Tag Archives: Manufacturing industry

The Czech Republic Has Been a Manufacturing Industry Leader for Decades

Czech Republic flag

When the Austro-Hungarian empire split up, Czechoslovakia became an independent nation and immediately established itself as a manufacturing industry world leader. Today, manufacturing is still paramount to the Czech Republic. Nearly 40% of all working citizens have jobs in the industry, and manufacturing comprises 35% of the Czech economy.

With a centralized location in Europe, excellent transportation infrastructure, a wealth of natural resources, and trade agreements linking the East and West, it is no wonder Czech Manufacturing attracts a lot of direct foreign investment. It’s the perfect trading buddy for Germany, Russia, and the rest of Europe.

Mining:

Before we can talk about any other manufacturing industry sector, we must pay homage to the resources that make it all possible. The Czech lands have a wealth of natural resources, mostly including raw mineral deposits. Unfortunately, Iron ore must be imported. However, black coal and limestone mines in the Ostrava region make manufacturing in the homelands cheaper and easier. Leading mining companies include Arcelor Mittal, Evraz Vítkovice Steel, and Třinecké.

Automotive:

As with much of central Europe, the most important sector in Czech Republic manufacturing is the automotive industry. More the 50% of all Czech exports are automotive products, and the industry employs more than 120 thousand people. The largest producers of automobiles in the region are Škoda Auto (Volkswagen group) TPCA (Toyota/PSA joint venture) and Hyundai Motor Manufacturing Czech.

Chemicals:

The Czech chemical sector consists of various niches including basic chemistry, crude oil processing, pharmaceuticals, rubber production and plastics. Since chemical production requires raw materials, water and energy sources, and qualified human’s resources, the chemical industry is often considered an economic indicator. With these ingredients in place, chemical manufacturing dominates the northern Bohemia region, along the Morava River. Major contributors include Chemopetrol Litvínov, Paramo Pardubice, (Petrochemical production) Spolana Neratovice, Lovochema Lovosice, (Basic Chemicals), Kaučuk Kralupy nad Vltavou, and Barum Otrokovice (Rubber industry).

Barriers:

Despite having such an excellent infrastructure and capacity for manufacturing, foreign investors and workers still have difficulty breaking into the Czech market. This is partially due to the language. Although English is widely spoken in business, the saturation of English speakers is considerably lower in the Czech Republic than other European nations. Moreover, Czech is a considerably difficult language to learn.

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Hungary Has Been Building a Manufacturing Empire in Europe

Hungary Manufacturing

40 years ago, Hungary was not even a spot on the map for the manufacturing community because of their lack of resources and small economy. However today, Hungary is a key trading partner for Germany, France, Italy, Austria, Romania, Slovakia, Poland and the Czech Republic. Each year more companies choose to expand to Hungary strategically. Multi-million dollars, multi-national enterprises like Knorr-Bremse, Thyssen-Krupp, Suzuki, Bosch, and Mercedes-Benz all have a strong presence. What is causing this manufacturing explosion? A centralized location, low production costs, skilled workers and most importantly, political incentives for large firms.

Government Incentives

The primary contributor to this Hungarian manufacturing boom is the government incentive for foreign investment. Refundable and non-refundable incentives are available to investors with great potential to create jobs, level wealth inequality, and drive innovation through research. The Hungarian government provides support opportunities for investments greater than EUR 10 million. These incentives include cash subsidies, tax incentives, low-interest loans, and land for free and reduced prices. Such offerings are hard to refuse for multi-national companies looking for a centralized location in Europe.

Skilled Workers

The Hungarian workforce is known for being well-educated, highly skilled, and hardworking. They tend to work long hours and take fewer vacation days than other European workers. In addition, about two-thirds of the labor force has completed a secondary, vocational, or technical degree. In particular, Hungary produces great talent in IT, engineering, mathematics, economics, and physics—the fields that fuel technology and innovation. Lastly, nearly 90 percent of graduating students speak fluent English, which makes for easier acquisition and transition.

State of the Art Electronics

Electronics manufacturing and research is another key driver of innovation and economic growth. As the largest producer of electronics in Central and Eastern Europe, Hungary is a leader in information security, mobile technology, and related research. This sector employs around 112,000 people and produces 26% of the region’s electronics. It is home to six of the top ten electronic manufacturing services including Foxconn, Sanmina, Zollner, Flextronics, Jabil, and Videoton. Their power in electronic manufacturing is a partial contributor to the growing economy.

Competitive Automotive

Automotive manufacturing is a core industry which generates nearly 21% of all Hungarian exports and employs more than 100,000 people. Stakeholders include Mercedes-Benz, Audi, Suzuki, Opel, and Daimler. Győr is even home to the second biggest engine factory in the world. The automotive sector is so fortified that a few smaller, local automotive companies have emerged and become stable among the giants. With a strong presence in auto-production, many educational institutions have partnered with the auto sector to establish research and development.

Having all the components to drive manufacturing—investment, location research, and ideal workers—Hungary’s efforts are both massive and intensive and thus far have shown great results in just a couple of decades. (Although still far behind the top global manufacturers like the United States, China, Japan, and Germany.) They’ve overcome their lop-sided economy and lack of resources, and will likely soon be competing in the big leagues as more and more corporations secure their plants in central Europe.

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Germany Faces Economic Manufacturing Challenges

German manufacturing

Since the Industrial Revolution about 200 years ago, the Germans have been an international manufacturing powerhouse. They have it all covered from cars to pharmaceuticals; the manufacturing industry here has always been on top. Like most of the global economy, Germany suffered a drop after 2008 and has been steadily recovering since. Of course, their bounce back has been paved with many obstacles but none larger than the ones they have today.

In general, Germany’s economy has seen a slow and delicate shift. Its workers have increasingly transitioned from manufacturing jobs to the services industry. This shift is marked by the incoming new generations and their labor market decisions. Recent studies suggest that manufacturing has a slow and steady decline in Germany, but it is not as devastating as the American offshoring wave.

These shifts in the German economy may have led up to the 3% drop in PMI reported in January. This comes after a nearly 6 year rise in PMI indicators for Germany, and is somewhat alarming for the manufacturing industry. While most senior economists aren’t at all too concerned with the fall of the PMI, there might be some up and coming changes that could affect the manufacturing industry in general. Most of this change in PMI is attributed to the fact that unemployment in Germany also grew. But, it appears there might be bigger fish to fry for the German manufacturing industry.

The biggest challenge coming to the German manufacturing industry is led by political initiatives. Under the new administration, American economic protectionism is starting to look like the ruling ideology. The US administration does not show a promising picture of future economic trade with Germany. And this of course could damage the German manufacturing industry. BMW, who has their biggest manufacturing plant located in South Carolina, held meetings and tried to lobby the administration into seeing the benefits of open-trade with Germany. Americans have been buying German products for decades, and any loss of the 115 billion dollars a year profits that German companies make from Americans could be devastating to their manufacturing industry.

These challenges are compounded with the shifting of the European economic market, the failures of the European Union to uphold political stability, and the coming Brexit. German economic markets will have to adapt their policies, and hope that the promises of protectionism from the current administration don’t come to light.

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