East and Central European Countries - Case Study Example

East and Central European countries In modern conditions the rapidly evolving scientific and technological progress and globalization processes it ispossible to fit into the global economy and take the right place through increased technological factors and the transition to innovation model of development. Those countries for which this model of development has become a fait accompli today demonstrate a high level of competitiveness of their economies, allowing them to maintain strong positions in global markets technology products and services and receive huge income. The worlds undisputed leaders of technological change are the countries of Western Europe, the United States and Japan, with a high technological culture and monopolize major breakthrough technology of recent decades, in fact already entered the phase of post-industrial development, successfully addressing the socio-economic objectives. In pursuit of the leaders the countries of South-East Asia and China stepped up on the way to build the innovation economy. (Lavigne, 1992) In recent years, many countries of Central East Europe and CIS are actively moving towards the socio-economic modernization and striving for adapting to the rapidly growing processes of globalization, also announced an innovative course as a priority in their development. However, none of the post-socialist countries has been able to integrate in terms of technologically advanced countries, being mainly on the periphery of the global economy. The basis of the structural change and technological upgrading of Central/East European countries is the policy of their governments, aimed at creating a favorable investment climate, ensuring a serious income of foreign investment. In general foreign companies by the end of 2003, invested in the economies of Central/East Europe 162 billion dollars. About the number of foreign investment in national economy of these countries shows the percentage of volume of accumulated investments in GDP, which amounted for Czech Republic 52%, Hungary - 44, Slovakia - 40%. (Inglot, 2008) Among the major foreign investment companies operating in the market in these countries, there are such well-known multinationals as Opel, Volkswagen, PSA, Audi, Toyota, Daewoo, General Motors, Nokia, Philips, Bosh, IBM, Hewlett Packard, General Electric, Electronics, Ford, Suzuki, Sony, Sanyo, Electrolux and others in the field of view of their interests are mainly in the automobile industry, electronics, manufacturing of computer and telecommunications equipment, pharmaceuticals and chemical industries. In fact, for the Central/East European countries today, there is no alternative course of European integration and inclusion in the international technological chains. Most of them belong to the category of small countries with limited capacity to diversify their products. In addition, small-capacity domestic markets do not encourage the creation of innovative products, the effect of which manifests itself only in the economies of large scale. The scientific and technical potential of small countries is limited in its abilities. It is possible to overcome these limitations only actively engaging in foreign trade, attracting foreign investors and forging cooperative ties in the scientific, technical and industrial fields. However, despite the fact that the investment activities of large multinational companies has a positive impact on restructuring and improving the competitiveness of the economies of the Central East Europe, their arrival gave rise to many problems that negatively affect the socio-economic development of those countries. (Lavigne, 1992) First of all, we should not forget that transnational companies are the main investors of the process of “technologization”, always acting in the interest of conquering new markets and enabling factors of production to maximize profits, little consideration the interests and directions of economic policy in host countries. Typically, transnational companies do not form in Central East Europe the holistic reproductive contours by investing primarily in investment in the development of autonomous elements (either assembly or production of components). This means that dominance in the economy outside the contours of its reproductive possible serious external constraints on its development up to the loss of economic autonomy of the state that have such a situation. The economy of Central East European countries is becoming more dependent on fluctuations in world market. In addition, the affiliates of transnational companies are based in Central/ East European countries, mostly using innovative technologies developed within the corporation that is outside of these countries. They practically do not attract national science of Central/ East European countries in their research and development, resulting a continuing threat to its degradation. It should be taken into account that there is a the negative side, foreign investors have largely come in the highly profitable export-oriented production of Central/ East European countries, while low-traditional industries remain outside the zone of interests of foreign investors. In the best case for their modernization, they may use the modest support from various EU funds and the loans from international financial organizations. As a result, the economies of the Central East European countries is how to split into two parts: on the one hand, companies that provide the bulk