Following a slump in 2012, FDI flows are once again rising globally, according to the UNCTAD World Investment Report 2014. Of the 9 per cent increase in flows reaching €1.07 trillion worldwide, Europe remains the largest FDI recipient, while emerging markets are reaping some of the bigger benefits, reaching 54 per cent of that total and a new high of €575 billion.
Property in Central and Eastern Europe is becoming increasingly popular among investors. In Q2 2014, the total value of investment transactions in Poland, the Czech Republic, Romania, Slovakia and Hungary reached €1.14 billion and was 73 per cent higher than in Q2 2013, says a recent report by Cushman & Wakefield. Since the beginning of this year, the region has seen an investment of about €2.5 billion — 38 per cent more than in the first half of 2013.
Economic growth is expected to almost double in EU11 in 2014, continuing to strengthen into 2015, according to the latest World Bank report. Overall, GDP growth in Poland, the Czech Republic, Slovakia, Hungary, Romania, Bulgaria, Croatia, Slovenia, Lithuania, Latvia and Estonia, is forecast to strengthen from 1.4 per cent in 2013 to 2.6 per cent in 2014.
Europe hardly exists as a homogenous economic region and would be better off not being treated as such in further financial strategising. In particular, the great divergences between the countries of Emerging Europe on the three strategic axes – namely, smart growth, inclusive growth, and sustainable growth – and the 7 flagship initiatives that fall under them show that even those belonging to Central and Eastern Europe come as a mixed bunch, economically speaking.
While Emerging Europe as a whole drew 5 per cent fewer investment projects than 2012 in 2013 — particularly from Western European automotive companies and shared services outsourcers — R&D operations were the hottest area, with the number of projects increasing by 23 per cent that year. Poland is still perceived as the most attractive CEE location for FDI by 31 per cent of respondents, followed by the Czech Republic at 11 per cent, Romania at 9 per cent, Hungary at 8 per cent, as well as Latvia and Slovakia at 3 per cent and 2 per cent respectively.
The privatisation of state-owned companies in Poland has been taking place for almost a quarter of a century, a process that Under-Secretary of State at the Treasury Ministry, Pawel Tamborski, believes has been an immensely successful process.
The massive growth of Poland’s financial market in the last two decades has catapulted it to the status of a capital market leader within the CEE region, and the Warsaw Stock Exchange (WSE) to that of CEE’s biggest stock market boss. According to Paweł Graniewski, Deputy CEO of Warsaw Stock Exchange, this transformation was not a miracle, but rather the result of hard work – the hard work of privatisation, to be exact.
The Visegrad countries (Czech Republic, Hungary, Poland and Slovakia) joined the EU in 2004 as rather weak economies, but with huge growth potential. With a population of more than 64 million, or 13 per cent of the EU28, the economic output of the Visegrad countries was only about 3.7 per cent of the total EU28 output, says Erste Group’s report.
As just one example of the aerospace sector being a key opportunity for foreign investment in Emerging Europe, Warsaw Airport – otherwise known as Frederyk Chopin International –has been undergoing renovations since 2012, due for completion in December 2014. As Poland’s biggest airport, the new Terminal 1 will make it even bigger with a traffic capacity of up to 26 million passengers a year.
It’s been ten years already since Poland’s EU accession. Of the 10 countries that joined the EU in 2004, only Poland, the Czech Republic, Hungary and Lithuania have yet to adopt the euro.
Economic prospects across Emerging Europe remain strong despite recent events in Ukraine and Russia, according to Regional Economic Prospects in EBRD Countries of Operations: May 2014. While the EBRD region as a whole has suffered the negative impacts of political uncertainty, the CEE economies — of Poland, Hungary, Slovakia, Bulgaria and Romania in particular — are benefiting from the positive effects of recovery in the Eurozone. In fact, growth in Q4 2013 enjoyed stronger than initially estimated growth in the region, in Poland especially.
When it comes to outsourcing, countries in Central and Eastern Europe (CEE) are becoming the places to be – or to outsource to, as you have it. Why Emerging Europe talks to Vikrant Khanna, working as Principal of Tholons, a leading strategic advisory firm for global outsourcing and investments, about the appeal of the CEE region as an outsourcing hotspot.