Romania and Bulgaria Enter EU

R.Epstein

On January 1, 2007, Romania and Bulgaria both acceded to full European Union membership. However, membership isn’t what it used to be. Just look at the Romanian Embassy’s website in Washington where there is a movement for gaining Romania participation in the visa waiver program to gain entry to the US without the need of a visa. http://www.roembus.org. Only Slovenia has been granted fully equal status with the rest of the leading EU countries.

It is likely that other expectations will take longer to realize than expected. Government turmoil does not necessarily stop just because EU membership has been achieved. The Czech’s have been living without a government for 10 months! Poland is run by the “Twins.” And Hungary’s president is a crook!

All in all, EU accession is a key step in the transformation of these former Eastern Bloc countries. Funds that have never before been available for the big ticket infrastructure items like roads, bridges and the like will now flow into these countries from
Brussels. Now it is up to each country, and its citizens, to take advantage of what amounts to the best opportunity yet for general economic stability for all.

Congratulations are in order for these two countries as they have made it through a long and difficult process. I just hope they reap the benefits they’ve been promised.

Roadshows

R.Epstein

Like good entrepreneurs, many of the Eastern European countries send representatives out on roadshows that are designed specifically to provide information about the details of doing business in their respective countries. Currently, such a roadshow is going on for Poland which I attended today in New York.

This roadshow is designed to coincide with the State Visit of Poland’s ruling twins. It will be in Chicago tomorrow and then Washington, DC on Monday, September 18.

White & Case, which is one of the preeminent American law firms with offices established in nearly all of the Eastern European capitals, is leading this showcase. PriceWaterhouseCoopers is also along for the ride. There are a few Polish development agencies and heads of the Embassy’s economic section all making presentations as well.

If you find yourself with an opportunity to attend one of these roadshows, don’t miss it. While the presentations are sometimes tediously detailed, the information is excellent and the contacts can be incredible. Today I ran into an old friend who is the lone ex-pat remaining in White & Case’s Warsaw office as well as a new venture capital firm that is seeking to pursue early stage and seed investment opportunities there. You just never know!

Eastern European Economic Missions

R.Epstein

I’ve been visiting several of the Eastern European Economic Missions in New York this week following the annual meeting of the Licensing Executive Society here. I am happy to report that all of them are quite positive about their countries! But seriously, these representatives are stationed strategically around the United States and other countries so that Americans and other foreigners can gather information and be pitched to make investments in their respective countries.

Typically, these Economic Missions are found in New York, Chicago and Los Angeles as a section of the the Consulates General in those cities. Also, there is an Economic Mission or Economic Section of each Embassy in Washington, DC.

I make it a habit of staying in touch with these people as they have very updated information about their countries, usually have lists of useful resources and generally are very interested in helping. Keep in mind, though, that their assignments are usually for periods of 4 or 5 years, so you may need to reestablish contact with each office frequently. But in the end it’s one of the truly excellent sources of information about doing business in Eastern Europe.

Eastern Europe vs. Asia

R.Epstein

There are several ways to compare Eastern Europe and Asia. There is the outsourcing opportunity. There is the investment opportunity. There is the market opportunity. There is no clear answer which of these regions is better in any of these categories in a general sense. One thing that is clear is that both of these regions offer tremendous opportunity in all three areas.

Outsourcing. In general, Asia will have lower wages than Eastern Europe. Arguably, there is a larger cultural gap between North American and other “Western” companies and Asian providers as opposed to “Western” companies and Eastern Europeans. European Union Membership or ambitions for it make Eastern Europe more attractive in terms of reliability and respect for intellectual property and other ownership rights. I think that both regions have equally skilled, well-educated workers.

Investment. The Asian markets are far larger than Eastern Europe. But again, one should consider the lack of regulation and order in the Asian markets as opposed to Eastern European markets which have more predictability due to European Union membership or influence.

Addressable Markets. This is a very diffciult topic. While the Asian markets are far more populous and eventually will present a larger oppotunity, the disposable income in Eastern Europe would seem to be higher on a per capita basis. Whether the sheer numbers of Asians overcome this disparity is the question.

In the end, both of these regions present tremendous opportunities. The question for those interested in entering them in any capacity is where they feel most comfortable in terms of risk/reward. For me, I never felt comfortable in Asia due to what I perceived to be a giant cultural gap while going to Eastern Europe was like going home.

