How to select your new
site in Eastern Europe?
by Dr. Balazs Csorjan
investment promotion specialist
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“Tell me where Central Europe is, and I
can tell who you are.” (Jacques Rupnik)
When we say ‘Central - and Eastern
Europe’, we mean the new (Eastern)
member states of the European Union.
This region went through a fundamental
economic transition in the last 25 years:
from a state-led communists economy to a
more or less free market economy.
The low-cost manufacturing region
became the member of the European
Union in 2004, so the cultural and
geographical nearness accompany to free
access to the World’s largest market.
industry in CEE
Eastern Europe became a leading
automotive manufacturing location: it
produced the 59% of Germany’s output in
2012, which is more than the output of
France, Italy and Belgium alltogether.
The automotive industry is not just robust
but growing, thanks to the strong technical
education, good infrastructure and stable
These few slides try to help you when its
about the site selection of your new
automotive manufacturing plant.
The Czech Republic is traditionally the
leading automotive manufacturing
destination in CEE. OEMs like Skoda,
Hyundai, Toyota, PSA, Iveco delivered 1.1
million motor vehicles in 2013. The czech
automotive industry has a strong small car
manufacturing profile, and the country
provides the nearest location to Western
learn more here >>
Slovakia is the rising star of the Eastern
European automotive industry. The small
county is the world’s #1 producer of cars
per capita, 45% increase in 2012 (after a
250% increase from 2005 to 2010)
The 3 OEMs: VW, PSA, KIA located
mostly in the Western part of Slovakia, but
Eastern Slovakia provides large labour
supply and emerging infrastructure.
learn more here >>
Poland is the largest economy and the
most populated state in Eastern Europe.
The leading OEMs are Fiat (60% share),
Ford, Opel, VW, Volvo, MAN, Scania,
Poland is the #1 bus manufacturer of the
European Union, with relevant domestic
learn more here >>
There are 4 OEMs (Audi, Mercedes-Benz,
Opel, Suzuki) and 600+ suppliers in the
Hungarian automotive manufacturing
industry, which produced 222k cars in
If Hungary, than automotive component
manufacturing. There are a traditionally
strong vehicle component manufacturing
focus in the Hungarian economic policy.
Hungarian governements think, big
supplier (component manufacturer)
pyramid provides stability to automotive
industry, and deeper embedement to the
The emerging Eastern Hungarian
locations have large labour pool and
special governmental support. On next
slide’ short video, Daimler Hungary’s CEO
talks about why they have chosen Eastern
learn more here >>
In Central and Eastern Europe, there are
approx. 1,000 industrial parks. Hungary
and the Czech Republic have the most
wide-spread industrial park networks
(approx. 200-200 IPs), and Poland has a
modest network, but larger business
The number of industrial brown field sites
can be estimated for more thousands,
however be careful with these old
industrial facilities: there can be relevant
environmental issues thanks to the
communistic heavy industrial track record.
Industrial real estate markets are
liberalized everywhere, you can get a
property quickly (but hire a local attorney).
Real Estate costs
In CEE, property prices are relatively high,
thanks to the weak supply. However, note:
the property costs are under the 25% of
total costs of a new manufacturing plant.
In numbers, industrial land average sales
prices are everywhere between 20-40€
per sq.meter in larger cities, and under 20
€ in smaller towns. 10€ per sq.meter is a
good deal, however some municipalities
offer free of charge industrial land.
Industrial hall rental markets are relatively
small outside larger cities, but the average
rental fees are between 2 and 5 € per sq.
meter per month.
Developed infrastructure makes Central-and
Eastern Europe more attractive
location than other emerging countries of
The European Union has a vision about
the cross-European transportation, called
Trans-European Transport Network (TEN-T).
The goal of TEN-T developments
(funded by EU) is to make the EU internal
market more competitive and to speed up
the market access. The developments of
member states fit into this framework,
including the low-cost CEE Region.
Regarding national motorway networks,
Hungary and the Czech Republic have the
most developed motorway systems.
The Central- and Eastern European
motorway network is underdeveloped
compared to the Western European
networks, but the CEE railway network is
in much better status. The extended
railway network was built in the last
century, and large-scale EU programmes
are running to rebuilt and develop it. The
European Union prefer railway
transportation, because environmentally it
seems to be cleaner. However, the
Eastern European rail cargo companies
are often not so reliable and not flexible
enough, that's why the road transportation
has significantly bigger share.
Manufacturing sites and business parks
have often a railway access, the typical
construction cost of 1 km (0.62 miles)
industrial rail is roughly 1 million euros.
The CEE electricity market is highly
regulated by the EU. The EU has a
competitive energy market (theoretically),
separating the grid developers and energy
providers. (On-site grid development is
managed by business parks). As a key
account, you can achieve competitive
EU energy price statistics can be checked
As far as CEE is one of the most dynamic
region of the European economy, the
unemployement is relatively not so high
(compared to Spain, Ireland or Greece,
see the map on the right).
However, there are relevant in-country
differences. With an example: the entire
Western Hungarian Region has a similar
number of job seekers (30k+) like a single
Eastern Hungarian town,
Hajduboszormeny and its vicinity (25k).
Generally we can say: Eastern Poland,
Eastern Slovakia and Eastern Hungary
have the highest unemployement rate.
Not independently from unemployment,
the Czech Republic and large cities like
Budapest (Hungary) and Bratislava
(Slovakia) have the highest wage level:
average labor costs (involving taxes and
social contributions) are between €1200-
€1800 per month in these locations.
The low-cost Eastern parts of Poland,
Slovakia and Hungary have a much more
modest wage level: average labor costs
are between €600-€1200 per month.
Romania and Bulgaria provides a
superlow cost wage level (around 5-600 €
learn more here >>
The Eastern European vocational training
systems follow more or less the “German
modell”. The so called dual education
means: vocational school students learn
practical skills at companies. In BSc/MSc
engineering trainings companies are also
Recruiting are usually managed by
professional recruitment agencies, but
university job fairs and governmental labor
offices recruiting between job seekers can
be a relevant help.
Finally: labor market regulations are
definitely flexible and business friendly.
How to select your new site?
long listing: 10-20 potential sites
might fit to your criteria
site selection questionnaire - answers
from the long listed locations
facilities, transport, labour issues,
regulations and taxes
short listing: the most promising 4-8
visit personally each one
listen to your instincts - it's not a
rank and propose 2-3 to your board
During the site selection process, beside
infrastructure, real estate and labor
market, analyze this:
● start-up time: existing halls for rent?
● logistics: local service providers?
transportation networks (e.g: TEN-T)
● wage trends: competing employers
in the city? labour market potential?
● transparency: level of corruption?
political stability? fair business
There are several ways to get help from
professional site selection resources:
● non-profit governmental investment
promotion agencies (IPAs): HIPA
(Hungary), CzechInvest (Czech
Republic), PAIZ (Poland), Sario
● World Bank's investment portal,
● consultants and real estate agents
● … and last but not least: ask our free
of charge help
Manufacturing Hungary Blog is an information source about
the manufacturing topics in Hungary and Eastern Europe. Our
goal is to support site selection team’s job, providing useful
Dr. Balazs Csorjan, investment promotion specialist, the
former regional director of Hungarian governmental
investment promotion agency. Dr. Csorjan has taken part in
more hundred site selection projects - he knows your
E-mail your questions or ask the original
maps, graphics, slides: