business environment in central and eastern europe

Business Environment in CEE

Czech University of Life Sciences PragueMartin Kolmhofer

kolmhofer@cee-portal.at

CEE Countries

CEE Countries – Historical AspectsMaximum Extension of the Roman Empire

CEE Countries – Historical Aspects OTTOMANS AND HABSBURGS (800-1914)

Imperial capital was Vienna, except from 1583 to 1611, when it was moved to Prague.

Market Players in CEE Banking

CEE Currencies

Debt Capital Markets in CEE

ViennaBudapestLjubljanaPrague

CEE Insurance Market

• Most known European brands are present in the CEE markets, in top positions

• Very few domestic companies left

CEE Pension SystemsDemographic Shock Exposure

The EBRD

• Founded in 1991 • Its mission was to support the

formerly communist countries in the process of establishing their private sectors.

• Headquartered in London

CEE Retail Market

Shopping in the past…

…and today

Market Overview

CEFTA• Central European Free Trade Agreement: Trade

agreement between non-EU countries in Southeast Europe.

CEFTA is a single Free Trade Agreement (FTA) linking all the Western Balkans and Moldova. It replaces a previous network of more than 30 bilateral FTAs, thereby setting uniform trade rules across the whole South Eastern Europe.

CEE Consumer ConfidenceIndex measures consumer sentiment: The figure is determined by the difference

between positive and negative answers. Therefore a headline above zero indicates positive consumer confidence, while a negative number shows more

negative answers.

CEE Shopping Centre Prime Rents

Rental growth in CEE is diverging based on countries’economic and property market performance.

“Prime Rent” = rent for high quality location

Source: Jones Lang Lasalle

Utilities and Energy Markets in CEE

Planned “southern corridor” to limit dependence from Russia. Pipeline should bypass Ukraine and Belarus and connect EU directly with the countries of the Caspian Sea region.

Russian “South Stream” project: Gas pipeline via Black Sea to Bulgaria, then split to • Greece• Romania, Serbia, Hungary, Slovenia and AustriaThe project is seen as a political project / rival to the planned Nabucco pipeline (and to expand Russian presence in the region). Completion is due by 2015.

Marketing in CEE

Marketing in CEE

• What business logic drives foreign companies in CEE and how they approach the region and manage their business in CEE?

• Typical entry and marketing strategies used in the region today?

• The characteristics of economies and markets in CEE?

CEE Population in million

Number of cities with more than 150,00 residents

CEE Market Characteristics

Fairs and Events

• BRNO: Central European Exhibition Center

• CEFA: Central European Fair Alliance (www.cefa.biz)

Outsourcing to CEE

Outsourcing to CEE• CEE countries are notable for technology-

oriented educational system, strong academic background

• Cultural, regulatory and geographic proximity to Western Europe and USA

• High-skilled multilingual labor force with good engineering and R&D talent

• A stable and advanced legal and infrastructure framework compared to competing locations.

Outsourcing to CEE

Investment Promotion Agencies

Mission: To attract investment to a country, state, region or city. The agency does this by introducing investors with local real estate developers and other commercial service companies, by providing statistical information and by managing any investment incentives that the country may offer to companies which invest there (subsidies, grants, tax exemptions).

CPI – Corruption Perception Index

CEE Real Estate Market

Main Players

CEE Real Estate Events

• CEDEM CEE in September is organized by Roberts Publishing Media Group, publisher of CiJ, Central & Eastern Europe's leading property investment and development monthly magazine.

• Real Vienna  in spring is the CEE/SEE-focused Real Estate and Investment Fair organized by Reed Exhibitions/Messe Wien

• Urbis Invest: Important regional Real Estate Fair in April at the Brno Exhibition Center

CEE - Investment by SectorResidential

Office

Industrial and Logistics

CEE Office MarketPrime Office Rents

CEE - Transportation and Infrastructure

Public Transport as a part of socialist ideology

• Communist dictatorships ensured that private car ownership and use would be extremely expensive and difficult, while public transport was widely available and subsidized to such an extent that it was almost free.

• There were long waiting times for purchasing new cars (over a decade in East Germany and Poland!)

Road Transport: Road Incompatibility between Germany, Poland and

Russia

Road Transport: Road Incompatibility between Germany, Poland and

Russia

Trans-European transport networks

• A planned set of road, rail, air and water transport networks designed to serve the entire continent of Europe.

• Goal: to provide integrated and intermodal long-distance high-speed routes for the movement of people and freight throughout Europe.

30 Priority Projects (or axes)

Pan-European transport corridors

• Defined at the second Pan-European transport Conference in Crete, March 1994, as routes in Central and Eastern Europe that required major investment over the next ten to fifteen years. 

• These development corridors are distinct from the Trans-European transport networks, which is a European Union project

Pan-European transport corridors

Public Relations and the Media Landscape in CEE

Historical Perspective

• Common History as part of the communist Eastern bloc

• Lack of public awareness in the activities of companies

• Socialist system did not allow competition or promotion of companies, brands and products

• Years behind the Iron Curtain and under socialist regime have made people suspicious, cynical and difficult to influence

Media Landscape in CEE

Advertising expenditures per 4 traditional media groups

CEE Business Tycoons / Media Owners

Human Resources Management in CEE

CEE Market: “War for Talents”

• Western multinationals shift emphasis away from their traditional focus on corporate reputation and remuneration towards such areas as international mobility, structured learning and development, work-life balance and workplace atmosphere.

• While all the classical instruments are used for recruiting (such as ads and partnerships with universities, etc.) the most promising instrument are personal networks and recommendations

• The quality of applicants is assessed to be rather high, international experience is the weakest point.

• The loyalty of the high potentials towards the own company is expected to decrease to a long time low in the near future.

• Source: 2012

Recruitment Process Outsourcing (RPO) – Main Players

= an employer transfers all or part of its recruitment processes to an external service provider. 

Common Features of Education System in Communist Nations

• After World War II, Eastern European countries, including East Germany, Hungary, Poland, Bulgaria, Albania, Czechoslovakia, and Romania, all adopted educational systems that mirrored substantial features of Soviet practice. 

• Special importance to mathematics and the natural sciences

• Closely linked to youth organizations - strong elements of work-study and practical training into school programs

Biggest Companies in CEE