Food for thought on Central and Eastern European markets

Silvia Savich, U.S. Dept. of Commerce, spoke about how the government can help companies seeking business in Eastern and Central Europe.

At NPE 2006, Modern Plastics Worldwide and The Society of the Plastics Industry’s Global Business Council assembled a panel of industry experts for a breakfast briefing to address doing business in Central and Eastern Europe.

According to the SPI, in 2005 Central/Eastern Europe saw economic growth exceeding 4.5%, and U.S. plastics industry exports to this region were more than $155 million. Panel members discussed this oft-overlooked area of development and offered their experiences and advice on the best way to take advantage of this ripening market.

Avoid the pitfalls

Panel member Jim Peck, corporate VP and general counsel for Nypro Inc. (Clinton, MA), said that you must first define the objectives of going to the area and the barriers to entry.

Finding the right local advisors is critical to keeping on top of the local customs and political climates, according to Peck. Necessary advisors include law firms, public accounting firms, bankers, suppliers, and trade organizations. You need to keep an open mind and be ready for any problems. “You must have a stomach for the unpredictable,” Peck said.

A joint venture (JV) partner can provide the necessary advisors for smaller companies unsure of how to navigate a region. “A joint venture partner can make the difference between incredible success and spectacular failure,” Peck said.

Charles Sholtis, CEO of Plastic Molding Technology (El Paso, TX), said that his company found success using a JV partner, but there is no single right way to start a partnership; it’s best to explore multiple avenues, especially if you’re a smaller company. And, if the deal doesn’t seem right, don’t be afraid to walk away. “Some of the best deals are the deals you don’t do,” Peck said.

Keep in mind that U.S.-honed instincts may not apply in that area. To prepare his lawyers working in the region, Peck told them to “keep asking questions until you learn the law, and then throw it out the window because it’s probably not right anyway.”

Silvia Savich, senior international trade specialist at the U.S. Dept. of Commerce, said that implementation of EU legislation and directives tends to differ from country to country, which can add to the legal confusion.

Helmar Franz, executive VP, strategic business development, Ningbo Haitian Group Ltd. (Ningbo, China), warned that EU directive implementation problems are just the tip of the iceberg and one should be leery about treating the countries of Central and Eastern Europe as a homogenous business field. “Cultural differences between the countries of Eastern Europe are huge, and often underestimated,” said Franz. He added that market potential of the countries should be carefully considered, with multiple variables, not just population, taken into account.

Help is on the way

Now that you’re aware of the possible roadblocks, what resources are available to avoid them?
• When starting out, do your research. Peck recommends searching online for websites that cover your market and technologies in Central/Eastern Europe. Also check your competitors’ websites to learn where they are in the region.
• Take advantage of available government resources. “The U.S. Dept. of Commerce [www.trade.gov] is here to help you to search for opportunities and assist in any market barriers that you may encounter,” said Savich. She added that the U.S. Trade & Development Agency (www.tda.gov) is the “best-kept secret in the U.S. government.” The organization can provide information about competitive market opportunities and challenges. Other trade finance programs include Export-Import Bank (www.exim.gov) and the Overseas Private Investment Corp. (www.opic.gov).
• Exploring the areas in person may be the best way to gather information. If you’re concerned about going it alone, SPI is hosting a business development mission to the Czech Republic and Poland Sept. 24-30. The mission offers tours of plastics plants, market research reports, and networking opportunities. Contact Eugenia Ross ([email protected]) for information.