The European Union's former Eastern Bloc countries economic transition

European Union's Former Eastern Block: A New Emerging Market and Region

This paper will focus on the European Union or "EU" former eastern block countries of Czech Republic, Slovakia, Hungary and Poland. This region of the EU was selected as a recent emerging market and economic community to study because of its recent introduction into the global marketplace. The EU carries a lot of clout in the world of politics. In recent years, the Czech Republic, Slovakia, Hungary and Poland have made concessions needed to become a part of the European Community. The countries were former eastern block countries, controlled by Soviet powers and up until the late 1980's and were closed to the rest of the world but they have been successful in their transition to a market oriented economy. Specifically the country of Hungary has been ranked one of the world's top tourist destinations for the last four years and its exports for 1999 "totaled $25 billion, nearly half of the GDP with 85% supplied to EU customers (Country Profile, 2000)" and the Czech Republic is not far behind in popularity. Hungary has also "attracted an aggregate $20 billion in foreign direct investment (Country Profile, 2000)" trailing only Poland. This paper will explore this region's emergence and discuss issues of integration, economic development and the major drivers of globalization for these countries. What are the ramifications of compliance not just monetarily but also for the people of these countries and their cultural identities? How will integration into another economic environment influence success?

Background on the Region

Politically the countries are harmonious and borders are open. Hungary has played an important positive role in Central European socio-political growth and issue resolution. It has become the peacekeeper and in order to end the arguments among its neighbors Slovakia and Romania, Hungary "decided to modify the law on status of Hungarian expatriates (Deloy, 2003)." This law grants social services and other rights to minorities living in bordering countries within the region. These social services include health care, free university education and the right to work in Hungary legally for three months. This law was amended for many reasons. First this lifts the burden of taking care of this population off of the neighboring countries while they stay in those countries. The countries populations remain stable during the final steps of integration into the market. Still the changes to this law have come under much criticism from Slovakia and Romania. These minorities make up a good chunk of these countries lower working class. By taking care of them, Hungarian social reform is put in a good light to the market but this does not change the fact, these people are not living in Hungary and should be bettering their adopted country. All of the major political movements are in favor of becoming a part of the market. The Hungarian government created a media blitz to get the word of the EU membership out there to the people. They have done this by circulating millions of letter flyers and creating an Internet web site (www.euint.hu/cgi-bin/ikk.cgi). Advertisements were broadcast on television promoting the 200 debates organized to inform the public. In the end, only the Right-wing movements in Slovakia protested the EU membership with a vote "no" campaign.

Economic Development and Possible Negatives

Whoever coined the phrase "Change is good" was not prepared to deal with both sides of the double-edged sword. Overall, there are many benefits to joining the EU market but when the focus changes to more specific issues of export trade, wages and taxes, it becomes clear that there are many concerns with the integration for this region. Laszlo Kovacs commented that to "enhance stability in Central and Eastern Europe by developing and maintaining good relations with neighbors and help ethnic Hungarians living in neighboring areas (Columbia, 2003)" would mean further economic development of the area. In other words, by being a member of the larger organization of countries, the EU, these countries can have a greater influence over the happenings of Central Europe and therefore exposure to the outside world. Maybe other area countries do not agree with this issue, new policies or are afraid that by enlarging the market too much change will come? Still there are greater issues to address. The region needs to be focused on how it will handle being a part of a greater economic playing field. How will regional businesses deal with outside competition or increased production? EU membership does not protect these countries from potential problems that may arise upon greater development. How will export trade meet the pressures of the European Market? Can these companies do this and still remain true to its employees and provide a living wage? Specifically Hungary has many characteristics in its favor for success after entering the market. During the first phase of EU membership, Hungary went through a "characterized dramatic reorientation and explosion of trade, the value of Hungary's exports increased 84% (Kaminski, 1999)." The Czech Republic experienced similar economic expansion right after the walls were torn down and the advent of free trade caught on like wildfire with foreign investment playing a key role.

What actually could change is product as a major driver of globalization. Central European companies and foreign invested firms changed their focus away from producing resource intensive, low-value-added products to making highly technical high-end engineering products. The world's increased need over the years for expensive telecommunication gadgets has provided many firms with a niche market. Overall, exports to the EU will remain strong because of the area's open mind to outside investment.

Another driver toward globalization is taxation. How will entering the EU affect their tax structure and really how will it affect the wages? How will its people react? There is no one model to follow when it comes to regulating taxes. It is thought that with increased economic development that more money would be made, therefore, making payment of taxes easier. Still would taxation increase as a result? It is clear; a well-defined plan is needed for this region. The European Commission has left this issue up to each individual EU member as to how it will tax its people.

Conclusion

In conclusion, it is clear that the notion of change is a driving force for this region's emergence and integration into the EU market. Will such movement to new economic center affect product pricing and people's ability to live? Will too much change cause the economy to grow too fast? With integration come new problems. It is clear from research that government members are making steps to protect the Central European way of life by remaining competitive in the export market at the global level and allowing local currency to remain stable along side the Euro.