In the light of recent events in various parts of southeast Asia, several leading investors have turned their attention to new markets. One region that is becoming increasingly popular is Eastern Europe and parts of the former Soviet Union.

In the past nine years, Eastern European countries have had varying economic fortunes. While Poland, the Czech Republic, and Hungary are all on the verge of joining the European Union, others-most notably Romania and the former Soviet republics-have lagged behind, and in some cases even posted negative growth rates in construction.

The main countries in the region-the Czech Republic, Poland, Russia, Bulgaria, Hungary, Romania, Slovakia, and the Ukraine-all have huge potential for growth as all are seen as being on the verge of a post-cold war reconstruction boom.

According to analysts at Lafarge, the Romanian cement market, for example, has considerable growth potential. Romania is the second largest country in the region by population, but its cement consumption per head is still relatively low (180 kg), and they claim that economic reforms undertaken by the new government should permit sustained development. The market grew by 8% in 1995 and 7% in 1996, reaching 4.1 million mt.

As with most things in this part of the world, the recent history of the cement industry is based on the changeover from a command to a free-market economy. Commentators have said that the attractiveness of the industry to investors depends upon when the reform process started and how it was structured. However, recent events such at the take over of Romcim by Lafarge and continued infiltration by giants such as Holderbank suggest that the majority of investors are now satisfied that stability has returned to some degree.

In a capital-intensive industry like ours, any form of upgrade or reform demands a huge investment. In countries in Eastern Europe, the trend has for some time been for privatization of the major production centers. However, the funding for this investment has generally been provided by investors from outside the country.

Many major western companies currently trading in mature markets are looking for new opportunities and see this region as something of a salvation. The more optimistic view is that the reconstruction of the former Yugoslavia after years of war, combined with the stated desires of countries like Russia and Poland to upgrade transportation and infrastructure networks, will fuel a future demand for cement and building products.

To those who adopt a more cautious approach, factors such as the slow down in the pace of growth in the east of Germany (which at one time was said to be the fastest growing construction sector in world) and continued uncertainty about the Slovakia/Czech Republic political situation may mean that the policy should be more of the watch-and-wait variety.

The more pessimistic observer may also cite the continued recession in western Germany, as well as the possibility of the Russian president losing control either due to political action or ill health, as reasons for not committing to the region too soon.

Nevertheless one only has to look at the shareholding of some of the major cement manufacturers in the area to see that the West has already invaded in a big way. The UK-based group RMC owns the modern 2.6 million-mt Rudersdorf plant near Berlin. Lafarge acquired majority control of Poland's leading cement company Malogoszcz and recently concluded an agreement with the European Bank for Reconstruction and Development on the renovation of several building materials plants in central and eastern Europe.

As the Asian crisis continues, with major infrastructure projects being put on-hold or cancelled around the region, the future may not rest with Asian tigers but with the black bears of Eastern Europe.