of industrial exports, owned by foreign investors, on the other - all other local companies that if they are able to compete, it is only by their low prices. (Lavigne, 1992) In recent years, governments of the Central East European countries started to think about the possible negative effects of transnational activities on their territories, in the long run. In order to avoid the excessive dependence on transnational activities in several CEE countries the attempts were made to strengthen and expand its base of growth of national economy. For this purpose a number of fundamental documents in the field of science, technology and innovation policy was developed and adopted. They contain the basic directions of innovative strategies and program development of national innovation leaders on the basis of large enterprises, holding companies, high-tech industries, with priority to the formation of a national model for industrial growth. In the CEE countries is growing the awareness that there is a need to strengthen their own scientific and technical complex as a source of technological innovation, create environment for the assimilation of acquired technology, which ensure the modernization of production and release of competitive products. The current situation is characterized by severe underdevelopment of the region of Western European countries on basic indicators of development of scientific and technological capabilities. Thus, the share of R & D expenditure to GDP of CEE countries as a whole is significantly lower (2-3 times) than in the EU. If in 1990 the proportion of the European Union remains unchanged, then post it markedly decreased. For example, internal research and development costs in the Czech Republic in 2003 amounted to 95% compared to 1991, while in Slovakia - only 47.3%.(Inglot, 2008) It should be noted that the main source of funding for research and development in the CEE countries continues to be the state budget; the private sector has shown little interest in funding such activities. If the average ratio between the public and private financing in this area in the EU is 30:62, in the countries of Central and Eastern Europe - 51:422. Reduced funding for research and development of the private sector, and naturally leads to a reduction in the number of researchers in this sector. For example, in Poland in 1997, by private enterprises employing approximately 20% of all researchers, in 2002 - only 8.3%, in Slovakia, during the same period, the rate fell from 34 to 23.6%.(Inglot, 2008) In the center of special attention in the CEE countries there is a currently applied industrial research, which is identified as the main factor in the development of innovation processes, affecting virtually every industry, but most of all - the industry of high and medium technology. This is primarily to establish their own scientific and technological base in the automotive and electronic industries, information and communication technology, petrochemicals, etc. Slovakia, Czech Republic and Poland have already had their own engineering departments in the automotive industry. The specialists of high level scientific research bases of aviation industry in the Czech Republic, which operates a major center of aviation and space research with a well-developed network of companies that are developing innovative projects. Traditionally, high performance difference between research and development in the Czech Republic and Romania, in the field of lifting and transportation equipment in Poland, etc. And this, of course, gives the results. The active position of the Governments of the CEE countries in the deployment of its own research base, training of relevant staff has made appropriate adjustments in the behavior of transnational countries in the region. Today, many multinational companies operating in particular in the field of pharmaceutical and automotive industries, information technology and telecommunications, place their research in the CEE countries, are actively involved in the work of highly skilled professionals from those countries. For example, in Hungary between 1998 and 2000 the number of research centers has increased from 258 to 478. Their units here have opened the company Nokia, IBM, GE, HP and other high-tech giants, many of the vacancies in these companies is employed by Hungarian experts. In the Czech Republic its research centers have opened large companies such as Siemens, Matsushita, Honeywell, BSH Holice, Valeo, Boeing, Rockwell, Philips. They use the scientific potential of the country in aerodynamics, electronics, biotechnology, etc. In 2003, 47% of investments in R & D in the field of business accounted for by affiliates of foreign firms. Automobile companies have their factories in the Czech Republic to establish long term cooperation with local universities and research laboratories. In the electronics industry, foreign investors have focused on low costs in research and development. In the development of such initiatives the Hungarian Ministry of Economy has developed a special program to attract foreign capital to establish a network of innovation centers, business incubators and small businesses, agents of the innovation process in the ten years (2002-2011). Under this program, multinational companies, creating centers of technological development, can receive solid financial support, the value of which can reach 100 million forint. Overall, the program planned by the government 50 billion forint. Approximately 14.5 billion