Partnering for Growth and Competitive Advantage in CEE
by Yuri Avramenko, Director, Head of Sales in Russia, CIS, Central and Eastern Europe, Treasury and Trade Solutions, Citi
Central and Eastern Europe (CEE) has experienced huge change over the last two decades, with many countries making a successful transition from state-run, closed economic systems to fast-developing, competitive market economies. As the economic, regulatory, cultural and infrastructural environment continues to improve, an increasing number of multinational corporations are investing in CEE. While corporations in manufacturing-intensive industries, such as the automotive, technology, electronics, pharmaceutical and chemical sectors were amongst the first to do so, companies from sectors such as FMCG are now looking to CEE as a key sales and sourcing location, and as a base for manufacturing and centralised business services. As they do so, they need a reliable banking partner to support them across their target countries and integrate their flows, balances and information within a wider regional or global cash, liquidity and risk management framework.
Resilience and growth
Unlike many economies in Western Europe, CEE recovered quickly from the global financial crisis. Governments in countries such as Poland, Czech Republic, Slovakia, Hungary, Bulgaria and Romania continue to focus on closing the development gap with Western Europe and enhance their competitiveness globally. As a result, a number of key CEE countries have reported strong, steady growth figures over the past five years, particularly the past 12 months (figure 1). This is particularly noteworthy given that this period coincided with a global economic slowdown, geopolitical uncertainty in Russia and Ukraine, and increasing risks in Turkey. This reflects the strong macro-economic fundamentals in the CEE region, and the increasingly favourable business conditions.
Setting firm foundations for growth
In this environment, CEE is becoming an attractive centre for manufacturing, centralised business support functions (such as finance and accounting) and business process outsourcing (BPO) not least due to its favourable time zone and location as a crossroads between Europe, the Middle East, Russia, Turkey and the former Soviet Republics, providing access to around 250 million consumers within 1,000 km. The region is also characterised by a well-educated but relatively low-cost workforce and a business culture that is becoming more closely aligned with international standards. Infrastructure is also improving, with better communications and an increase in well-appointed, low-cost office space.
In Hungary, for example, the shared service centre (SSC) industry is one of the fastest growing and best-performing sectors. The first regional SSC was established in the late 1990s, and around 80 SSCs are now in operation, including those of industry leaders such as Exxon Mobile, British Petrol, Vodafone, IBM, Morgan Stanley, British Telecom, Diageo and Citi, employing more than 30,000 professionals. Czech Republic and Slovakia are also attractive, and many technology companies, such as Dell, HP, IBM, Lenovo, NESS or Siemens have already located their administrative and business support centres for EMEA in Slovakia.