Where can we see the future of transportation infrastructure (logistics market) in East Europe?

The future in Transportation infrastructure (logistic) between China and East Europe

Transportation infrastructure, or we can simply say logistics.

If we get down to building the bright future for East Europe, then investment definitely comes first. However precondition and base has to be met. This is exactly the part of logistics.

For better understanding, let us see the general condition of East Europe:

 

 

There are 18 countries (except BY, UA and RU) on this land and population with 250 million (except RU).

The transportation volume statistic in each country (per years) :

 

 

Clear views on transportation in East Europe

Airborne in East Europe:

1.       Speed fast (lower the risk in transit, suitable for valuables and precise instrument)

2.       No geographical restriction

3.       Few airport comparing to West Europe (it takes time to build airport, also with high cost, thus, just a few East European countries use air transport)

Waterborne (shipping) in East Europe:

1.       The overall level of shipping in East Europe is low

2.       Out-dated and backward in management system

3.       Improper fleet construction

4.       Lack support of fund

5.       Less developed in private shipping industry

Not competitive in the international shipping market, also the needs of shipping cannot be met.

Just a few East Europe countries have waterborne transportation.

Most of the East European countries are far from port, therefore it falls behind.

Road transportation in East Europe:

1.       High flexibility and adaptability (much much frequently use then railway and shipping)

2.       “door to door” can be realized (directly sent to different farms and industries in different district)

3.       Low scale of volume, high cost

4.       Low security index, environmental unfriendly

5.       Backward in road network (low speed of improvement in transportation infrastructure)

Railway in East Europe:

The main type of transportation from 1990

1.       High speed

2.       Low land occupation (comparing to other types)

3.       Environmental friendly (the electric locomotive basically has no toxic gas)

4.       High security index (relative reliable)

5.       Low cost in transportation

6.       High scale of volume

7.       High resistance to changeable weather conditions

8.       Improper allocating in cargo capacity and infrastructure, high cost in using infrastructure

9.       Relative worse relationship between the state, the manager of infrastructure and transportation company

 

Let’s see the transportation infrastructure from the view of Hungary.

 

First of all, we cannot ignore the significant meaning in logistics as it is the heart of Europe. Since it became part of the 455 million populated European Union in May, 2004. All investors and foreign companies can see are new opportunities in their eyes. Logistics and transportation services became one of the 7 largest industries in Hungarian development system.

As the main part of developing Hungary, the Hungarians are bending themselves in gradually becoming the logistic centre of CEE countries.

The main suppliers in logistics

The logistics market in Hungary scales $1 billion and it is keep developing in a relative high speed.

After 8 year the scale will doubled or tripled.

Nowadays, logistic takes the main force in Hungarian enterprises, the market share of foreign companies only takes 13% from more than 41 countries even if the foreign companies continuously entering the Hungarian logistic market. The main FDI are coming from the neighbor countries like Netherland, Germany and Austria.

Rynart Group, Netherland.

It has cooperated with Hungarian enterprises since 1980s in warehousing customs clearance, domestic distribution network etc. the subsidiary called Rynart Transport Hungary Kft. In Hungary has becoming one of the bellwether in Hungarian logistics service supplier.

REWICO, Germany.

Who entered Hungary since 1996, purchased the share of partners in Hungary, it has further plan in taking over other logistic companies there, which aims to be one of the top 10 logistic companies.

Also there are other logistic companies like DHL, Frans Maas, Kuehne&Nagel, NYK Logistics, Rudolph Logistik, UPS and Wincanton etc.

 

We cannot ignore the sponsorship from government is another main incentive:

The targets in building logistics market from 2007 to 2015, Hungary.

1.       Build the central network of logistics. Environmental friendly and modernization.

2.       Develop infrastructure of the ports (Gyor-Gonyu, Budapest, Dunaujvaros and Baja) along the Danube.

3.       Develop the international airport in separate areas (Budapest, Debrecen and Sarmellek).

4.       Introduce the Intelligent Transport System to improve the transportation efficiency.

 

From the view of Chinese investors and responders in East Europe

On the one side, China lays the stresses on investing CEE (16 countries)

On the other side, the CEE countries pay more attention on what China going to do next and the trend of how Chinese economy will be.

