“The quality issue of Eastern European products is no longer true… Nowadays, Eastern Europe countries are the ‘production base’ of EU. Stable employment and investment…Need to improve infrastructure for long-term growth “
Eastern Europe is still in the process of developing its own competitiveness. It is true that they depend heavily on intra-EU trade. However, it will not be a big problem because the growth of the Western European economy continues at a low level.
“Business culture is very different even within the Western Europe. But the difference is not bigger between East and West Europe. In the days of the Communist regime, there must have been distinctive business practices of Eastern European companies that are different from other parts of Europe, but I believe many parts has been diluted considerably over a period of time since it has been incorporated into the European Union.”
Christoph Heider, President of the European Chamber of Commerce in Korea (ECCK), is a financial and accounting specialist and Northeast Asian expert who worked for 15 years at the Korea and Japan office of Bayer, a German pharmaceutical company, before the appointment of President in 2013.
He studied economics at the University of Braunschweig in Germany and received his master’s degree in management and economics from Mannheim.
The difference between Eastern and Western Europe is “difference from the national level,” he said, hoping that more Korean companies could enter the fast-growing Eastern European market. Economy Chosun interviewed Mr. Heider at the ECCK office in Jung-gu, Seoul.
Compared to Western Europe, what are the characteristics of the EU member states in Eastern Europe?
The area we often call “Eastern Europe” includes vast areas from the Baltic coast to the Balkans. As you can see from this EU Member State, each country has a distinct personality.
What made the rapid growth of the Eastern European economy possible?
Cheap labor and excellent human resources. Price competitiveness is same as before, but now it also has quality competitiveness. With the collapse of the Soviet Union and Eastern European socialism in the early 1990s, Western European companies began moving production facilities to Eastern Europe. However, not long after, many of them returned to their home countries due to quality reasons. Most of those companies moved their production to Eastern Europe only considering the benefit of price competitiveness. These days, the quality is not an issue anymore. In the case of the Czech Republic, it is firmly established as an EU production base, exporting 75% of the total export volume to the EU market.
Opening start-up business also helped economic growth.
Of course. Among young people who have gone to Europe to find a better job, more and more people start their own business after returning to their home with the experience and knowledge they wanted. There are not many world-famous companies yet, but as a result, the industrial composition has become more diverse. The share of IT industry percentage in Estonia and Latvia is higher than Germany.
Do you think human resources of Eastern Europe are competent even compared with Western Europe.
I worked at the Bayer headquarter in Germany from 2005 to 2010. Many of my colleagues were from Eastern Europe, including Poland and Bulgaria. They were very intelligent with outstanding work capabilities. At least I did not feel like there were any in comparison with Western European colleagues.
Although there are not many world-famous universities like in Western Europe, the level of education in Eastern Europe has been high for a long time. Especially, the engineering field is very competitive.
Are the influences of the communist system from the past still in place?
Over the years since the collapse of the communist regime, the influence of the past regime, with the exception of the country’s own culture, has been largely diluted. Also, with solid foundation of early childhood education and care system, the female labor force participation rate is higher compared to Western Europe.
Do you think heavy dependence of Eastern European economy on Western Europe could be a problem?
There are steps in economic development. Eastern Europe is in the process of developing its own competitiveness. It is true that they rely heavily on intra-EU trade. However, it will not be a big problem because the growth of the Western European economy continues at a low level. It is also encouraging that exports have steadily increased employment and investment. However, it is unfortunate that there are few Eastern European companies that have a strong presence in the international arena to enter Korea.
As of January 12, 2018, Polish Airlines (LOT) is the only Eastern European company registered as a member of the ECCK.
Are there many Eastern European companies that are interested in entering Korea?
I went to Slovenia last year to attend the seminar. I encouraged the Slovenian Trade Promotion Agency and the Chamber of Commerce and Industry to advance into Korea, and the response was very enthusiastic. Previously there were similar events in Lithuania, and many companies expressed their interest in the Korean market.
Eastern Europe’s wages are rising fast. Do you think it will remain competitive for a long time?
At Kia factory in Slovakia, the average wage for workers is only about 20,000 US dollars per year. On the other hand, average wage at Hyundai Motor Ulsan plant is about 80,000 US dollars. If the average wage of a Slovakian worker rises 7% a year, it can be overtaken in 15 years, but it is realistically impossible. The average hourly wage in the EU is around 20 Euros, but in Eastern Europe there are countries that are less than 5 euros per hour, such as Romania and Bulgaria. The wage competitiveness of Eastern Europe will remain for a long time.
What are the most pressing challenges for the long-term growth of the Eastern European economy?
Due to the high degree of reliance on exports in the region, more smooth logistics transportation from Eastern Europe to Western Europe will enable the economy to grow more steadily. This is why there is an urgent need for infrastructure development in Eastern Europe.
Will increasing China’s investment in Eastern Europe be a threat to “unified Europe”?
It is a good thing that investment is growing. There is nothing wrong with China’s investment. It is easy for a Chinese company to acquire an European company, but it is a problem that European companies have various restrictions on acquiring a Chinese company. In fact, Chinese companies are not the only ones to have their eyes on the Eastern European start-ups with strong IT advantages. US and German companies are also interested in acquiring Eastern European start-ups.
Is it a good strategy to make Eastern Europe a bridgehead when Korean companies enter Europe?
