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REXECODE R EXECODE European Enlargement and ICT Industrial Issues, Offshoring/location trends Michel Martinez Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 1 REXECODE Where we stand Since 2 years, FDI flows slumped CEE (excepted Russia) Balance of foreig n direct investment (in % of GDP) 8 6 4 2 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 © REXECODE Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 2 REXECODE Where we stand But the amount of international debt securities increased by 60 % since 2000 Amount of international debt securities (bil ions $) 140 120 100 80 60 40 20 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 © REXECODE Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 3 REXECODE Where we stand But the foreign claims were multiplied by two since 2000 CEE : amount of foreign claims of reporting banks (bil ions $) 500 400 300 200 150 100 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 © REXECODE Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 4 REXECODE Where we stand High level of foreign claims in new new members countries (40% to 60 % of GDP) Amount of Foreig n claims of reporting banks (in % of GDP) 70 60 50 Poland Hungary Czech republic 40 30 20 10 0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 © REXECODE Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 5 REXECODE ICT production Eastern European countries have high level of ICT production Share of ICT value added (in % of GDP) 12 10 8 6 4 2 Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 6 ec e G re ai n Sp en m ar k al D ep R rtu g lic ub la n Sl ov ak Po d ly Po Ita st ria Au s y ce Fr an er la nd et h N m an G er E15 U en Sw ed or wa y N Lu xe m bo ur g Sw iz er la nd um lg i lic Be ub Re p gd C Ze ch Ki n d ni te U om ar y un g d H an Fi nl Ire la n d 0 REXECODE ICT production Eastern European countries have high level of Telecommunication production Share of Communications Value Added (in % of GDP) 9 8 7 6 5 4 3 2 1 7 ar k ce en m D en Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 Fr an ly Sw ed Ita y d m an G er la n Po st ria lic ub ep R ak Au s er la nd Sl ov ai n et h Sp N um lg i Be d E15 U la n Ire er la nd al rtu g Sw iz Po e or wa y N ec G re gd Ki n d ni te U om ar y un g H ub lic ur g Re p ze ch C Lu xe Fi nl m bo an d 0 REXECODE ICT production The Eastern European countries are less better ranked in IT production Share of IT Value added (in % of GDP) 6.0 5.0 4.0 3.0 2.0 1.0 8 e ec lic ub R ep Sp ak Sl ov Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 G re ai n al ur g rtu g Po m bo xe Lu Re p ub lic st ria Au ze ch C er la nd ar k Sw iz en m D la n d ly Po Ita d an Fi nl ar y or wa y N un g H y E15 U m an s ce G er Fr an er la nd en et h N om gd Ki n d ni te U Sw ed um lg i Be Ire la n d 0.0 REXECODE ICT production But they are very well placed in the production of components and scientific instrument Share of other IC technologies value added (in % od GDP) components and scientific instruments 3.5 3.0 2.5 2.0 1.5 1.0 0.5 Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 xe 9 e ec G re m bo ur g ai n Sp Lu lg i um s Be al er la nd et h rtu g N Po d or wa y N an d la n Fi nl ly Po Ita ar k en m E15 D U st ria Au gd om ce Ki n d ni te y en Sw ed m an lic G er ub Fr an U Sl ov ak R ep ub lic ar y Re p un g H C ze ch d la n Sw iz Ire er la nd 0.0 REXECODE Two aspects for Offshoring/location trends 1. Access to (new) markets 2. Competitiveness Improvement Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 10 REXECODE 1. Access to markets 1. Access to (new) markets: reasons for locating activities ICT marketing ICT services need to get closer the customers some ICT services are produced when and where they are consumed. ICT products costly to transport (??) which is the size of ICT markets of CEE countries and which will be their growth? Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 11 REXECODE ICT production The 10 new members represent already a larger share of ICT market than of GDP S ha re of 1 0 ne w me mbe rs in the EU in the ICT ma rke t, billions € a nd % S ha re of 1 0 ne w me mbe rs in the EU in the G DP , billions € a nd % 9 309 95.7% 420 4.3% 562.3 94.4% 33.5 5.6% EU15 EU15 EU 10 new members EU 10 new members Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 12 REXECODE ICT production This is particularly the case on the Telecommunication market, not on the IT market S ha re of 1 0 ne w me mbe rs in the EU in the IT ma rke t, billions € a nd % 270.0 96.3% 10.5 3.7% S ha re of 1 0 ne w me mbe rs in the EU in the Te le c ommunic a tion ma rke t, billions € a nd % 23.0 7.3% 292.3 92.7% EU15 EU15 EU 10 new members EU 10 new members Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 13 REXECODE 1. Access to markets Trends of economic growth: better prospects 2004-2010 for new members as during the last 10 years Average annual econom ic grow th rate (%) 4.5 4 1990- 2003 3.5 2004- 2010 3 2.5 2 1.5 1 0.5 0 European Union (15) Germany France Uk It aly Spain CEE Hungary Poland Czech Slovak Republic Republic Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 14 REXECODE 1. Access to markets Trends of ICT markets IT: Low penetration rate and high needs of investments Telecommunication Which impact of deregulation? ? Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 15 REXECODE 2. Competitiveness Improvement 2. Competitiveness Improvement : reasons for locating activities wages costs taxes on benefits infrastructures innovation and R&D Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 16 REXECODE 2. Competitiveness Improvement Eastern european countries have, with Ireland, the lower profit taxes Profit taxe in 2004 (%) 40 35 30 25 20 15 10 5 ia P ol an ak d R ep ub li c H un ga ry Li th ua ni a E st on ia Ir e la nd tv S lo v La an y S lo ve Lu ni a xe m bo ur g ga l tu er m G lic P or en ch R ep ub 5 in la nd F U E -1 do m S w ed C ze U ni te d K in g m ar k ly Ita D en e B el gi N um et he rla nd s A us tr i a in re ec G S pa F ra n ce 0 Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 17 REXECODE 2. Competitiveness Improvement Eastern european countries have the lower hourly wage costs Hourly wage costs in 2004, in €/hour 35 30 25 20 15 10 5 Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 18 ia Bu lg ar ia Ro m an La tv ia a Li th ua ni lic Es to ni a Re pu b Po la nd Sl ov ak Sl ov en ia Po rtu Cz ga ec l h Re pu bli c Hu ng ar y Sp ai n Ita ly Ire lan d Ki ng do m Un i te d Fi nl an d Au st ria la nd s Ne th er Fr an ce er m an Lu y xe m bo ur g G Be lg iu m De nm ar k Sw ed en 0 REXECODE Conclusion Conclusion Low hourly wage cost Low profit tax EU subsidies highly skilled workforce High growth rate of domestic It market attractive locations for FDI Michel Martinez, Journées de l’IDATE, European Enlargement and ICT, 24 novembre 2004 19