forint in the development of these centers will be made by the European Union. (Inglot, 2008) Under the plan the Czech support innovation competitiveness of domestic industry is also running the program to attract foreign investment in R & D activities. Through the establishment of preferential and special preferential treatment over 40% of foreign companies operating in the territory of the Czech Republic, has decided to move here its research centers and engineering offices. Thus, the Swedish company Ericsson in cooperation with the local mobile phone operator Cesky Mobil has already established a research framework in the Prague Technical University, which will deal with the problems of third-generation multimedia systems. The transnational companies such as Honeywell and Philips are deploying their research centers in electronics. Special attention is paid today to the formation of innovation infrastructure and, above all, of the development of innovative small businesses, because the percentage of small innovative companies in the total number of small and medium-sized enterprises is still lagging behind on average at 25% in the Czech Republic, Hungary - 18, Slovakia - 13, Poland - 12%.(Inglot, 2008) The solution to this problem in the CEE countries largely contributed to building technological parks (Hungary) and Business Incubation (Czech Republic), which are designed to support the national program. In general, governments of CEE countries now quite actively developing and implementing national innovation projects, with the ultimate goal of improving the competitiveness of industrial products and business services. They are trying to follow the path of optimal development of the industry, accompanied by the rise of its technological level to a level comparable with the developed countries, improving economic efficiency, while growth in employment. By some estimates, if the success of the national innovation projects over the next 10 years, trade of CEE countries that joined the EU, could significantly increase. It will increase as follows: machinery and equipment - 37%, electronic equipment - to 79, transport equipment - at 94%. The greatest effect will be prepared in this respect, by Hungary, the growth of exports which amounted to 44%. In Poland, an increase in exports by 30% in the Czech Republic, Slovakia and the Baltic countries - 32%, while in the EU as a whole - at 2%. (Inglot, 2008) To improve the performance of innovative development of CEE countries, and allow their incorporation into European integration processes on the basis of participation in various scientific and technical programs and joint projects of the European Union. Such participation not only gives access to the results of a joint research, but also opens up the possibility of expanding the sources of financing their own development. Among the projects that are actively engaged in the CEE countries - the EU Sixth Framework Program in Science and Technology, PECO (environmental protection, energy development, the safe splitting of atomic nuclei, biomedicine and health care), TEMPUS (higher education), etc. Certainly, the experience of CEE countries in attracting foreign investment to address the challenges of innovation and modernization of the economy is of great importance for CIS. Experts estimate that today approximately 60% of technology needed to modernize the CIS economy, not only in the car structure, but also in such key fund-forming industries as machine tool and robotics structure, electronics and instrument may also have to buy abroad. There is a need in a short time to master the methods of production do not let the modern, but modern technology is based on the purchase of licenses, know-how, consultation, etc. Here, the practice of attracting foreign investment, and inclusion in international technological chains of transnational companies could be very useful. However, it is necessary to achieve equal partnership, and this is possible only in conditions of existence of its own well-balanced long-term strategy for national industrial and innovation policies, as well as the ongoing strengthening of national scientific and technological capacity, can not only perceive the foreign technology, but also to be the generator of their own technological innovations. In conclusion it is worth saying that the countries of Central and Eastern Europe could never boast of low inflation, high rates of economic growth and stability of stock markets. But against the backdrop of recent events, it becomes clear that the worst is still ahead. The fact is that the economy of this region is in a very strong dependence on the euro and Russia. However, the euro zone economy is slowing (and rather rapidly), as trade and diplomatic relations with CIS. Currency and stock markets of such countries as Poland, Hungary and the Czech Republic are very heavily dependent on inflows from the single European currency. Accordingly, the slowdown in economic growth of the eurozone economy of Central and Eastern European states are not in the best position. Works cited Lavigne Marie . The Soviet Union and Eastern Europe in the Global Economy (International Council for Central and East European Studies). Cambridge University Press. 1992 Inglot Tomasz. Welfare States in East Central Europe, 1919-2004. Cambridge University Press; 1 edition. 2008 Perczynski Maciej , Kregel Jan , Matzner Egon . After the Market Shock: Central and East-European Economies in Transition. Dartmouth Publishing Group. 1994 Read More