Estonia and Hungary Best for Investment Among New EU Members

          Of the 10 countries scheduled to become European Union members in 2004, Estonia and Hungary offer the best investment opportunities for small- and medium-sized Georgia companies, according to Charles Ludolph.

          Mr. Ludolph, senior vice president of Stonebridge International LLC and former deputy assistant secretary for Europe at the U.S. Department of Commerce, spoke about the economic consequences of EU enlargement during the Southern Center for International Studies’ 7th Annual Europe Seminar last week.

          “If your company is established in Hungary, where you have access to highly educated and lower-wage labor, then in 2004 you will have free access to the French market [or any other EU member],” Mr. Ludolph told GlobalFax.

          He said Atlanta companies should look to Estonia for consumer electronics production or computer chip design and Hungary for software development.

          The best way to start the process of investing in the new EU countries, he added, is to contact the Commerce Department’s office in Budapest, Hungary, to set up interviews with the 10 best potential partner companies in a chosen sector, he added.

          Other countries scheduled to join the EU are Cyprus, Czech Republic, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia.

          These future EU members do not have as much potential as Estonia or Hungary, Mr. Ludolph said, because they are more reliant on traditional extractive, commodity-based or “Soviet-style” industries rather than technology-intensive or knowledge-based production. Poland, for example, is still largely dependent on metal production, he noted.

          For the new EU member countries to successfully integrate into the union, sweeping small business policy reforms are needed, Mr. Ludolph said, adding that greater mobility of labor and capital markets is key to restructuring post-Soviet institutions.

          EU policies make starting a business difficult, he added, yet new business creation, and especially high-tech business, is important for helping the new EU entrants to “catch up” to the current members.

          Mr. Ludolph said the outlook is grim in the short-run for the new members, noting that Central Europe’s average gross domestic product per capita is only 35% that of the current EU.

          Contact the SCIS at (404) 261-5763 or Mr. Ludolph at (202) 637-3699. Go to www.doc.gov for the U.S. Commerce Department or visit www.stonebridge-international.com