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New frontiers

9th February 2006
Page 26
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Which of the following most accurately describes the problem?

Both Romania and Bulgaria enjoyed spectacular truck sales in 2005. The countries are aiming to become EU members in 11 months' time, but what impact will accession have? Oliver Dixon investigates.

Last year Romania saw its CV market surge by 20%, while Bulgaria with a 50% increase can probably claim to be the fastest-growing truck market unearth.

This is fine news if you're sitting in Sofia or based in Bucharest. It's arguably awkward information if you operate out of Osset or run out of Rheims. And, if you're working out of Warsaw.,pullingout of Prague or are just an oldfashioned Hungarian haulage contractor, you could be forgiven for worrying a bit. But what does the next chunk of EU enlargement actually mean?

According to the Economist Intelligence Unit, Romanian CV sales are set to continue their upward trend. From a base point of 37,000 units in 2005. the ER) predicts a rise to 57.(XX) by 2010.That's a 64% increase over five years, and, more pertinently,one enjoyed almost equally by both the WV and light CV markets.

The marked increase in light C'V growth suggests an increase in local distribution activity, and this would tie in with the economic figures. With GDP growing at over 5%. and inflation at around 8%. Romania is far from stagnant. But EL: accession seems likely to have a greater effect at an internal level than an external one. The Bucharest government has a policy of tax cutting, meaning more spending power for the domestic consumer.This,coupied with an abolition of import tariffs,will see more domestic demand.The result will. primarily, he an expansion of the Romanian domestic haulage industry.

Prime location

Bulgaria is different. Unlike Romania.it boasts a well-established national and international haulage sector.Th is is now owned primarily by Willi Betz through ib; acquisition of former stateowned firm SOMAT It is also geographically well placed: the Southern CIS/Caucasus states border Bulgaria via the Black Sea, while the simultaneous accession of Romania to the EU means Bulgarian trucks can get into Europe via a northern or southern (via Greece) route.

Bear in mind too that to the south of Bulgaria is Turkey. It is also attempting to join the EU, but is currently a major outsourcing point for both the automotive and textile industries.

Where does all of this lead? A good bit of money poured into Poland,the Czech Republic and Hungary during the run-up to the 2004 accession. Ell social costs are a problem in a globalised economy. and so business has shifted eastwards But Romania and Bulgaria are by no means a shoe-in for a continuation of this trend. Both play by the rules of the IMF, and both especially Bulgaria have attracted notable amounts of foreign investment. But the spectre of corruption still looms large over both countries, as does the fact that there is only so much money in the investment pot.

The two countries may offer advantageous labour rates — which will rise post-accession — but both are also some distance away from the core EU markets. All this leads to the question as to whether the two 2007 accession countries will enjoy the boost experienced by those nations that joined in 2004.

Much of this boost came about as a result of increased exports into the existing EL And a fair bit of this increase in exports was a result of EU companies establishing themselves in the 2004 accession states with a view to capitalising on lower production and social costs. It seems unlikely that this will happen again —after all. the investment funds have been spent. Bulgaria is rich in natural resources, and has a young. reasonably well-educated and motivated workforce. But both countries may have missed the opportunity to profit in the same way as Poland or the Czech Republic did.

This may or may not be good news for the haulage industry in the rest of Europe. What is unlikely to be good news is that the further south-east the EU heads, the nearer it gets to Turkey.

Turkey rising

Just over the Bulgarian border is one of the modern world's economic success stories. Soil of. Agriculture accounts for a third of the Turkish economy, but, crucially, the country is one of the big players in textiles (think high street) and an increasingly important automotive centre. In the latter role it serves an industry that employs, directly or indirectly, around 14 million people in the EU alone. And it's growing fast: 9% or so per year.

There are one or two Turkish trucks on the EU's roads today. There is every reason expect that there will be more tomorrow. Turkey continues to industrialise it ■ continue to export.and those exports are Ilk to arrive at the EU's gates by truck. Given cost disparity between EU and non-EU labc there's good reason to believe that those nib will come badged TR as opposed to BG or F As for GB or D. it's unlikely that establist Western EU hauliers will get a slice of t particular pie.

Who will suffer? There's always going to t: place for niche business, and niche hauliers unlikely to be hurt. But (and here a parallel be drawn with the evolution of the natio industry) there's reason to believe that peo will be squeezed. Not by the operators base( the new EU states; by those based next door.

• For a comprehensive analysis of the gloi truck market, see page 50.


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