Western firms lick their lips as East opens its markets

Date: 25/09/1997

By Mark Turner

AMIDST all the political and financial intrigue surrounding EU enlargement to eastern Europe, it is quite easy to lose sight of what the process is ultimately all about.

The bottom line is that the new democracies want to improve their standards of living, and western Europeans want to cash in while they do so. That, as critics of European federalism all too often point out, does not necessarily require much more than a free-trade zone.

Whether or not the EU invites CEECs to join the club, foreign businesses will continue to invest in the region as long as it remains profitable.

While EU membership or support undoubtedly does make a country more attractive to potential investors, it is far from the whole picture. High education levels, low wages and improving productivity are often far more important than any political membership cards.

“EU enlargement was only one small part of the equation,” explained an executive from Bass, describing his company's reasons for advancing into the Czech beer market. “It ranked considerably lower than many other important investment considerations.”

Furthermore, the link between EU accession and economic prospects is a classic chicken and egg situation: membership potential attracts investors, but the Union only courts countries which foreign investors are already interested in.

Nonetheless, the eventual inclusion of 150 million new consumers in a (theoretically, at least) complete free-trade zone - more than a standard free trade association could ever achieve - is definitely an attractive prospect for firms weighed down at present by a mountain of paperwork.