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| The Ukraine - an area of huge potential |
| Communicating with Investors in the Emerging Eastern European Market |
Ten to fifteen years ago, many countries in central and Eastern Europe were a small dot on the international investment community's radar. Today, the entire region is rapidly gaining the attention it deserves and provides an exciting example of an emerging market, close to the financial hub of London.
The most developed countries of Eastern Europe and the Former Soviet Union (FSU) are blazing ahead, partly thanks to widening EU membership, while others in the region, including the Ukraine and Romania, are arriving more slowly. Nevertheless, these Eastern European countries are now also recognised as being capable of delivering some very high quality companies, with compelling investment cases.
 | Each company and country has its own unique selling points, but in general investors like Eastern Europe because economic growth is becoming consistent, natural resources are rife, and a middle class with high purchasing power is emerging. |  |
Opportunities and risks
Each company and country has its own unique selling points, but in general investors like Eastern Europe because economic growth is becoming consistent, natural resources are rife, and a middle class with high purchasing power is emerging.
Self sufficiency is a key driver. The emerging Eastern European countries are lowering their reliance on basic Western imports such as natural resources, engineering and agricultural products. This in turn is driving revenue growth and development of domestic companies as they supply their own markets, which has a dramatic effect on GDP.
Nowhere is this more apparent than in the Ukraine. Formerly known as the "bread basket of Russia," the country imports the vast majority of agricultural products which it can produce itself. The paradox is that the Ukraine imports over 85% of food goods from Europe, yet has the resources to supply Europe with 85% of its food goods, at a lower price and higher quality.
Facts, however, are often less important than perceptions in financial markets, and investors are increasingly unwilling to take risks as they worry about calling the top of the emerging markets surge. They are nervous for a number of reasons, including inflation, as interest rates are typically rising quicker and further than expected, and GDP and export growth expectations are being reined back.
Russian growth looks particularly unsustainable at 20% a year, and it's no secret that financial markets always take money off the riskier tables first. The inevitable political instability as countries push towards democratic maturity, particularly in the CIS, is also a factor, although less so than a few years ago. Such risks should not preclude investors from entering these markets, but they need to do so with their eyes wide open.
The communications challenge
Conducting financial public relations, investor relations or indeed any communications on behalf of emerging markets has its challenges. The main considerations are:
- Business practices are very different and it is said that in extreme cases one has to virtually forget about business methods that exist in the West. This is not the case from Weber Shandwick's experience, but it is true that investors need to be culturally prepared for a different way of working.
- Rules and regulations are often radically different. In financial PR terms companies are usually bound by the rules of the market they are planning to list on, commonly the London Stock Exchange, but contractual legalities need to be taken into account.
- The media landscape in the emerging markets of Eastern Europe is still developing and recovering from communist control. Extremes exist in media attitudes from the militant to the passive and the delivery of a story is often different too. For example, in the Ukraine it is still standard operating procedure for PR agencies to pay journalists to write positive articles for clients. Weber Shandwick's Russian and Ukrainian affiliate PRP is leading the charge on disbanding this practice.
- Language is clearly a challenge, so a trusted, dedicated translator is a must. It also means that extensive rehearsals should be mandatory before any communication is undertaken.
- Lack of visibility of the country needs to be addressed early. Financial PR in emerging markets is as much about educating outside investors about the country, its culture and its economics, as it is about the fundamentals of the company.
The London Stock Exchange is very appealing to international companies, and these emerging Eastern European companies are no exception. London is extremely excited by the companies coming out of this region, and Weber Shandwick l Square Mile has already helped a number of Russian and Ukrainian companies to effectively communicate their investment case to the London and European financial markets and its investors.
Weber Shandwick is taking the entire CEE region seriously, opening new offices in Poland, Croatia and Bosnia and Herzegovina and partnering with new affiliates in Romania, Slovakia, Slovenia, Serbia and Montenegro, Latvia, Lithuania, and Estonia. As Eastern Europe continues to develop, there will only be more companies from the area seeking financial communications expertise in the West.
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| James Chandler, director, Weber Shandwick l Square Mile, Financial Communications
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