It depends on the type of business. If you consider local production, it is a good strategy to start in Eastern Europe where labor costs are low. However, labor costs are not an important criterion for companies that only import and sell goods. On the other hand, excellent human resources are always important, regardless of the type of industry. More Korean business people should go to Eastern Europe and experience their value firsthand.
[Economy Chosun] Interview with ECCK President
A special interview with Christoph Heider, President of ECCK, published in Economy Chosun on January 17.
To read the article: “동유럽산 품질 문제는 옛말…’EU생산기지’위상 굳건. 고용,투자 안정적…장기 성장 위해 인프라 개선시급”
“The quality issue of Eastern European products is no longer true… Nowadays, Eastern Europe countries are the ‘production base’ of EU. Stable employment and investment…Need to improve infrastructure for long-term growth “
Eastern Europe is still in the process of developing its own competitiveness. It is true that they depend heavily on intra-EU trade. However, it will not be a big problem because the growth of the Western European economy continues at a low level.
“Business culture is very different even within the Western Europe. But the difference is not bigger between East and West Europe. In the days of the Communist regime, there must have been distinctive business practices of Eastern European companies that are different from other parts of Europe, but I believe many parts has been diluted considerably over a period of time since it has been incorporated into the European Union.”
Christoph Heider, President of the European Chamber of Commerce in Korea (ECCK), is a financial and accounting specialist and Northeast Asian expert who worked for 15 years at the Korea and Japan office of Bayer, a German pharmaceutical company, before the appointment of President in 2013.
He studied economics at the University of Braunschweig in Germany and received his master’s degree in management and economics from Mannheim.
The difference between Eastern and Western Europe is “difference from the national level,” he said, hoping that more Korean companies could enter the fast-growing Eastern European market. Economy Chosun interviewed Mr. Heider at the ECCK office in Jung-gu, Seoul.
The area we often call “Eastern Europe” includes vast areas from the Baltic coast to the Balkans. As you can see from this EU Member State, each country has a distinct personality.
Cheap labor and excellent human resources. Price competitiveness is same as before, but now it also has quality competitiveness. With the collapse of the Soviet Union and Eastern European socialism in the early 1990s, Western European companies began moving production facilities to Eastern Europe. However, not long after, many of them returned to their home countries due to quality reasons. Most of those companies moved their production to Eastern Europe only considering the benefit of price competitiveness. These days, the quality is not an issue anymore. In the case of the Czech Republic, it is firmly established as an EU production base, exporting 75% of the total export volume to the EU market.
Of course. Among young people who have gone to Europe to find a better job, more and more people start their own business after returning to their home with the experience and knowledge they wanted. There are not many world-famous companies yet, but as a result, the industrial composition has become more diverse. The share of IT industry percentage in Estonia and Latvia is higher than Germany.
I worked at the Bayer headquarter in Germany from 2005 to 2010. Many of my colleagues were from Eastern Europe, including Poland and Bulgaria. They were very intelligent with outstanding work capabilities. At least I did not feel like there were any in comparison with Western European colleagues.
Although there are not many world-famous universities like in Western Europe, the level of education in Eastern Europe has been high for a long time. Especially, the engineering field is very competitive.
Over the years since the collapse of the communist regime, the influence of the past regime, with the exception of the country’s own culture, has been largely diluted. Also, with solid foundation of early childhood education and care system, the female labor force participation rate is higher compared to Western Europe.
There are steps in economic development. Eastern Europe is in the process of developing its own competitiveness. It is true that they rely heavily on intra-EU trade. However, it will not be a big problem because the growth of the Western European economy continues at a low level. It is also encouraging that exports have steadily increased employment and investment. However, it is unfortunate that there are few Eastern European companies that have a strong presence in the international arena to enter Korea.
As of January 12, 2018, Polish Airlines (LOT) is the only Eastern European company registered as a member of the ECCK.
I went to Slovenia last year to attend the seminar. I encouraged the Slovenian Trade Promotion Agency and the Chamber of Commerce and Industry to advance into Korea, and the response was very enthusiastic. Previously there were similar events in Lithuania, and many companies expressed their interest in the Korean market.
At Kia factory in Slovakia, the average wage for workers is only about 20,000 US dollars per year. On the other hand, average wage at Hyundai Motor Ulsan plant is about 80,000 US dollars. If the average wage of a Slovakian worker rises 7% a year, it can be overtaken in 15 years, but it is realistically impossible. The average hourly wage in the EU is around 20 Euros, but in Eastern Europe there are countries that are less than 5 euros per hour, such as Romania and Bulgaria. The wage competitiveness of Eastern Europe will remain for a long time.
Due to the high degree of reliance on exports in the region, more smooth logistics transportation from Eastern Europe to Western Europe will enable the economy to grow more steadily. This is why there is an urgent need for infrastructure development in Eastern Europe.
It is a good thing that investment is growing. There is nothing wrong with China’s investment. It is easy for a Chinese company to acquire an European company, but it is a problem that European companies have various restrictions on acquiring a Chinese company. In fact, Chinese companies are not the only ones to have their eyes on the Eastern European start-ups with strong IT advantages. US and German companies are also interested in acquiring Eastern European start-ups.
It depends on the type of business. If you consider local production, it is a good strategy to start in Eastern Europe where labor costs are low. However, labor costs are not an important criterion for companies that only import and sell goods. On the other hand, excellent human resources are always important, regardless of the type of industry. More Korean business people should go to Eastern Europe and experience their value firsthand.