business to swap / exchange their own product or
service for things they need
• Reduces the cash outlay of the business
• Every purchase is matched with a new sale
• Purchase of international advertising, trade shows, translation,
legal and accounting services etc
• More sales result in more customer feedback and less cost for
“give-away” samples
Enables Market Entry in Restrictive Markets
• A method of repatriating profits frozen in a foreign subsidiary
operation’s blocked accounts. If unable to repatriate its
earnings, the firm will scout the local market for products it can
successfully export to world markets.
• When the alternative is no trade at all firms may want to consider
barter.
BARTER FOR EXPORTERS
19. May Be Mandatory When Selling to Certain Countries
• Various countries place restrictions on currency exchange for the
protection of the currency and to balance requirements
between imports and exports
Strengthens International Relationships
• Business relationships can be created by the willingness to
accept the purchaser's domestically produced goods as
payment.
Lower Opportunity Cost
• During difficult economic times a seller may face high finance
costs and slow movement of product - leading to surpluses
and/or the need to reduce staff numbers and/or inventory
holdings.
• There may be a lack of immediate opportunities to sell for cash.
• Finding a new cash-paying customer for goods involves a new
investment in marketing, versus a low cost for countertrade
(especially where marketing and entry costs are offset against
new sales via bartering)
BARTER FOR EXPORTERS
20. Eric L. Hirschhorn
Under Secretary
U.S. DEPARTMENT OF COMMERCE
BUREAU OF INDUSTRY & SECURITY
U.S. prime contractors generally see barter
as a reality of the marketplace for companies
competing for international sales. Several U.S.
prime contractors have informed BIS that
offsets are usually necessary in order to make
these sales - sales which help support the U.S.
industrial base.
“
”"Offsets in Defense Trade", U.S. Department of
Industry, December 2009
21. Attracts New Customers
• Businesses who would otherwise be unable, or unwilling, to
purchase for cash may be willing to undertake a barter deal
Low Cost For High Returns
• Sometimes it is hard to attract new cash paying customers
• Once a media company’s initial operating costs are covered
every new sale comes at a very low cost
• People paying on barter are still offering something of value –
barter credits and/or direct barter trades – meaning the media
company is turning something lost into something potentially
valuable.
Get more cash referrals
• Successful clients can be used as case studies to attract new
cash paying customers
• Word of mouth referrals are the best form of signing new clients
BARTER FOR MEDIA OUTLETS
22. International tourism is
part of the international
trade in goods and
services that occurs
daily. Most international
trade is facilitated by
international payment
mechanisms and
acceptable hard
currency mediums of
exchange. However a
considerable amount of
trade is facilitated without
such international
mediums of exchange.
These alternative trade
mechanisms come under
the heading of barter.
“
”
Martin Ferguson
Minister of Tourism
AUSTRALIA GOVERNMENT
"Countertrade and Tourism Development".
The Journal of Tourism Studies, Vol. 7, No. 1,
23. Every unsold room represents lost revenue
• Turns previously unsold rooms into needed products and services
• Takes customers away from competing brands or locations
Discounting rooms is not the answer
• If everyone discounts then the overall perception of the market
price will go down
• Once a business becomes known for discounting it is very difficult
to increase the price later
• Competitors with bigger pockets could win a discount war
Turns empty rooms into needed products or services
• Allows a business owner to “bank” previously unsold room space
for later use.
• Helps maintain advertising budgets regardless of cash sales
Turns unsold rooms into a source of referrals for new cash sales
• Referrals create more credibility than advertising alone
• Travellers often view referral information online
• Builds consumer trust and may lead to additional cash business
BARTER FOR TRAVEL AND TOURISM
24. Businesses often have excess
capacity in their own goods, services
or infrastructure, even more so when
the financial cycle slows and credit
tightens. Business people find that
using capacity to source needed
goods and services is an attractive
alternative proposition to
conventional sales and credit if it can
increase sales, ease cash flow or
reduce reliance on conventional
credit.
