Central and Eastern Europe
Central and Eastern Europe, a term describes the former communist state in Europe, after the collapse of the Iron curtain in 1989/90. CEE
includes the former socialist countries, which extend east from the border of Germany and south from the Baltic Sea to the border with
We see all the dimensions of a multipolar world at play in Central and Eastern Europe (CEE), as the region continues to grow in importance
in terms of opportunities for business investments and growth in different industries, including Chemicals. Factors such as new EU
membership have affected capital flows: the Czech Republic, Hungary, Poland and Slovakia have proved to be attractive locations for
investment, particularly in the area of automotive production.
Upon closer examination, it becomes apparent that the CEE region is highly heterogeneous and complex. In particular, the market situation
of Central Europe on the one hand and Russia and the Commonwealth of Independent States (CIS) on the other requires these geographies
and markets to be contemplated separately in terms of opportunities for chemical industry investment.
The Central European countries largely depend on oil and gas imports from Russia and display a controlled raw material supply for their
downstream industries. Nevertheless, the Polish, Hungarian and Czech Republic markets will remain of interest for downstream chemical
investment because of the end-user market size (38m, 9.9m, and 10m, respectively), increasing consumer wealth, and presence of
manufacturing sector for domestic and growing export demand.
A snapshot on some of the most prominent and important nations in this region.
The Czech Republic is one of the most stable and prosperous of the post-Communist states of Central and Eastern Europe. Maintaining an
open investment climate has been a key element of the Czech Republic's transition from a communist, centrally planned economy to a
functioning market economy. As a member of the European Union, with an advantageous location in the center of Europe, a relatively low
cost structure, and a well-qualified labor force, the Czech Republic is an attractive destination for foreign investment. The small, open,
export-driven Czech economy grew by over 6% annually from 2005-2007 and by 2.5% in 2008. The conservative Czech financial system has
remained relatively healthy throughout 2009. Nevertheless, the real economy contracted by 4.1% in 2009, mainly due to a significant drop in external demand as the Czech Republic's main export markets fell into recession.
Some of the biggest European Chemical manufacturers are based out of Czech Republic, and have a major influence on the entire industry.
The country is not much endowed in metals and minerals, but banks upon on its long technological heritage. Some of the available natural
resources in the country are coal, kaoline, clay, graphite and timber.
Poland has pursued a policy of economic liberalization since 1990 and today stands out as a success story among transition economies.
Before 2009, GDP had grown about 5% annually, based on rising private consumption, a jump in corporate investment, and EU funds
inflows. GDP per capita is still much below the EU average, but is similar to that of the three Baltic states. Since 2004, EU membership and
access to EU structural funds have provided a major boost to the economy. Unemployment fell rapidly to 6.4% in October 2008, climbed
back to 8.9% by January 2010, but remains below the EU average.
Poland has a large and mature pharmaceuticals and chemical industry and with investment moving in the region, the industry promises to
grow at a faster pace. The industry is witnessing good amount of capital investments from the Western European MNCs, and the industry is
poised for a steady growth chart in the future.
Hungary has made the transition from a centrally planned to a market economy, with a per capita income nearly two-thirds that of the EU-25
average. The private sector accounts for more than 80% of GDP. Foreign ownership of and investment in Hungarian firms is widespread, with
cumulative foreign direct investment totaling more than $200 billion since 1989. The government's austerity measures, imposed since late
2006, have reduced the budget deficit from over 9% of GDP in 2006 to 3.3% in 2008.
Russia has undergone significant changes since the collapse of the Soviet Union, moving from a globally-isolated, centrally-planned economy
to a more market-based and globally-integrated economy. Economic reforms in the 1990s privatized most industry, with notable exceptions in
the energy and defense-related sectors.
Russian industry is primarily split between globally-competitive commodity producers - in 2009 Russia was the world's largest exporter of
natural gas, the second largest exporter of oil, and the third largest exporter of steel and primary aluminum - and other less competitive heavy
industries that remain dependent on the Russian domestic market. This reliance on commodity exports makes Russia vulnerable to boom and
bust cycles that follow the highly volatile swings in global commodity prices. The government since 2007 has embarked on an ambitious
program to reduce this dependency and build up the country's high technology sectors, but with few results so far. The economy had averaged
7% growth since the 1998 Russian financial crisis, resulting in a doubling of real disposable incomes and the emergence of a middle class.
The Russian economy, however, was one of the hardest hit by the 2008-09 global economic crisis as oil prices plummeted and the foreign
credits that Russian banks and firms relied on dried up. The economic decline appears to have bottomed out in mid-2009 and by the second
half of the year there were signs that the economy was growing, albeit slowly.
After Russia, the Ukrainian republic was far and away the most important economic component of the former Soviet Union, producing about
four times the output of the next-ranking republic. Its fertile black soil generated more than one-fourth of Soviet agricultural output, and its
farms provided substantial quantities of meat, milk, grain, and vegetables to other republics. Likewise, its diversified heavy industry supplied
the unique equipment (for example, large diameter pipes) and raw materials to industrial and mining sites (vertical drilling apparatus) in other
regions of the former USSR.
Ukraine's dependence on Russia for energy supplies and the lack of significant structural reform have made the Ukrainian economy
vulnerable to external shocks. Ukraine depends on imports to meet about three-fourths of its annual oil and natural gas requirements and
100% of its nuclear fuel needs.
Ukraine's economy was buoyant despite political turmoil between the prime minister and president until mid-2008. Real GDP growth
exceeded 7% in 2006-07, fueled by high global prices for steel - Ukraine's top export - and by strong domestic consumption, spurred by rising
pensions and wages. The drop in steel prices and Ukraine's exposure to the global financial crisis due to aggressive foreign borrowing
lowered growth in 2008 and the economy contracted more than 14% in 2009, among the worst economic performances in the world.
Ukraine has a rich natural resource and with the investment moving in the region, there is huge potential in the chemical industry. Some of the
available natural resource in the region are iron ore, coal, manganese, natural gas, oil, sulfur, graphite, titanium, magnesium, kaolin, nickel,
EU membership, a highly educated workforce and fast growing domestic economies make Central and Eastern Europe a place of real
potential for chemical industry in the coming time.