Introduction
The population rate in Eastern Europe has been on the rise in the last few years, with the economy recovering at a rapid pace from the collapse of communist Soviet Union and the former Yugoslavia. The East-West divide has seen the Western Europe attain a higher standard of living with a high GPD compared to the Eastern Europe. Though the markets in this region are hardly recognized, it does not mean that it is a wasted region to invest in.
In fact, with the recent rise in GPD and economy, it has provided a big opportunity for investment to both the locals and foreign investors. For a developing region competing with already developed regions, Eastern Europe has shown great potential of growing and offering the growth opportunity to the investors. This paper will look at the opportunities available in Eastern Europe as well as the challenges facing investors attempting to penetrate the market in the region (Pal 23).
Economic Sectors In Eastern Europe
According to Mair and Reynard (169), the region has majored in several economic sectors that have attempted to contribute to the restoration of its GPD and standard of living. Investors wishing to invest in Eastern Europe need to be aware of this sector to help them in their area of investment.
Eastern Europe has three main growing sectors, the main one being Agriculture. This sector is generally developing at a high rate especially with the assistance of the Common Agricultural Policy. The policy has helped farmers to penetrate the competitive market by subsidizing their markets and setting a minimal price for their goods. The policy has however raised criticism as it is said to hamper with the policy of free trade between Eastern Europe and the other developed countries.
The other sector is Manufacturing. The region has been in this sector since mid 20th century but the sector was not long lived as it suffered from the collapse of communism. It however picked up in 21st century after Eastern Europe’s states joined the European Union and its agreement to join the European Common Market. The growth of manufacturing sector has increased the economy growth by creating industrial employment as a result of many companies that have emerged.
The last sector is banking that has contributed to huge growth of Eastern Europe financial sector. The introduction of euro as the common currency has made it easier to conduct trade in other European countries. Though this sector has been affected by the communist legacy, it is also picking up slowly to the standards of those in Western Europe.
Opportunities For Foreign Investment In Eastern Europe
With the economic strain that hit Eastern Europe and the effort it underwent to regain it, the new economy and flat tax plan have encouraged foreign investors and a growth of 8.8 in GDP recorded due to the foreign investors.
The market for foreign investors is rising with the investors given various opportunities to penetrate the market. A good opportunity is through Foreign Direct Investment which entails a greater stability rather than the speculative capital. This is where the investor directly purchase or create an entire business in the region or owns a certain percentage of the company shares. The shares play an important role of maximizing the profits of the company especially by the foreign shareholders (Dobsiewics 10).
Credits investment is also another available opportunity where investors open up private banks to finance the economy. Due to many debts the region owes to its creditors, this is a good opportunity to finance the debts but this investment requires protection and a strategic measure because of the risks involved.
The other opportunity available is property investment where investors can buy land. Statistics indicate that the land in Eastern Europe has increased in value over the years and is estimated to rise even higher in future years to come. In 2005 for example, a piece of land in Romania, a country in Eastern Europe was approximately 40 Euro per square meter and the same piece of land at the moment is being sold at 200 Euro per square meter.
It is therefore an indication that property purchased at the moment will fetch a higher amount of money if sold in the future and it is therefore a great investment to make. The population in Eastern Europe is also on the rise thereby increasing the chance of massive house development projects. Real estate investment is also another great opportunity to engage in to create a higher standard of living for the residents (Stillmock 2).
The retail sector investment has also played a big role in opening up markets in Eastern Europe. Big hypermarkets such as Carrefour and Tesco have already penetrated the market paving way for other investors with the same interest. The retail sector is enjoying the new trend of stable economy creating an expansion in the sector.
The regions in Eastern Europe are also adopting modern technology with the manufacturing sector relying heavily on the recent state of art equipment and the communication also adopting the new technology mode in communication. Therefore, penetrating the market in this sector will create a great opportunity to investors. A good example of such successful business in this region is the cellular industry which deals in cellular technology and cable lines.
Major Setbacks For Investing In Eastern Europe
It is worth noting that investment opportunities in Eastern Europe are on the increase with the regions enjoying very low debt and inflation rates in the region making the economy more stable. With the good national planning, markets are paving a big opening for investors hence making the residents feel wealthier in their new ways of spending. However, the opportunities have several setbacks hindering full market penetration.
The main setback is fear by the investors of the countries in Eastern Europe experiencing short-term risks and growing pains that they have not yet been able to manage them. The argument that has been tendered is the fact that being developing countries, the investors would suffer the most incase of a global slowdown.
The other setback is the inadequacy of laws put in place to protect investors in certain sectors, such as the financial sector. There are no proper laws put in place to protect investors who have put a lot of money in the market sector incase of any unforeseeable risk.
Conclusion
Even with the few setbacks facing the investors in Eastern Europe, investment opportunities in the regions are on the increase with growth potential. Investment in these regions has become better in comparison to earlier years when the countries were struggling with their economic setback. Being developing countries, investors should seize the emerging markets with potential future growth.
Works Cited
Dobsiewics, Zbigniew. Foreign Investment in Eastern Europe. U.S.A: Routledge, 1992. Print
Mair, Julian and Reynard, Chery. Investing in Emerging Markets: The BRIC Economies & Beyond. New York: Wiley, 2010. Print.
Pal, Stanley. Investing in Eastern Europe: Capitalizing on Emerging Markets. London: Addison-Wesley, 1995. Print.
Stillmock, Kevin. Romania On The Rise: Investing in Eastern Europe. 2005. Web.