ESOURCE GUIDE TO DOING BUSINESS
IN
CENTRAL AND EASTERN EUROPE
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Country ReportsUnited States Department of State, Bureau of Public AffairsAs changes occur in the Central and East European countries, the United States helps establish and solidify political and economic institutions and systems that will foster long-term democracy and prosperity in the region. The United States is expanding its political, diplomatic, and economic relations with CEE countries as American business seeks greater trade and investment.
Albania
In recognition of Albania's progress toward democracy and a market economy, the United States in March 1992, granted a waiver to the Jackson-Vanik amendment, which opened the door for various U.S. Government trade and investment programs of agencies such as OPIC and TDA. A bilateral trade agreement was signed in May 1992 and awaits approval from the parliament. Albania offers a number of opportunities for American businesses, particularly in tourism, telecommunications, and agribusiness. In 1992, U.S. exports to Albania doubled to $36.2 million. Imports rose 62% to $5.2 million. Albania is rich in natural resources. The mineral and the oil sectors, in particular, offer good prospects for investment. Industry generally suffers from outdated technology. Priorities for investment include bottling plants, food processing plants, and mining/refining facilities. Scenic mountain terrain and more than 200 miles of beaches offer considerable potential for tourism development.
Bulgaria
The United States and Bulgaria signed a bilateral trade agreement in April 1991, and a bilateral investment treaty is in the process of being ratified. The latter will assure American investors of national treatment guarantees, as well as the services of an ombudsman office to facilitate joint ventures. Bulgaria became a GSP beneficiary in December 1991, and most-favored-nation status went into effect in November 1991. U.S.-Bulgaria trade has slowed significantly due primarily to Bulgaria's persistent shortages of foreign exchange. However, economic reforms signal significant trade potential. The country offers several advantages, including a highly skilled labor force, an established distribution network with an extensive trucking industry, and an established (although antiquated) base for the electronics and computer sectors.
Croatia
Civil war has badly damaged the Croatian economy and temporarily halted economic reform efforts. Productivity has dropped 50% since mid-1991. Shipbuilding and petrochemical refining, the leading industrial sectors, have suffered tremendously, and much of the country's infrastructure is damaged or ruined. Croatia is expected to offer a variety of major reconstruction projects after hostilities have ceased and it is accepted in the IMF and the World Bank. Despite these problems, Croatia is the leading importer of U.S. goods among the former Yugoslav republics. There are good opportunities for U.S. exports of coal, motor vehicles, telecommunications and computer equipment, and chemicals, though arrangements should be made to guarantee payment before shipment. Croatia has nationalized several socially owned (local- vs. state-owned) enterprises as an initial step toward selling them to private investors. The process is expected to gain momentum as the fighting ends. Investment is allowed in almost all sectors, with 100% foreign ownership permitted.
Czech Republic
The Czech Republic welcomes U.S. trade and investment, which are seen as a counterweight to economic dominance by its more prosperous neighbors, particularly Germany. Most of the obstacles to bilateral trade and investment have been removed. The number of American companies represented in the Czech Republic has increased from an estimated half dozen in 1989 to more than 500 in Prague alone. U.S. exports to the former Czechoslovakia increased from a negligible level during the communist era to $89.1 million in 1990 to $413.2 million in 1992. U.S. 1993 exports to the Czech Republic currently are estimated to be about $300 million. Best prospects for U.S. exports include computers and software, air pollution control equipment, telecommunications equipment, aircraft and parts, and food processing and packaging equipment. Financial, management, consulting, and environmental services also are in demand. There is an increasing demand for consumer goods. U.S. business faces stiff competition from EU companies.
Estonia
Estonia is highly industrialized and supplies about 60% of its energy needs from oil shale and hydroelectric plants. The agricultural sector is small but largely self-sufficient. Fishing and shipbuilding are other key industries. Estonia has made remarkable progress in economic stabilization and structural adjustment since early 1992. Strong fiscal discipline, sound monetary policies, and a new currency fully backed by foreign exchange have helped reduce inflation to single-digit levels, albeit in the context of a 40% decline in output. Trade has been liberalized, and Estonia has begun to emerge as a market for U.S. goods and potential entrepot for markets farther east. Pharmaceuticals and consumer durables are in demand, as are telecommunications equipment and other high- technology products.
Hungary
The United States and Hungary signed an agreement on September 24, 1993, that provides commitments on intellectual property protection. Hungary benefits from MFN status as a result of a 1978 Title IV trade agreement. It became a GSP beneficiary in November 1989. Hungary acceded to the GATT in 1973 based on a non-market economy Protocol of Accession. The protocol will be renegotiated based on its market-oriented reforms and ability to fully accept GATT obligations American products are in high demand, especially now that the Hungarian Government has substantially liberalized imports. Average import duties have been cut from 50% to 17% in two years. Best prospects for U.S. exporters include food processing and packaging equipment, computer software, agricultural equipment, telecommunications equipment, computers and peripherals, construction equipment, and consumer goods.
Latvia
Latvia has an advanced industrial sector, producing high-quality electronic and consumer goods. It is largely dependent on imports of energy and raw materials. Industrial and agricultural machinery and equipment are key industries. Latvia has made excellent progress in economic reform. A new currency has been introduced, price reform is almost complete, and inflation has declined to nearly zero. However, output has dropped nearly 40% from its 1990 level, and unemployment is rising. Trade with the United States has remained small, but there are opportunities for U.S. exports of pharmaceuticals, consumer durables, computers, and telecommunications equipment. In late 1994, the United States anticipates signing an investment treaty, an updated trade agreement, and an intellectual property agreement.
Lithuania
Lithuania has a relatively diverse manufacturing base, which features a large machine-building industry, an oil refinery, and mini-computer production. Its livestock sector also is strong but depends on grain imports. Lithuania also is dependent on outside sources for energy. In 1991, Lithuania embarked on a comprehensive economic reform plan and has made substantial progress in price and trade reform and privatization. However, output has decreased 50% since 1989, and unemployment is rising. Its market is small, but there are opportunities for U.S. exports of consumer durables, pharmaceuticals, and high-technology equipment.
The Former Yugoslav Republic of Macedonia
The Former Yugoslav Republic of Macedonia has recently adopted currency reform and passed privatization legislation. It has a newIMF program. Although relations with neighboring Greece remain difficult, The Former Yugoslav Republic of Macedonia is at the crossroads of the southern Balkan region and offers investment opportunities in telecommunications, agribusiness, and transportation infrastructure development.
Poland
Four years into its transition to a market economy, Poland is the first former centrally planned economy in Eastern Europe to end its recession and return to growth. However, incomes remain low and unemployment high, straining the political consensus for reform. As a result, a new government, elected in September 1993, may seek to moderate the pace of change. Poland is the largest Central and East European market for U.S. exports, which totaled $636 million in 1992, almost 40% higher than in 1991. Major export product areas included computers, telecommunications, food processing equipment, consumer goods, pollution-control equipment, refrigeration and air-conditioning equipment, and travel and tourism services. To spur involvement in Poland, the American Business Center in Warsaw opened in March 1993 to provide office space and business services to the U.S. business community. Companies also are encouraged to use the services of OPIC, Eximbank, the Trade Development Agency, and the Polish-American Enterprise Fund.
Romania
Most-favored-nation trade status, renounced in 1988 by former President Ceausescu, was renewed in the fall of 1993. More than 100 American firms maintain representative offices in Romania. The Department of Commerce sponsors a U.S. pavilion at the annual Bucharest international fair. More than 50 U.S. firms participated in 1992. OPIC led a trade mission of U.S. businesses to Romania in October 1993.
Slovakia
American goods are in strong demand. Best prospects for U.S. exports to Slovakia include computer hardware and software, pollution-control equipment, telecommunications equipment, building products, and management and consulting services.
Slovenia
Slovenia has not been involved in the fighting in other former Yugoslav republics. It has a skilled, well-educated work force; a stable, convertible currency; and excellent trade ties to Western Europe. Slovenia's privatization law for the conversion of large, government-owned enterprises is close to ratification. It has an abundance of smaller, private companies in almost all fields. Slovenia places no restrictions on the repatriation of profits or invested capital and virtually no restrictions on any kind of business. Several major U.S. companies have established operations in Slovenia, which has six free trade/customs zones. Slovenia depends on imports of semi-finished and raw materials to produce exports. Best U.S. export prospects include hides and skins, coal, corn, and, in finished goods, computers, telecommunications equipment, chemicals, and petroleum products.
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