As Dresdner Bank points out in its study, “Investing in Central and Eastern Europe,” few regions in the world are undergoing such rapid upheaval as Central and Eastern Europe.
“The majority of these countries will be joining the EU,” according to the study. “On membership, many legal regulations of pivotal importance for foreign investors will change. Who will join ERM2 (Exchange Rate Mechanism), then, two years later, who will join the European Monetary Union?”
No one can answer these questions yet, but they are of crucial importance. Exchange rate policies are a parameter for the international competitiveness of the accession states, and thus for the success of export-oriented subsidiaries.
Also, success in attracting inward investment in Central and Eastern Europe is already standing the more traditional locations on their heads. Europe’s economy has been soft for too many years now, and everyone is anxious for more stability.
The Czech Republic has already done an impressive job at attracting the lion’s share of investment in the automotive sector.
According to Ernst & Young’s “European Investment Monitor-2003,” the Czech Republic attracted 18 percent of the 153 auto component investments in Europe last year.
The inroads made by the Czech Republic are significant. The country now ranks first among the countries that receive investments, with the United Kingdom ranked second with 13 percent and France third with 12 percent.
Carl H. Hahn, honorary chairman and former chairman of the board of directors of Volkswagen AG, lists the characteristics of today’s Central European automotive industry as such, “State-of-the-art technology and highly competitive factories, a highly skilled work force and long tradition in engineering, together with a favorable wage and unit costs.”
Nemark, a Mexico-based aluminum castings maker has recently launched production at a new plant near Most, the Czech Republic.
Non-automotive related, Honeywell has recently launched operations at its new production facility in Brno, the Czech Republic. The center focuses on R&D for air condition and combustion equipment.
Comfort Level
Although opportunities in Europe’s new markets abound, it has been repeatedly shown that U.S. companies feel most comfortable investing in operations in the United Kingdom. The shared language, a similar legal system and friendly governments have strengthened ties between the two nations.
U.S. firms involved in high tech have been particularly drawn to locating alongside their British colleagues.
Adam Breeze, director of UK-based Tenon Techlocate, an inward investment consulting firm, said that the most important factors in this group are access to highly educated workers, proximity to good business networks and ease of entry.
DataFlux, a Cary, N.C.,-based provider of data management solutions, recently opened a European office in Marlow in southeast England.
Southeast England has been successful in attracting high-tech firms and workers because of a mild climate, quality of life and reasonable cost of living, when compared with London.
DataFlux technology is designed to help companies verify and standardize contact information, such as addresses and phone numbers, in different regions and across language boundaries.
“As we continue to add more international functionality to our technology, we are positioned to serve the data management marketplace in Europe,” said Tony Fisher, president and general manager of DataFlux.
Germany is often regarded as a high-cost country with tough and demanding labor unions. Yet, American firms that want quality and skilled workers turn to Germany for their European inward investment.
Kroll Ontrack, which offers technology services that concentrate on forensic accounting and business investigations, chose to locate in Boblingen outside of Stuttgart in Germany’s state of Baden-Wurttemberg because the region is a technological and manufacturing center.
“[The region] is world class and widely known in its areas of expertise,” said Peter Bohret, managing director of Kroll Ontrack.
Kroll Ontrack first chose to locate in London in 1992, but later found that 33 percent of its business was in Germany.
“We looked at Baden-Wurttemberg and Dusseldorf, as well,” Bohret said. “We noted where Hewlett-Packard, DaimlerChrysler were located, as well as the manufacturing centers of Germany, Switzerland, Italy and Austria. Stuttgart fell in the middle. Plus, we learned that Stuttgart has the highest number of patents in the world.”
Karen E. Thuermer is a freelance business writer based in Alexandria, Va.
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