Excerpt from "Capacity Trade and Credit:
Emerging Architectures for Commerce and
Money". UKTI, BIS, City of London Corporation &
ESRC Joint Report. Published December 2011.
Launched by Lord Sassoon.
“
”
Lord Sassoon
Commercial Secretary
UK TREASURY
25. BARTER FOR OTHER BUSINESSES
Reduces existing cash outlay
• Buying using your own goods or services as payment is a lower-cost
option than purchasing using cash
• Every purchase is offset against a new sale
Attract new cash-paying customers
• Barter for advertising
• Have more people use your product or service
• Get more referrals
Creates efficiencies in business
• Earn full value for overstocked, last season or end-of-line items
• Reduce storage costs
• No need to discount
Helps expand (or maintain) market share
26. • Goods acquired using barter are still counted as an increase in
the assets of the business.
• Bank capital guarantees reduce available lines of credit - barter
capital does not.
• Allows the organisation to meet assets and/or equity ratios for
other (cash) subsidies and loans.
• Lets a business obtain future international lines of credit
guaranteed by countertrading operations.
BARTER CAN HELP TO IMPROVE
THE BALANCE SHEET
27. 3
Direct Barter vs Ormita
The Role of a Barter
Exchange
Third Party Record Keeping
Tax Issues
Business Structure
THE ROLE OF ORMITA
28. DIRECT BARTER IS DIFFICULT
• You may want something from someone but they do not want
anything from you
• You want more from the other business than they want from you
• It is sometimes difficult to value the goods or services
• You want a product now but you can only repay in exchange
later
• You do not have a direct relationship with the seller
• Agreements are difficult to document and enforce
• Hard to find sellers who will agree to exchange
30. ROLE OF THE BARTER EXCHANGE
The Ormita platform serves several functions:
• Provides a multi-lateral matching system of wants and needs
• Helps source new customers
• Promotes existing participants (nationally and globally)
• Acts as a third-party to mediate between delivery of goods and
services for the best price
• Finds alternative (non-cash) suppliers for you to make purchases
from
• Records the values of transactions
• Issues account statements to show the transactions
Ormita provides each member with an account which:
• Offers access to interest-free lines of credit
• Records the value of every purchase or sale
• Issues account statements
31. Ormita brings new customers
• These customers do not replace existing cash customers
• Customers come from competing businesses that are not
members of the Ormita network
• These customers generate new revenue
Ormita will never devalue your current cash market
• Ormita does not resell products for cash
• We do not discount products against the prevailing cash market
price
• Ormita will only offer your service for exchange into markets where
it does not currently exist and/or where there is low brand
awareness
Ormita does not resell products for cash
• We do not discount products against the prevailing cash market
price
• Customers who acquire a product or service through barter are
more likely to give positive feedback
• The cost to service an additional customer may be nominal versus
what is gained in return
BARTERING CREATES NEW OPPORTUNITIES
32. THIRD PARTY RECORD KEEPING
• Transactions are recorded in a
centralized “ledger” which
records the value of the items
purchased (debit) and sold
(credit) - much like a
clearinghouse does for stocks,
or a commercial bank does for
checks.
• This ledger system utilises a
“trade credit” as a method of
accounting with 1 Trade Credit
= $1. (NB. Trade credits are also
referred to as Barter Dollars).
• Just like any brokerage firm,
Ormita charges a cash
commission on each
transaction.
