As part of the MaDI program, we are lucky enough to have regional and country seminars that are based on ‘doing business’ within a particular place around the world. For a Master’s in International Business, seminars like these are going to come in handy. They are given by an industry expert, such as Belen Garcia from Galicia who came to speak to us on 9th April about doing business in Eastern Europe and Central Asia.
When we think about doing business in Eastern Europe and Central Asia, we often differentiate between sub-regions: Eastern European countries, Balkan countries, Baltic countries and Central Asia. Furthermore, it was quite clear (from the response that we had in class), that the general perception of these regions is that they can be precarious, corrupt and politically unstable. Not an ideal candidate for your future business plans. Or is it?
According to the Economist ‘Time to scrap Eastern Europe’, if you are ones of those that still use the term “Eastern Europe” (like me), then you are light years behind. Most of the Eastern European countries are actually now within the European Union or are at least on the list to be so, and the richest are catching up to the poorest countries in Western Europe. Now, don’t get me wrong, there are significant differences when it comes to doing business, but the economy has improved a lot. Another reason why we cannot generalise with the term ‘Eastern Europe is that each country has their own individual culture and language. By combining Eastern European countries under the term ‘Eastern Europe’ makes it sound like the countries are the same or similar.
Challenges with international politics
As a British citizen myself, I know full well that Britain was once one of the main countries to accept Eastern European citizens; most commonly, people from Poland. Many of the younger generations grew up with Polish classmates, so it is extremely sad to hear that many Polish citizens have had to return back to Poland or that have been treated badly by certain politically inclined British citizens.
As per a Sky News’ short documentary on ‘What Trump’s election win means for Eastern Europe‘, the effect American politics has had on Eastern Europe is that it has opened up certain parts to invasion. For example, the Russian/Latvian border has become exposed and vulnerable.
Trump has warned Latvia that they need to spend more money on military defence. This to the Latvian Foreign Minister is a little unfair as they are more than willing to spend their fair share on military expenses. However, the amount they spend cannot be on par with America’s expenses as the difference in economy is too drastic.
Doing business in Eastern Europe and Central Asia: what to think about?
Trade in Europe and Central Asia continues to have its ups and downs. According to a recent World Bank report based on these regions (although in recent years there has been a global slowdown in trade), this area has grown commercially. Even the so-called transition economies (countries that were under the Soviet influence) are restructuring their production patterns through international trade. Some of the main challenges for these economies is the leap from interregional to global trade, as well as the jump from international trade in products to international trade in services.
There are many differences within these countries: Eastern Europe is specialized in qualified manufactures, while Central Asia in natural resources, and Balkan countries or the Baltic countries have intensified their participation in Western Europe as they have been receiving foreign investment. Integration into global markets has been very important for Eastern Europe and has transformed this region into the factory of Europe, and Central Asian countries have benefited from export opportunities to the Russian market. The increased international presence of these countries has made it possible, not only to access opportunities and profits derived from exports but to align domestic production and consumption with the strength of global markets.
However, they face huge limitations. On the one hand, high levels of public debt and low levels of productivity, and on the other, in order to achieve the same level of some of the world’s best economies, they need to develop global brands that can be sold in international markets.
Doing business in Europe and Central Asia: some countries and their cultural peculiarities
As previously mentioned, huge differences exist between these countries as even within this regional category, there are sub-regions.
Bulgaria has a centre-right government and a population of 7 million people. They are punctual, polite, have a ‘live to work’ attitude and of course, speak Bulgarian. According to the perceived corruption index, Bulgaria is at 41, slightly better than some of its neighbouring countries, such as Greece and Albania; however, you still might find that a Bulgaria will offer a gift in order to seal a deal or to receive a better service.
Dos and Dont’s
Don’t nod your head to say yes.
Don’t say ‘Ciao’ as hello.
Do shake hands when you first meet.
Belarus is currently trying to achieve economic stability, sustainable economic growth, diverse investments and to be on good terms with all of its neighbouring countries. They have a population of 9.5 million people and their official language is Belarussian.
Dos and Dont’s
Don’t say “Belorussia”.
Don’t comment, “It’s very clean here!”
Do look them in the eye when speaking.
Investment and consumption declined due to cuts in public investment and a credit crisis in the banking sector. This, together with their political instability, has caused them to fall behind on the previous progression made in the reduction of poverty. Therefore, they face great challenges on improving the business environment, with reforms in the banking sector and to achieve greater transparency and effectiveness in their policies.
Dos and Dont’s
Don’t shake hands across a doorway.
Don’t be offended if they ask you personal questions.
Do refuse a gift twice before accepting.
They have a strategic geographical position and a population of 10 million people. They have a ‘work to live’ attitude and of course, their main language is Czech. According to the perceived corruption index, the Czech Republic is at 49, which is slightly better than Bulgaria.
Dos and Dont’s
Don’t ask about people’s health.
Don’t ask about personal finances.
Do give a firm handshake and keep eye contact.
Since 2016, structural reforms have been made that contribute to its economic stability. They are in full conflict with Russia over some shared borders. Its GDP is growing but inflation is low, which is attracting foreign investment.
Dos and Dont’s
Don’t confuse Ukraine with Russia.
Don’t shake hands with gloves on.
Do consider that feminism is a little behind.
Hungary wants to attract foreign direct investment. They currently have a very open economy so their GDP is high. Their aim is to position Hungary as the manufacturing and innovation hub of Europe. They have a population of 10 million people, a ‘live to work’ attitude, tend to be punctual and of course, speak Hungarian. According to the perceived corruption index, they have a score of 55, which is pretty good!
Dos and Dont’s
Don’t discuss business during dinner
Don’t say ‘cheers’ when toasting
Do ‘consider’ Hungary as part of Central Europe
Poland has one of the largest populations out of our Eastern European countries at 38 million people. They have a ‘work to live’ attitude and of course, speak Polish. According to the perceived corruption index, they have a score of 58, which is Higher than Italy and not too far off from Spain.
Dos and Don’ts
Don’t shake hands in the doorway.
Don’t give an even number of flowers.
Do shake hands with everyone after a meeting.
They maintain a certain economic vulnerability due to the fall in oil prices and a weakening of local demand. The implementation of institutional and structural reforms will be fundamental to achieve an improvement in living standards and a reduction in poverty.
Dos and Don’ts
Don’t bring up Borat.
Don’t try to rush the initial small talk in meetings.
Do dress formally.
From now on, don’t let perceived perceptions of these regions scare you away from doing business. These gems are developing rapidly and have similar Dos and Dont’s as the rest of Europe. There is no reason why we shouldn’t be investing and developing in either of the countries mentioned above.