Tip sheet for Eastern Europe.

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Tip Sheet For Eastern Europe

Even if investing in Eastern Europe means taking lumps early on, many Western companies may not have much choice if they want to defend or strengthen their competitive positions in world markets. When all of the foreboding problems and the perceived opportunities of going East are sorted out, the primary concern of the prospective investor is that economic and political upheavals in East Bloc countries are but parts of a rapid transformation taking place throughout the world. Thus, the company must determine where and how Eastern Europe fits into its plan to compete strongly on an international basis.

The drive toward free markets in Eastern Europe, for example, is dovetailing with the economic unification of the Common Market in Western Europe at the end of 1992. Together, the two blocs will form "a natural European market," in the view of Karl Dannenbaum, an executive director in the mergers and acquisitions department of Goldman Sachs International. "That will increase the share of Europe in world economic activity," he said. "Europe will get bigger and grab a bigger worldwide share and become more competitive."

While the enormous problems faced by the Eastern countries may be producing a "vacuum" in economic terms, Dannenbaum suggested that this should not deter long-range thinkers. "You cannot expect a vacuum to stand," he asserted. "Those that go into the vacuum will increase their power and their scale, reduce their unit costs, and become tougher competitors globally. There is good reason to be skeptical. There is good reason to be cautious. But in the long run, this is a fundamental change globally."

Growth prospects of specific Eastern European industries could be key to the timing of investments, according to Thomas G. Lewis...