Hi and welcome to Just Answer!
You are correct that your self-employment income is reported on schedule C.
If you are hiring contract labor - the compensation is reported on schedule C line 11.

Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business is operated to make a profit.

To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your trade or business. A necessary expense is one that is helpful and appropriate for your trade or business.

If you operate a business in a foreign country - that activities should be according to local regulations - employment and tax laws. In particular - all local reporting and taxes should be paid.
If you have foreign contractors who are working outside the US - you do not need to report their compensations to the IRS on form 1099MISC.
However - because you will deduct your expenses - you should be able to proof the fact of payments, and that services were performed outside the US and your business activities do not violate local laws.
In the header - see line "I" - Did you make any payments in 2011 that would require you to file Form(s) 1099 - you will answer "No" - assuming you do not have contractors in the US.

In additional - because you are living abroad...

For the person to qualify for the foreign earned income exclusion - he/she should:
-- Work and reside outside the United States for at least 330 days during the year(Physical Presence test), or
-- Meet either the Bona Fide test.
If the person qualifies, he/she may exclude up to $92,900 (2011) in foreign wages. The amount of foreign earned income exclusion fro 2012 is $95,100.

Exclusion is not granted - to receive that exclusion - the Taxpayer should file the tax return and attach the form 2555.

Please be aware that - the exclusion above will not affect self-employment taxes - only income taxes. Only earned income is excludable - income from wages and self-employment. For instance - dividends, investment income, rental income, pensions, etc - are not excludable.

Let me know if you need any help
Be sure to ask for clarification if needed.