34. Barter is not a “tax dodge”
• Most countries have laws about barter
• For barter to be legal the price must be the same as the
real cash market price. (This is why we account for barter
transactions in the same way as cash and at the same
price as the cash market price)
Used correctly, bartering creates no major tax liabilities
• Income tax is paid on profit
• If you spend all the income that you earn you have no
profit (and therefore no income tax)
• Sales tax / GST / VAT must be paid according to your
government regulations
TAX ISSUES
35. Media Buying Agencies
• Media buying agents purchase media for cash (at a 10-15%
discount) and resell it for cash
• Ormita already acts as a media buying agency and aggregator
of media for our customers (this is how we charge the customers
a higher fee for media)
• Ormita benefits from bulk media buys (reduced cost per deal
which can be turned into a barter dollar profit)
Importers
• Unless an importer has excess stock, they offer no “value add” to
the Ormita business model and are simply seeking a mark-up
which would reduce manufacturers and exporters benefits of
being involved in barter.
Other
• Typically anything with less than a 30% profit margin is difficult to
do on barter as the member must pay a commission when they
buy of 7% cash.
BUSINESSES WE EXCLUDE AS MEMBERS
37. STANDARDISED SYSTEM
Ormita provides a uniform system of
operation, so that consumers receive
uniform quality; efficiently and cost-
effectively.
Ormita provides management
assistance, including accounting
procedures, personnel and facility
management.
The Company has credit control, IT,
staff and risk management
procedures similar to those used in
the standard financial services
industry.
Operating to Bank Standards
44. ROBUST NETWORK
ARCHITECTURE
Ormita telehouses in various parts of its
server network in geographically
redundant locations:
• Belgium
• Canada
• China
• France
• Germany
• Spain
• United States
Redundant Server Network
45. GLOBAL TELEPHONE NETWORK
• Redundant Voice-over-IP telephone
• PABX system
• Fully hosted and managed by Ormita
• Voicemail
• Conference Calling
• Servers hosted in 7 countries
Integrated PABX System
50. FINDING US ON THE INTERNET
AGRICULTURAL BARTER
www.agriculturalbarter.com
BARTER FOR ADVERTISING
www.barterforadvertising.com
BARTER FOR PRINTING
www.barterforprinting.com
BARTER FOR EQUITY
www.barterforequity.com
GOVERNMENT BARTER
www.governmentbarter.com
ORMITA WORLDWIDE OFFICES
www.ormita.com
ORMITA COMMERCE NETWORK MEDIA KIT
www.ormitamediakit.com
51. LOCAL OFFICE CONTACTS
Australia +61 2 8064 2487 Greece +30 211 790 2320 Singapore +65 3158 1477
Austria +43 1 311 7296 Hong Kong +852 5808 2722 Slovakia +421 2 3305 7871
Belgium +32 2 808 9128 India +91 22 522 141 South Africa +27 10 500 9060
Bulgaria +359 2 492 5044 Israel +97237630190 South Korea +82 70 7705 3525
Canada +1 647 931 6841 Italy +39 015 952 6193 Sweden +46 8 4083 9907
China +86 755 33 011 789 Malta +356 2778 1011 Switzerland +41 43 508 1008
Cyprus +357 25 025092 Mexico +52 55 4170 7577 Thailand +66 600035265
Czech Republic +420 22 888 1634 Netherlands +31 20 808 2007 Turkey +90 850 377 8101
Denmark +45 89 88 11 29 New Zealand +64 9 974 9159 U.A.E. +971 4 451 7070
Estonia +372 668 2549 Norway +47 21 98 89 79 Ukraine +380 94711 2556
Finland +358 9 3158 2401 Portugal +351 30 880 1735 United Kingdom +44 203 432 3828
France +33 1 8288 3929 Romania +40 3 1630 0662 USA +1 314 269 5876
Germany +49 931 3069 99280 Russia +7 498 619 5663 Zambia +260 97 789 5034
Head Office: 702, 27 Hillier Street. Central. Hong Kong. Tel: +852 5808 2722
EU-Zone Head Office: 152 City Road. London. United Kingdom. Tel: +44 203 355 1381
For local office contact addresses please visit www.ormita.com
Ormita has offices in 23 countries. Countries with no local presence may have an office
number which will divert to the nearest service centre. Some countries may also have more
than one office in operation.