There are recent proofs supporting the situation we face now, where we see China and Eastern Europe are waving hands to each other.

In terms of related legal bases

It is well-known that the Shanghai EXPO was holding in the summer of 2010, not surprised a public lecture or training organized by China-EU School of Law and the China University of Political Science and Law was holding in the European Union pavilion on 26th of July, 2010. The main subject to this lecture is the potential opportunities and future achievements in directly investing in Eastern Europe from China. This training involves the movers and shakers from different universities in Hungary. Such as Andras Kisfaludi and Attila Menyhard from Eotvos Lorand University, Tibor Tajti from China-EU University. The training shared the successful achievements (mostly in Hungary, Poland and Latvia) and the companies (eg: Huawei, Lenovo, Kinglong and TBV), clarified the legal parts which directly influence FDI from China especially the applied new laws, in discussing the best way for investing Eastern Europe under the advanced investment model. Where we can say this is specially designed for Chinese potential investors and the waited opportunities in Eastern Europe.

 

In terms of related political bases

As Hungary is the heart of Europe, it makes sense that FDI starts or sets Hungary as the main target. Where we can see from the official conference between Chinese and Hungarian President as the following video, which was holding just in the year 2011.

 

Right after the year of 2011, the Chinese government has made several actions in this following year. New rules, new investors, new missions and new opportunities. That’s their job.

The most obvious is on 26th of April, 2012, Wen Jiabao, President of China had a meeting with all the 16 countries presidents in Warsaw, Poland.

 

In terms of the investors’ interests bases

The so called “2012 International Economic and Trade Fair for Central and Eastern European countries” was holding in Beijing CBD on 18th, September, 2012. The Chaoyang District has been the first one who signed the Strategic Alliance Agreement with 16 CEE countries as the No.1 district concerning foreign affairs in China. From the date the agreement approved, all the Chinese competitive and strong enterprises will have the priority to enter and invest in the 16 countries (eg: Slovenia, Bosnia and Poland). The field of investment involves some important sectors like telecommunication service, transportation infrastructure and financial sector.

 

In terms of the financial bases

Wen Jiabao, President of China announced on 26th of April, 2012, the meeting with all the 16 countries presidents in Warsaw, Poland. China will provide a special credit limits $10 billion with preferential rules for supporting the cooperation in the field of infrastructure, high technology and green economy etc. initiates the mutual fund under the collaboration.

 

Then we are looking forward to the bright future in East Europe and be patient to see what will happen.

Thanks for reading!

Will you consider the labor market in East Europe? Not late to decide it now

As I mentioned in the previous article--The electronic industry in China. China has become a world factory, the international company stepped into this “fertile soil” one after another due to the advantage of cheap labor. However the advantage is getting less obvious with the time passing by, and also in the meantime, Chinese electronic manufactures and IT industry has already lay their target on east Europe, here has relative cheaper labor comparing to west Europe, the geographic advantage can easily give a way for entering the eastern market, increasing the response speed of changing situation.

Let me give you an example of Changhong Electric Co.,Ltd.

In Nymburk, a small town with the population around only 15 thousand in the central Czech Republic, Changhong Electric was building a manufacture which costs USD 300 million, since the first year it completed, the yield of LED television reached one million. The mayor of Nymburk says “we are glad to invite Changhong Electric here, for providing us a great opportunity to make the amazing achievement”.

Since China has becoming the world factory, the manufactures in East Europe has impacted a lot because of the comparative advantage in China, the so called labor intensive industries for instance in textile and shoes industry has already got no chance to compete with the labor market in China. However, the market gave them another opportunity, the business from China brought them a way for developing.

In fact, some Japanese industries have already find potential in East Europe, China and Taiwan just set the target in recent years. Apparently on the one hand, this decision avoid the tariffs within European Union, on the other hand, it decreases the labor cost in manufacturing within Europe. Then why not choose this hotspot?

The data shows in the previous years, around ten companies from mainland China and Taiwan have already invested in this hotspot for more than USD 3000 million.

• In Czech Republic, Foxconn has invested USD 800 million in employing more than 5000 staff for the company like HP, APPLE, Cisco and other companies in producing computer peripherals products.