US Government Resources for Doing Business In Eastern Europe

R.Epstein

One of the more disappointing realizations I came to when I was researching my planned relocation to Eastern Europe in 1991 is that there is very little support provided by the US government for Americans wishing to be entrepreneurs in foreign countries. All of the US government agencies, including the Commercial Sections of the US Embassies, are primarily geared to supporting the export of American products abroad, not to supporting Americans doing business abroad.

This is an important piece of information for those interested or already doing business in Eastern Europe. One should not expect financing, grants and other of these types of support from OPIC, the Import-Export Bank, the US Department of Commerce or other federal agencies. While these kinds of things may be available in some form, they will likely be unique, periodic opportunities rather than a regular part of the US government’s standard operating procedures.

On the other hand, there are resources both here in the US and usually in-country to be found. One very good resource are the American Chambers of Commerce in each country. Typically these organizations are well-informed, well connected and looking after the interests of their member companies which must be of American origin or a majority American owned.

Another good resource are the ethnic communities here in the US originating from a particular country. Most Eastern European countries have significant immigrant populations in the US that have formed strong ethnic communities in many American cities. Chicago, New York and Los Angeles probably have the largest of many of these ethnic communities and within them can be found excellent contacts and information about doing business in each of the Eastern European countries.

The two resources mentioned in the preceding paragraphs are by no means an exhaustive list. The Consulates General offices and embassies of each of these Countries in the US are also good resources just to name two more places to go. In the end, though, do not expect the US government to be much help unless you have a product manufactured here to sell over there.

Is Eastern Europe Really Eastern Europe?

R.Epstein

The countries that made up the former Eastern Block are commonly referred to as “Eastern Europe.” While that may be true for some of those countries, such as Bulgaria and Romania which are in the true southeast of Europe, most of the former Eastern Block countries geographically are in what is really the central/eastern part of the continent of Europe.

The reason I raise this issue is because I expect visits to this blog from those who will know that the geographical center of Europe fall within this region and will care that this part of the world is referenced correctly. To all of those visitors I would like to apologize in advance for my shorthand reference to the region as “Eastern Europe” so that I may avoid having to use the longer, more cumbersome (yet more accurate) references of “Centeral and Eastern Europe” or the “former Eastern Block countries.”

My objective is to keep these postings readable and short. The use of the term “Eastern Europe” is meant to encompass all of the former Eastern Block countries as well as a few other countries that were not part of the Eastern Block but were either part of the Soviet Union or part of Yugoslavia. And again, I apologize in advance to anyone who may be offended by this and hope they understand.

Eastern Europe: Business and Legal Reality

R.Epstein

It has been almost 17 years since the Berlin Wall came down and the Eastern Block was liberated from Soviet rule. After the jubilation of unexpected freedom, the real work began. After nearly 50 years of “communism,” 5 year plans, command economies and ruthless political and cultural oppression, Poland, Czechoslovakia, Hungary, Bulgaria, Romania, and a few short years later as the Soviet Union disintegrated, Latvia, Estonia, Lithuania and the Ukraine, all found themselves with a blank economic and political slate and a world full of “experts” happily advising them on how to restart a market economy. And then of course the Yugoslavian nightmare began and Russia and its Commonwealth of Independent States (aka an attempt by Russia to maintain at least the remnants of its empire) arose out of the ashes of the Soviet Union – sort of. Such was the state of Eastern Europe as the decade of the 1990’s got underway.

Since those early days, amazing things have happened to the former Eastern Block countries, some bad but mostly good. Czechoslovakia went into the ash heap of history to be replaced by the Czech Republic and Slovakia. Yugoslovia’s ethnic conflicts resulted in the birth of many new independent countries: Slovenia, Croatia, Bosnia-Herzegovina, Macedonia and Serbia-Montenegro. Latvia, Lithuania, Estonia and the Ukraine gained true independence from Russia while Hungary, the Czech Republic and Poland led the economic and political transformation of the region into a true market economy and ultimate accession into the European Union for many of these countries.

Now that many of these countries are European Union member states, what is the business and legal reality of Eastern Europe? The business reality is that there are tremendous opportunities for investing in all sectors of these still developing economies as well as taking advantage of extremely well-educated, highly skilled workers at very low wages. The legal reality is that there are many pitfalls and quirks in the reconstructed legal frameworks based on civil codes resurrected from the 1930’s overlaid by importation of a hodge-podge of “Western” approaches to employment, industry regulation and politics.

The purpose of this blog is to explore the business and legal realities of the former Eastern Block countries and provide those interested in doing business there, or already in the mix, with helpful tips and insights based on my 9 years of hands-on experience.