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Central/Eastern Europe: Consultants Advise Redoubling Of Reforms

Washington, 15 May 1997 (RFE/RL) - The nations of Central and Eastern Europe -- no matter how far advanced in the process of transition -- need to redouble their efforts to attract foreign investment, according to several private business consultants deeply involved in the region.

Without stronger measures to deal with the problems that continue to keep foreign investment to a mere trickle of what could be possible, the consultants says these nations in transition will not catch up to the living standards of Western Europe for decades.

The consultants are officials with two public relations and business consulting firms which are establishing a strategic alliance to better focus their business. APCO Associates is a Washington-based company that opened its first office in Moscow in 1988. CEC Government Relations is a Warsaw-based firm with offices in Budapest and Bucharest.

At a gathering in Washington Wednesday to mark the alliance of the two consulting firms, officials from the United States, Western and Central Europe, talked about the future of the region.

CEC Director Marek Matraszek from Warsaw said people in Central Europe get "very excited over large scale investment by huge corporations like Ford or General Motors or other giants." However, he says, those investments cannot be repeated many times and the only way the region can secure the very long term growth it needs is to attract capital from small- and medium-size investors.

"It's very important for these countries to have an environment that is friendly to the medium-size investors, not just the large, global corporate giants who often-times feel very comfortable in an environment that is pretty regulated and pretty protected," he said.

Part of this comes from the fact that the scales are heavily weighed against the interests of all foreign investors in most countries in Central and Eastern Europe, said Matraszek, especially smaller investors.

Wherever state-owned monopolies are involved, he said, there is a "symbiosis between the managers of the state owned monopolies and government officials" and the result is that foreign investors have the deck stacked against them.

APCO's Brussels Office Managing Director Brad Staples agrees, saying that even those nations expecting to be the first invited to join the European Union (EU) are lagging badly in opening to smaller investors.

"It would be a mistake to understate the disquiet and growing frustration within the European Commission at the lack of progress in meeting the basic criteria that was set-out in the Commission's white paper for the preparation for expansion in 1995," he said.

"If the nations of Central and Eastern Europe are unable to demonstrate effectively that markets are opening up to small- and medium-size investors," said Staples, the commission will "make its concerns known even louder" later this year.

He said that a number of the associate countries hoping for quick accession "are going to come in for some very considerable criticism for their inability to demonstrate that they have actually implemented some of the core, regulatory measures necessary for accession into the EU."

Former U.S. Congressman Don Bonker, now Executive Vice President of APCO in Washington, said most leaders in the region still do not understand fully how essential foreign investment is and that reforms must be continue unabated. If the problems aren't solved, he said, they could plague these countries for decades.

APCO President Margery Kraus said small- and medium-size investors are interested in the Central European region because they like to do business where they can feel comfortable and many have ancestral ties. But she warned they are easily frightened away by complex webs of regulation that cost more in time and money than small firms can afford.