• An electronic company called Tatung from Taiwan has a manufacture in the west Czech which is producing 50 thousand LED television per month.

• Hisense from mainland China has ready invest a manufacture in Hungary at the year of 2006, at that time with only 110 employees.

• In 2007, the manufacture of SVA Information Industry from Shanghai brought into production in Bulgaria.

The labor cost in East Europe is still a fraction comparing to the West Europe, even if the European Union has expanded from West to the East. Moreover, these new members are eager to grab the opportunity of FDI which providing more job offer. On the other side, the government gives a strong support as well, for instance, both Foxconn and Changhong Electric in Czech are enjoying the ten year long taxation preference policy right at now.

The west market can be the most attractive point that FDI choose to stay in East Europe. In the manufacture in mainland China, Foxconn can produce more than 3 million computers, that’s not a bad number. However if the need from Spain and Germany is urgent, the manufacture in East Europe can deliver it there within 24 hours, from the mainland China, it take 35 days. Think like this, if you are the one who are interested, which one do you prefer?

Will you consider the labor market in East Europe? Not late to decide it now

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Note:

Sichuan Changhong Electric Co. http://en.wikipedia.org/wiki/Changhong

Tatung  http://en.wikipedia.org/wiki/Tatung_Institute_of_Commerce_and_Technology

Foxconn http://en.wikipedia.org/wiki/Foxconn

Hisense  http://en.wikipedia.org/wiki/Hisense

SVA http://www.svainfo.com/main/index.aspx

"Produce" or "Create"--- China Electronics labor market and trend

The electronic industry in China----from ”produce” to ”create”

The transformation decides the picture of Chinese labor market in electronic industry.

 

Around the PRD (Pearl River Delta) area in China, there is a dazzling star who called Guangdong. The birth province of electronic industry in China.

No matter the volume of production, the value of production or the export share, it ranks the top in comparing to other province there.

 

The future of Guangdong electronic park is not only rely on the cheap labor market to provide all kinds of international brand, however, the main focus turns to create and develop the domestic brands such as BBK and Nintaus, at least in the same level with this two big domestic brands.

This is not only a change in one province, but rather a thinking for the future of electriconic industry in China. A thinking about to “produce” or to “create”.

Comparing to these international electronic giants like Philips, Nokia, Samsung and Sony which located in Pearl River Delta electronic park, the core technology and self-owned brand has become the drawback of the whole park.

In the personal computer production, it lacks of R&D center for chips; in electronic export, the self-owned brand has take less than 10% of the whole number. The so called “giant in exports, dwarf in brands” totally describe the electronic industry in China. The self-owned brand can even be counted.

Recently, there are some domestic and international brand growing in the electronic market, however due to the lack of supporting core technology, appealing the current market but cannot stand for a long-time competition, in addition to the pressure of trade barriers and technology barriers, the life cycle of those brand has been shorten very quickly.

 

The key point of branding is to use brand building-led innovation in technology and products, in order to improve the competitiveness. For this, China still has a long way to transform, the reason is there is no strong driven for independent innovation in China, seeing from the aspect of government, the policy of stimulating independent innovation is not settled yet.

But it shows definitely that government is supporting it. From more see the video below:

 

 

 

 

Nevertheless, in the mean time from the social aspect, just take a look from Pearl River Delta electronic park, there are 15 enterprises have self launched a union for putting the top talents and investments together, lessen every single cost of the innovation. Here we can mention a successful Chinese enterprise Huawei which ranks in top 50 in Chinese outstanding enterprises. The aim for China is to build several enterprises like it from now on.

 

In decades, China had grabbed such a huge international market relies on cheap labor, however with the economy keeping growing recently, the advantage of “cheap labor” is gradually fading as well. If China does not make a revolution in technological process, then the “Made in China” from “huge” to “strong” will be a reachless dream.

 

From this we can see China is concentrate on develop talents in electronic industry, many younger workers, typically better-educated, seek higher salaries at technology companies, fuelled by fast productivity gains. Many also believe the jobs more interesting. China’s labor market, like the country, is diverse. Electronics companies have no worker shortages.
The Chinese labor market provides plenty of opportunity for developing the electronic industry, however what could be changed will see the job done by incentives from government and strength of domestic enterprises.