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3. THE MOST APPROPRIATE MARKETS FOR BUSINESS

According to Ernst and Young (2004), the three most appropriate markets for business in the CEE are Poland, the Czech Republic, Hungary but also Slovakia and Slovenia because of their political and economic stability (in comparison to others CEE countries). In regards to Slovenia and Slovakia, investment there may be not the best strategic solution due to their small consumer market, so will focus on Czech Republic, Poland, and Hungary' present situation.

3.1. CZECH REPUBLIC

Economic situation for 2004:

"Following entry into the EU in 2004 the main concern for the Czech Republic is to strengthen growth prospects" (www.oecd.org)

The Czechs are enjoying nearly 4% of growth in their GDP in 2004, indicating an increase in demand for their produce.

"........ one of the most stable and prosperous of the post communist state of the CEE" (www.cia.gov)

The Czechs have stabilized their inflation rate in recent years, according to (www.europa.eu.int), and hoping to maintain it at that level. Investments in the Czech Republic are expanding rapidly and exports are on the up.

However the government is facing problems of high deficits because of their increase in spending in recent year. This is causing them to fund their spending through higher taxes. The Czechs economic transformation is not yet complete. Therefore there are many challenges faced by the government involving industrial restructuring, transforming housing sector and also reforming of pensions and the health care system. (CIA, 2005)

Business opportunity:

The size of the potential domestic market in the Czech Republic is much smaller compared with the Polish market; however Czech attracts more foreign investment.

The Czech Republic has adjusted commercial laws and accounting practices to accommodate the West and has also offered investment incentives in order to attract foreign companies (Ernst & Young, 2004).

Business infrastructure:

According to Ernst and Young, the business infrastructure is 'extremely developed' with significant new high-speed rail and road networks across the country. Telecommunications are good as well as a high level of business sophistication.

Stability:

The Czech Republic is regarded as the most politically stable of the VISIGRAD countries and has the lowest inflation rate of CEE economies apart from the likes of Lithuania.

3.2. HUNGARY

Economic Situation for 2004:

Hungary continues a strong economic development of recent years. Its real GDP in 2004 was 3.9%, and showing a steady trend. Unemployment is one of the lowest amidst CEE --around 5.8% (www.europa.eu.int). The trend of inflation decreased in recent years, but still stands at 7%. Hungary's exports and investment have both picked up in recent years as well as enjoying a growth in GDP (www.europa.eu.int). Private sectors contributed to the biggest share at 80% of the GDP, hence making Hungary quite attractive for foreign investment.

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