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Make investors in the Retail and Consumer goods sector aware of business development opportunities within Eastern Europe, and more generally, to a 343 million consumer market extending from Russia to Albania, from Estonia to the Czech Republic.

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The objective of the following Business Report is to make investors in the Retail and Consumer goods sector aware of business development opportunities within Eastern Europe, and more generally, to a 343 million consumer market extending from Russia to Albania, from Estonia to the Czech Republic. Lucy Hewitt EASTERN EUROPE: A region defined geographically as that part of Europe covering the eastern part of the continent. Generally, this means that it lies between the Ural and Caucasus Mountains and the western border of Russia. 1 For the purpose of this report Eastern Europe will include: * Belarus * Estonia * Latvia * Lithuania * Russia * Ukraine * Moldova * Bosnia - Herzegovina * Bulgaria * Croatia * Macedonia * Romania * Czech Republic * Hungary * Poland * Slovakia * Slovenia A Brief History2 In late 1989 the countries of Eastern Europe broke loose from the Soviet Union, threw off communism, and began to construct democratic institutions and market-oriented economies. This great transformation is founded on the idea that adopting the institutions and practices, that have proven successful in Western Europe since World War II, can best advance freedom and prosperity. ...read more.


Russia is home to 143 million people and is highly urbanised (69.5%), Table 3: Unemployment Figures for Russia (millions) 1998 1999 2000 2001 2002 8.9 9.0 7.0 6.4 5.7 however there has been a decline in birth rate with the majority of the population being aged 15+. Nevertheless, the economy is still highly sensitive to instability and price fluctuations within the world raw materials market. The driver behind economic growth has been the oil industry. Due to this economic growth, Russia has experienced a significant consumption boom (30% growth since 2003), which can be attributed to the recovery of real incomes and the reduction of unemployment rates. Furthermore, Russia is now looking at a booming consumer sector with personal finance becoming more readily available in the form of Credit and Loans. Russia's low cost, highly skilled labour force is highly attractive to investors. However, poor education has meant there are significant skill shortages at industry and regional levels: there is an underlying reliance on an unskilled workforce to fill low paying jobs, however, in regions the labour market is more comparable to developing countries. In contrast to Russia, Poland's macro economic environment has known turbulent and violent times. ...read more.


The following table portrays just some of the major barriers to entry: Table 6: Barriers to Entry Russia Poland * Regulatory constraints are strong but changing * Some regulation constraints * Unreliable suppliers and large delivery expenses * Unclear legal status of high street properties in prime location * Extremely high import tariffs (20%) * High corporate income tax (27%) * Land code means investors may only purchase land under a tendering process which is restricted and limited * Purchase property requires permission from the minister of internal affairs and administration * Restricted opening hours - employees working non standard working hours must receive added compensation * Since joining the EU there is a 10 year transition period thus limiting access * Heavy vertical integrations * Tight zoning laws - restriction on locations for Hypermarkets * Heavy geographic segmentation * There is an act on counteracting unfair competition * Intellectual property rights and enforcements * Waste law - environment tax on those that do not attain regulatory recovery or recycling rate for that given year * Technical barriers to trade * Weighted average tariff rate is 7.4% (2000) which is very high * Problematic customers valuation * To defend their market and domestic retailers, Poland are extremely proficient at employing temporary import tariffs, quotas and antidumping duties Source: GMID, www.econlib.org, www.atkearney.com, www.cidiharvard.edu,www,bbc,co. ...read more.

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