Eastern Europe Luring U.S. Companies

According to FAZ.NET, a recent survey conducted annually by the American Chamber of Commerce in Germany and the Boston Consulting Group (BCG) indicates that Eastern European countries are achieving increasing success in attracting U.S. manufacturing investment away from Germany. Participating in the survey were two-thirds of the 50 largest U.S. companies in Germany, including Ford, Proctor & Gamble, and Coca-Cola.

American companies plan to continue to invest in Germany, however, the largest job-creation business activities, such as automobile and industrial goods manufacturing, are going to Eastern Europe. Also departing Germany are call center and information technology services.

In the area of financial services, the trend is for companies to pass up locating in Germany in favor of Switzerland, the Netherlands, and Great Britain, countries considered to offer better business opportunities.

The results of the survey come as no real surprise, rather they confirm what has been apparent. The German economy labors with a dismal and enduring unemployment rate in excess of 10% and government reforms have been instituted to improve circumstances. Nevertheless, current German social and labor reforms haven't improved its reputation as a business location. Companies participating in the survey cite persistent concerns with high taxes, high wage rates, and government regulations.

The longer-term outlook for Germany is troubling also as the Central and Eastern European nations, called the CEE-8, progress toward greater privatization. With more and more CEE-8 state-owned properties being sold to private interests, alternatives are available for U.S. and other foreign companies to invest in less regulated economic environments. At present, private sector business produces from two-thirds to over 80% of the income for the Czech Republic, Estonia, Hungary, Slovakia, Lithuania, Poland, Latvia and Slovenia.

In conclusion, as long as a company sees a way to reduce the cost of doing business by relocating its operations, it will move. And, it appears that some places are cheaper than Germany for certain business activities.