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IT in Eastern Europe

In the first of a series, we look at Central and Eastern Europe

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Analysis The Central and East European Countries (dubbed the CEEC in Euro-jargon) constitute a fast-growing, emerging market that is likely to be highly significant in the next ten years. Much attention was focussed on the Asian tiger economies until economic conditions became tough there, but the size of their IT market is insignificant compared with that of the CEEC. In terms of GDP growth per capita, nine of the top twelve countries in the world are in the CEEC, and in terms of population, the block is similar in size to Western Europe or North America. A clincher for the linguistically challenged is that English is the lingua franca of these countries in the IT world, to the dismay of the Germans and French. We shall be reviewing the IT activity in the CEEC on a country-by-country basis over the next few weeks, and in the future we expect to include updates in The Register about significant IT developments. It is an opportune moment to do this, as the tenth anniversary of the fall of the Berlin wall occurs in November, which was of course followed by the Mikhail Gorbachev's era of glasnost (openness) and perestroika (reconstruction), the eventual transformation of Russia following his resignation on Christmas Day 1991, and the final hauling down of the hammer and sickle over the Kremlin the next day. The new era of reform and democratisation has been slow and painful, with Russia finding itself behind most of the CEEC in IT development. Five CEEC countries (the Czech Republic, Estonia, Hungary, Poland and Slovenia) - as well as Cyprus - are negotiating for European Union membership in 2002. These countries are known as the "acquis" in Euro-jargon. Russia is far from being able to meet the economic criteria for membership, even if it wished to join. The acquis have their sights firmly fixed on the subsidies and grants they expect to receive from the EU, and are fully aware of how Ireland, Greece, Spain and Portugal have benefited at the expense of other EU members. Mostly the CEEC seems to consider the EU to be a good thing, but there is considerable concern at the weakness of the euro. It is unlikely that any of the acquis would be in a position to join the EMU for some years after their joining the EU, since their economies are not robust. There is an alternative in place should the EU founder as a result of the collapse of the monetary union: the Central European Free Trade Agreement (CEFTA) has seven member countries with a 100 million people, and it is probable that Russia would join, adding its 150 million people to what could be a successful independent trading block. Using data from IDC and the European Information Technology Observatory (EITO) task force, the IT expenditure is highest in the Czech Republic (116 euros per capita in 1997), followed by Slovenia (109), Hungary (81), Estonia (75), Slovakia (55), Poland (40) and Russia (20). Already, the CEEC is catching up with some of the West European laggards - IT per capita expenditure in Greece in 1997 was just 84 euros, Portugal was 128, and Spain 168. By comparison, the US expenditure was 1,075, the UK 627, France 526, and Germany 492. IT expenditure as a percentage of GDP is similar in the acquis countries to that of Western Europe. The major problem in the East European market is of course the lack of funds to spend on hardware. Software presents a different kind of problem, in that there is a great deal of piracy so that CD-ROMs, of MS Office for example, have a street cost of around $5. Microsoft also seems to be maintaining its position in the world of unprofitable market share. ®

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