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Europe on the location map of Europe
Central Europe on the location map of Europe
The Ernst & Young Annual report 2002 on the pan European location of 1974
large investment projects is symbolic of the much wider scope of the decision
makers. In spite of the shortcomings of this kind of partial investigation, five
lessons can be drawn from the CEECs ranking in the projects listed in 2001:
Central Europe is far from constituting the core location of the
investment projects in the whole of Europe, but it clearly starts to take a
significant place. With the exception of Poland, which recorded its peak
in 1999 and remains at the 14th position (over 25 countries surveyed), all the
remaining CEECs improved their position last year. On the total projects
listed, Hungary and the Czech Republic were each selected for nearly 4% of
them, and reached the 7th and 8th rank respectively, just after Belgium. A new
and positive fact for the second wave of applicant countries: Romania is
ranked 15th, just before Finland for example.
The investment projects in CEEC have two characteristics : the
majority of them are greenfield investments (77% of the industrial projects)
in opposition to capacity extensions; they attract the largest projects in
term of labor force since they represent more than half of the 36 projects
with more than 1000 people, and even 70% in industry: 32 projects overall,
including 8 in Czech Republic, 3 in Hungary and 3 in Slovakia. Despite the
rising attraction of CEECs' in manufacturing investment projects, France and
the United Kingdom remained the most favored destinations in this field last
year.
In terms of sectors, several centers of intermediate technologies
appear in the automotive industry, in electronics or in chemistry-pharmacy. In
the car industry, Hungary and Poland account each for 4% of the total 96
European projects. For the automotive suppliers, the Czech Republic took the
first place last year in Europe with 20% of the 125 projects, including 3 of
the 10 largest investments announced. In electronics, Hungary remains the most
dynamic within the CEECs but even in this industry, U.K. and France are still
the most dynamic poles in Europe.
Despite the growing emergence of Central Europe on the industrial map of
Europe, it is necessary to remain realist on the magnitude of its
attraction, especially compared to the EU15 member states. The number of
operations as well as the sectors covered still put France at the 2nd rank
(13%) behind the United Kingdom (16%) and before Germany (9%). At the regional
level, Ile de France stays with the leading trio, after London and before
Catalonia. Nevertheless, the combination of the sectoral and regional rankings
of the Ernst & Young survey shows that the benefits of the EU enlargement for
the existing members will depend on their capability of adaptation to the new
competitive landscape. In the R&D, the region of the Ile de France once again
appears at the top of the European league followed by Catalonia, Madrid and
Stockholm whereas not one CEEC belongs to this high tech league. Furthermore
Ile de France is even ranked n°1 in the software industry. In electronics
also, a center like Grenoble, East of France, will receive € 2,8bns of
investment from STM, Motorola and Philips for one of the top design and
manufacturing production facility in semiconductors. In the car industry, the
Alsace region, border of Germany, still belongs to the most attractive
European areas, CEEC's included, with Catalonia and Moscow just behind. The
same is true for the chemical industry.
A catching-up demand but still rather marginal
The figures recently published by EUROSTAT on Information Technologies in the
applicant countries remind us that their contribution to the overall demand in
the enlarged Europe still remains marginal even if they are catching up quite
fast on EU levels.
As to personal computers (PC), the average equipment for 100
inhabitants in the applicant countries is strongly influenced by Turkey,
Romania and Poland as they account for 74% of the whole population. At the end
of 2001 they displayed three of the lowest equipment rates, albeit a strong,
or even very strong growth, with respectively +8%, +12% and +24% against +8%
on average in the EU15. Poland has even gone through a real boom, its current
park (3.3M PCs) representing the equivalent of the Czech Republic (1.4M,
+12%), Hungary (1M +15%) and Slovakia (0.8M, +8%) together.
Globally, the computer equipment market in the applicant countries
represented € 6bns in 2001 against € 117bns in the EU, with a similar growth as
for PCs, and was mainly driven by foreign investors. For all Information
Technologies together (IT, equipment, data processing, software and services),
the ratio to the EU market size is even smaller (€ 11 and € 305bns), Poland and
Turkey being the main markets (50% of the total). In terms of per capita,
Slovenia and the Czech Republic are most spendthrift, with expenses of
respectively € 176 and € 168, yet still far behind the EU15 (€ 777 per capita).
Apart from Turkey, telecommunication expenditures were even more
dynamic; first, thanks to the increasing use of Internet, itself stimulated by
the growing number of Internet hosts, and second, to the fast catching-up in
mobile phones. These expenditures accounted for 5% of their GDP (in 2000),
more than the double of those related to IT, a definitely higher figure than
the European average (3.3% of the GDP), but marginal in terms of amounts (€ 30
against € 300bns), as prices remain high in the region.
The number of mobile telephone subscribers progressed very fast in the
applicant countries: between 1995 and 2000 their number doubled each year. In
2001 the growth rate was lower but, nevertheless, amounted to +42%, including
Turkey, with a boom in Bulgaria (+110%) and Slovakia (+93%). On average, one out
of three persons had a mobile phone, with Slovenia (76%) and the Czech Republic
(66%) at comparable levels with the EU (72%).
Internet surfers in the applicant countries rose by approximately 40%
in 2001, which is a higher rate than in the EU (+33%). But compared with Western
Europe the rate of use for 100 inhabitants still only reached one quarter (7.8
against 31.4). These differences can mainly be explained by a lower income and
relatively high access costs to Internet limiting the number of private users:
in 2001, 2% of the households in Latvia had a connection, 3% in Lithuania, 3% in
Hungary (2000), 8% in Poland, 10% in Estonia and 24% in Slovenia. Finally,
Internet host growth in the applicant countries was slightly higher than in the
EU (+33% vs. +27%), strong persistent disparities however, remain within the
applicant countries.
Flextronics, worldwide n°1 in the electronic subcontracting sector,
with 4 producing facilities in Hungary, has just decided to re-localize its
X-Box production from Hungary to China, the other production site being in
Mexico. If this decision was largely justified by costs and economies of
scale*, demand aspects were also crucial: China, for example, has already 145M
mobile subscribers, which illustrates quite well the limits of attractiveness
of the CEEC, this time on the demand side.
