Central European markets are considered a bright spot for business across Europe because they continue to experience relatively strong economic growth.
Poland, the Czech and Slovak Republics are upper-middle-income nations that have rapidly transformed to market-based economies following the fall of communism
Poland, the Czech and Slovak Republics are all expected to grow at two to three per cent per annum over the next three years. Growth will be driven
by increased disbursements of European Union funds, private consumption supported by a stronger labour market, and improving business confidence.
Although challenges such as rising economic nationalism has affected foreign investment, the markets are generally well regulated and corruption issues
are being addressed.
Defence and energy security
Geo-political tensions, terrorism and the immigration crisis have increased the emphasis on defence and energy security. As a result, Poland has allocated
A$45 billion until 2026 to modernise its armed forces, while the Czech Defence Minister announced in January 2017 plans to invest 180 billion Czech
crowns (A$9.4 billion) over the next decade.
Energy security is another key priority across Central Europe, with the sector undergoing fundamental transformation. To achieve this, more than €70 billion
has been committed or planned for gas infrastructure projects across Europe over the next five years.
The projects will help improve connectivity through upgraded gas grids, increase capacity to store gas, and establish LNG-receiving terminals in Poland
Poland is also one of the largest coal producers in Europe. Coal remains vital to the Polish energy mix, accounting for over 70 per cent of electricity
generation. This is unlikely to change in the medium term, although the Polish Government is committed to maintaining and modernising the industry.
Structural changes are showing promise and state-owned enterprises continue to look for solutions to reduce costs and increase productivity and efficiency.
Strong growth rates across Central Europe over the last two decades have resulted in a significant rise in GDP per capita wealth in Poland and the Czech
and Slovak Republics to $29,349, $34,849 and $33,054 respectively. This rise in wealth and change in lifestyles have increased demand for high-end
consumer goods such as wine.
Wine consumption in Poland is forecast to grow at five per cent annually. There is considerable upside, as the current four litres per capita consumption
is well below the 20 litres experienced in more mature markets.
Demand for health and aged care systems in Central Europe is also expected to experience unprecedented pressure due to a growing ageing population. More
than 20 per cent of the population in Central Europe and the Baltics is aged 50-64 and is expected to increase steadily over the coming decades.
The combination of an ageing population, rising wealth, changing social norms and an aspiration to reach the level of EU-15 countries is expected to
result in increased expenditure in the senior living care sector.
The influence of the European Union’s structural adjustment funds – which aim to upgrade the infrastructure of new member countries – continues to
be a strong economic driver and presents significant opportunities for Australian businesses.
Poland and the Czech Republic and Slovak Republic will receive $82.5 billion, $21.6 billion and $13.7 billion respectively over the 2014-20 period for
a range of projects in infrastructure (road and rail), energy (mining, oil and gas) healthcare, defence, aerospace and education.
Poland’s railway network forms a key element of Europe’s wider transport system, acting as a transit crossroad for both north-south and east-west traffic.
Poland has embarked on a modernisation program with plans to spend $10.5 billion until 2020.
This will include upgrading rail infrastructure, especially modernising existing tracks to accommodate high-speed trains; improving rail safety; increasing
transport efficiency; and adding new rolling stock and rail freight operations.
Key markets in Central Europe have successfully shifted from planned economies to modern market-based economies integrated into European Union value chains.
This is particularly evident in advanced manufacturing sectors – such as automotive, aerospace and defence – which have been stimulated by inward foreign
direct investment largely sourced from Western Europe and the United States.
The Polish aerospace industry is also playing an important role in the global aviation supply chain and is now ranked eighth globally for aviation manufacturing.
Major international players such as Pratt & Whitney, Safran, Airbus, Sikorski, Leonardo and UTC Aerospace Systems have established offices in Poland.
Accessing the opportunities
Australian companies in the region include Macquarie, Goodman and Brambles, which are all building a strong presence in the logistics sector. Similarly,
leading medical device manufacturers like ResMed and Cochlear are helping improve the lives of the region’s citizens.
The most common market entry strategy for Australian companies has been to appoint a local partner or distributor. However, to be successful, Australian
companies need to be actively involved in marketing and promoting their product, and visit the market regularly.
Language is not a significant issue, as English is widely spoken in internationally exposed sectors such as manufacturing. Most young people also have
reasonable competency in the English language.
Central Europe markets are generally price sensitive but proven innovative services and solutions, particularly those that lift living standards, will
help secure a place in the market.
There are many opportunities for Australian businesses across Central Europe, so contact Austrade Warsaw for more information and to discuss how we can
help you enter the market.
*This article was first published on pages 20-22 of Winter 2017 International Business Today Magazine.