Going out - Investing in Central Eastern Europe
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Recently, Deloitte Chinese Services Group hosted Investing in Central Eastern Europe (CEE) roadshows in Shanghai and Beijing. Gabor Gion, CEO of Deloitte Hungary and EMEA Chinese Services Group (CSG) Leader, and Csaba Wolf, EMEA CSG Business Development Director, shared with attendees Deloitte's insights of investing in Central Eastern Europe, while tax and legal professionals from Deloitte China also shared their observations of tax and legal issues of outbound investment to Central Eastern Europe. Below are the major drivers of investing in Central Eastern Europe.
A diverse and sizeable market
Central Eastern Europe is at the heart of Europe, including 17 countries, spanning over 1.3 million km2 and home to 122 million people. Central Eastern Europe itself is a diverse and sizable. Major cities of this region are in driving distances and there are non-stop commercial flights between China and Central Eastern Europe.
Among the European Union members in Central Eastern Europe are Poland, Czech Republic, Slovakia, Hungary, Latvia, Lithuania, Estonia, Slovenia, Bulgaria, Romania and Croatia. Being an EU member has multiple benefits from the economic development point of view.
However, for Chinese outbound investors, investing in a non-EU Central Eastern Europe country means there is no EU regulations and possibility of direct negotiations with local governments on infrastructure projects.
Slovenia, Slovakia and Estonia are the only three countries in Central Eastern Europe using Euro and Other EU-member CEE Countries still use their own currencies.
Excellent geographical location: between the East and the West
Central Eastern Europe's proximity to the Western European market is a great driver to attract foreign investments. And its geographical advantage is well supported by a good level of infrastructure:
Favourable connections to the European-wide transportation network
Good internal rail and road network
Major expansion of capacities and services at international airports
Quality transportation network connecting Western European economies with Russia & CIS nations, Turkey and the Middle East
A dynamically growing region with great potential
Over the last years before the financial crisis, CEE experienced a remarkable economic transformation. The region underwent very dynamic development and the services sector grew faster than the industrial and agricultural sectors in relation to GDP. By 2015, economies were fully recovered from the recession in 2009, and grow even faster in 2016-17. Below are the forecasted 2016 growth rates of countries in Central Eastern Europe.
Investor-friendly environment: favorable tax environment, lower labor cost and investment incentives
In the last 10 year, Central Eastern Europe has created friendly tax regimes and various investment incentives schemes, which has resulted in a steady growth of inbound FDI.
Many Central Eastern European countries have sharply cut their tax rates to attract foreign investment. Significant corporate income tax reductions are driving factors behind the relocation of manufacturing and service-oriented business activities into this region. This continuing trend will make this region attractive for foreign investments in the long run.
In comparison to Western Europe, Central Eastern Europe boasts notable advantages in terms of labor regulation and costs. It is worth noting that Central Eastern Europe provides not just low cost but also skilled labor. Major foreign companies have successfully established or relocated their shared service centers, customer and call centers, software and IT centers into CEE. This region also sees more and more R&D centers.
What's more, inbound foreign investors may apply for various incentives granted by CEE countries. The table below gives you a glimpse of the various incentives available in each country of the region.
If you are interested in investing in Central Eastern Europe or for more information, please contact us at GCSG@deloitte.com.cn.