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EU: Businesses Have Doubts Over Expansion Benefits

  • Tony Wesolowsky

Much of the debate on the planned expansion of the European Union has focused on its political and social elements. But how do business leaders in Eastern and Western Europe view the enlargement process? A new survey by a leading Western consulting company finds that companies in both the East and the West have their doubts over the benefits of expansion.

Prague, 10 November 2000 (RFE/RL) -- West European business leaders will remain lukewarm to European Union expansion to the East as long as a firm timetable is not set for taking in new members. And businessmen in Eastern Europe are not especially keen on EU expansion, fearing further competition from the West.

Those are the key findings of a study by the international consulting firm PriceWaterhouseCoopers, released today at a press conference in the Czech capital Prague. The report is based on a survey of senior executives of nearly 40 international and Eastern regional businesses -- mainly in Poland, the Czech Republic, and Hungary.

The report is entitled "The Strategic Impact of EU Enlargement -- A Business View." It seeks to demonstrate that both international and local businesses are placing little strategic value on enlargement. As a result, the report warns, many could lose out on the potential benefits EU expansion brings.

One of the report's authors, Rosemary Radcliffe, emphasizes that Western businesses are more concerned with the establishment of a firm timetable for EU expansion than with quick accession:

"Businesses expect accession to be a little later than accession governments are currently targeting. But they think accession should not be unduly delayed, and very importantly, they make it clear that they would value a clear accession timetable. To them, it's the clarity of the timetable rather than the immediacy that matters. What they're looking for is an increased degree of certainty and thereby a reduction in their risk."

Radcliffe explains that larger transnational corporations, which have already established themselves in the East European market, do not think EU expansion will further benefit them. Other global firms that have invested less in the region, she adds, place greater emphasis on expansion, seeing it as a means to further political and economic stability in Central and Eastern Europe.

As a result, Radcliffe says, the study predicts enlargement will not result in a great increase of investment by international businesses in the leading EU accession countries, such as the Czech Republic, Hungary, and Poland. That's simply because, she says, many of the opportunities for such investment have already been realized.

But Eastern European-based businesses, Radcliffe says, have different needs. She says business leaders in Central and Eastern Europe are fixated on the perceived threat posed by expansion.

"Although some have started to capitalize on the opportunities presented by enlargement, many more clearly lack information about the opportunities. They also lack the management skills and the resources needed to tackle the challenges. And we found that they focused on the competitive threats of enlargement, and, often it seemed to us, overstated those threats."

Radcliffe says that fixation on the perceived threats posed by EU enlargement could mean businessmen in Central and Eastern Europe might miss out on the opportunities offered by expansion.

Radcliffe and the report's other authors are urging EU member states and accession governments to do more to generate support for enlargement among Europe's business community. She says the challenge for both the accession countries and the EU is to help local businesses to capitalize on these opportunities by developing more positive business strategies. She warns that without such support, local business enthusiasm could further erode.

The PriceWaterhouseCoopers' analysis also considers the strategic implications of enlargement for specific countries and industry sectors. It finds that many international investors are still attracted to the strong technological skills based in the Czech Republic and Hungary.

The report highlights Poland as the most attractive market in Central and Eastern Europe for consumer goods and services because of its large population and recent rapid economic growth. As a result, the report says, Western business executives attach more strategic significance to Poland than to the other accession countries. The report says, too, that sectors such as consumer products and financial services have already experienced significant internal investment in the East. But it finds that others associated with what is called "the new economy" -- for example, media and entertainment -- have yet to undergo the types of changes now reshaping Europe.