Transcript Chapter 16: Doing Business in Transition Economies C&E Europe FSU FSU Vietnam PRChina Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a International Trade and Investment by John Gionea Slides.

Chapter 16:
Doing Business in Transition Economies
C&E Europe
FSU
FSU
Vietnam
PRChina
Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a
International Trade and Investment by John Gionea
Slides prepared by John Gionea
LECTURE PLAN:
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Definition of Transition Economies (TEs)
Import markets
Trade issues in TEs
Export marketing issues
FDI in TEs, including China
Globalisation and China’s economy
– Benefits and implications
Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a
International Trade and Investment by John Gionea
Slides prepared by John Gionea
Transition Economies
• Current and former Centrally Planned Economies
in transition to a market-based economy
– Former Soviet Union countries;Central &Eastern
Europe;PR China and Vietnam
• China-the world's 3-rd largest
economy (PPP method)
• Government sector-still the leading sector in
FSU;However, in 1998 it accounted for less than
50% in most C&E European countries
• Privatisation of state enterprises
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Former Soviet Union(FSU)
• Most developed Commonwealth
Independent States(CIS) markets
– Russia,Ukraine,Belarus,Kazakhstan
• The Baltic states
– Estonia,Latvia,Lithuania
• CIS Islamic Republics
– Azerbaijan,Turkmenistan,Uzbekistan,Tajikistan
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The Share of China and Eastern
Europe* in world merchandise imports,
1948-2000
% of World Imports
12
10
8
6
China
E.Europe
4
2
0
1948 1953 1963 1973 1983 1993 2000
* Eastern Europe= Former Soviet Union and C&E Europe
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Fig.16.2:China’s share of world
merchandise imports, by product, 1990,%
8
7
6
5
%
4
3
2
1
0
Farm
products
Energy
1990
1.8
1.4
2.5
2.2
1.8
4.9
2000
2.4
2.2
5.4
4.4
2.9
7.1
Iron and
Chemicals Machinery Textiles
steel
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Merchandise import markets in
Transition economies, 2000,US$B and %
Region/
Country
Imports Share of Major sources of Imports
US$
World
In 2000(% of total imports)
Billion Imports
China
225
3.5
Japan(24%), W.Eur.(15),US(15)
C.I.S
Baltic
States
82.2
12.9
1.3
0.2
C&E
Europe
Vietnam
146
2.3
CIS(41%), Japan(1%)
Baltic States(7.4%), all other
Sources(92.6%)
European Union(48-62%),
C&Europe, Asia, Russian Fed.
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Imports of selected Transition Economies by
Product, 1999, US$ Billion and %
China
Total Imports
US$ Billion
Total %
- Food
-Agricultural
Raw materials
- Fuels
-Ores&Metals
- Manufactures
Estonia Czech
Hungary Romania
Republic
165.8
4.1
28.8
28.0
10.4
100
4
4
100
13
3
100
6
2
100
3
1
100
7
1
5
5
80
7
3
74
7
3
82
6
2
86
10
3
77
Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a
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Trade Issues in Transition Economies
• Decentralisation of foreign trade
(China since 1985)
• From central plan to tariff protection
• Members of WTO:Czech Republic,
Hungary,Poland, Slovak Rep., Romania,
China(November, 2001)
• Abolition of import licences /quotas
• Over 1992-2001, China has undertaken a number
of 8 reductions of non-tariff measures.
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International Trade and Investment by John Gionea
Slides prepared by John Gionea
Export Marketing Issues in Transition
Economies
• More marketing efforts required
• Lack of information about end-users
• Lack of hard currency
– Counter trade
• Commercial bank lending up again
• Advertising expenditure up(See next slide)
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International Trade and Investment by John Gionea
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Advertising expenditure, total(US$
Million)and % by medium, 1999
Country
China
Czech
Republic
Estonia
Hungary
Lithuania
Poland
Russia
Ukraine
Total
US$M.
TV
%
Print
%
Radio Cinema Outdoor
%
%
3,403
598
48.4
49.5
47.1
45.8
4.5
4.6
50
713
59
1,435
39
67
25.2
67.1
47.5
56.0
74
80.2
62.9
28.2
43.2
27.3
18.3
15.1
11.9
3.8
1.3
7.5
1.8
4.7
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0.2
3.4
0.2
0.7
4.2
9.0
Australia’s position in the import
markets of Transition Economies
• Best position in China:A$ 6.5 Billion in
2000/2001; 2% of China’s imports; 8th rank
• Small exports to other markets:the share of
Australian exports varies between 0.1% and
0.7%(Romania)
• Exports include primary products, but also some
Elaborately Transformed Manufactures( e.g.
telecom equipment, measuring and controlling
• Instruments, medicinal & pharmaceutical goods
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Slides prepared by John Gionea
FDI in Transition Economies
• Emerging FDI markets
– Labour cost advantages (Czech Rep.
1/10 of German costs in car manufacturing)
– Political stability ?
- Finance issues
- Hard currency problems
– Motor car industry, Food processing in China
Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a
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FDI Inflows and FDI Inward Stock in
transition economies, 2000, US$B. and %
Economy
China
Vietnam
C&E
Europe
-Russia
-Czech R.
-Hungary
-Poland
- Romania
FDI Inflows % of world FDI Inward
No. of
US$ Billion FDI inflows
Stock affiliates
38.5
3.0
346.7 364,345
2.1
0.2
25.4
2.0
2.7
4.6
1.7
9.3
1.0
0.2
0.4
0.1
0.7
0.1
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17.9
1,544
124.7 236,829
19.2
21.1
19.9
36.5
6.4
7,793
71,385
28,772
35,840
71,318
Sectoral Trends in FDI Inward Stock in
Transition Economies,1999
• Leading Sector: Tertiary (US$ 49.3 Billion,
50.1% of total)
– Finance; Trade; Transport, storage &
communications.
• Secondary Sector:US$ 43.5 Billion (43.5%)
– Food, Beverages; Motor Vehicles & Other
Transport Equipment; Machinery and
Equipment;
• Primary: US$ 2.4 billion (2.5%)
Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a
International Trade and Investment by John Gionea
Slides prepared by John Gionea
Investment considerations
• Political stability:
– High grade:Central Europe; Medium grade
(E.Europe); Low grade (CIS)
• Local content requirements are on the way
out
• Some degree of foreign exchange controls
• Cost of labour:major consideration for FDI in
the area
Copyright ©2003 McGraw-Hill Australia Pty Ltd PPTs t/a
International Trade and Investment by John Gionea
Slides prepared by John Gionea