Free Essays

Manufacturing Industry

Ten new members joined the European Union as from 2004; these states were Latvia, Luthiana, Slovakia, Slovenia, Cyprus, Poland, Czeck Republic, Estonia and Malta. These Central Europe countries which were mostly inclined towards communism have been opening their economies prior to their joining the European Union. These economies have had tremendous changes within their systems transforming their economy into market economies together with becoming an important part of the world economy.

Their full membership in the European Union will lead to their integration with the other nations in the Europe and this will contribute greatly towards development and expansion of the European industrial structure. (Abramowitz, M 1986 384) From the economic point of view the central Europe entry into the European Union is going to be beneficial as it will further enhance competitiveness as far as the market is concerned.

Market has started to enlarge and the cost of production is going down as there are cheap raw materials especially from the new states whose industrial development was low compared to that in the western nations which had already joined the Union. Roger, W and Pichelman, K 2003 119) These former communist nation manufacturing sectors were limited as at what they could have produced. With the fall of the communism a reform process was started in most of these countries. This reform process was mainly geared towards changing the political and economical systems of the central European states.

In Czech Republic in particular Manufacturing sector underwent reforms through the system of privatization and voucher system. Ownership was transferred to different levels . The separation of the Czechoslovakia in to two states led to the prosperity of the Czech Republic in comparison of the other former communist nations. (OECD 2000 36) In the most of the countries industrial concentration was mainly geographical, where industries were located in certain areas due to various factors.

Such factors could be availability of raw materials or sources of energy. Industries tended to be located in areas where the cost of production could be kept as low as possible. Another characteristic of industries in the central Europe nation was the strong focusing on the heavy sector, they producing heavy duty goods while at the same time concentrating on the production of huge capacities. Industries were mainly owned and controlled by the state; it has the sole role to dictate what has to be produced in a particular area.

This discouraged competition in the industry and in some instances monopoly was the main dominant factor in the economy denying consumers a choice as far as products were concerned. ( Landesmann, H 2000 97) (Commission of the European Communities 2003) Technologies that were used to produce goods in these countries were not directed towards competition. They were outdated and could not compete fairly with other industries in the western nations. Production was mainly towards satisfaction of the local demand with the products being of inferior quality since there was generally no competition with the same industry.

Production was usually relied on the cheap energy resources which in most cases were not reliable. The cost of production was basically low since the industries relied on subsided energy, transport an even labor. This was due to the fact that most of these manufacturing facilities were controlled by the government. After the fall of the communism a liberalization process was part of the reforms that was undertaken by these states. This had a heavy too on the manufacturing sector as they had all through depended on the government as far as production was concerned through its control.

Those countries that opted to privatize their industrial sector chose the roughest path but in the long term it yielded some fruits as they were able to overcome some of the challenges and emerged successful. Those sectors which were not attractive to the investors had to restructured first before the privatization process, such industries had heavily been subsidized by the government and were located in areas which were not attractive as far as investment was concerned.

(Havlick, P 2003 34) Through integration of these former communist nations in the European Union their industrial sector have improved tremendously, this is through their ability to access a wider market and also the element of competition which was not common in the former state. They have managed to increase export market share in the European Union market at a time when the demand for the European products is at the lowest.

These countries have been able to attract a substantial amount of foreign direct investment therefore being in a position to increase their share in the European Union market and raised their competitive position too (Smith, C 2007 56) (Worthington, I,2006 287) The increasing industrial production which is mainly propelled by the expansion of the exports has been a major contributor to the growth of the former communism central Europe countries. Though there has been a slow down at some point these nation have transformed the industrial structure of the European Union.

With the accession of the ten states the market share has increased but on the other hand competition has been steeped up. Several industries are now competing for the same market since different countries have now been given a platform to trade free. What this means is that the survival of these industries will depend on their flexibility and ability to adapt to the dynamism of the market. For any sector to remain relevant to the market they have to produce goods which are competitive and at the same time relevant to the European market.

Cost of production has been pushed downwards due to availability of the key resources needed for the industrial sector. Subsidies by the respective government have been cut down due to the level of competition and privatization which has been undertaken especially by the former Communist states. (Petrako, G and Morgenroth, E 2008 78) The accession of the ten states to full integration within the European Union is good for the market; consumers have been spoilt for the choice. They have a variety of the product to choose from while at the same time enjoying high products in the market.

This means that the industrial sector will be structured in a way that only those who meet the standard set by the market will survive. This will eventually lead to production of high quality goods. Industries have to keep up with the pace to avoid being made irrelevant to the market. Increasing the level of competitiveness also means good for the producing country since it will be the preferred destination for investment. (European Commission 2007) European Union will continue to dominate the market as far as imports and exports are concerned.

It will be self reliant in the long term future due to the diversity nature presented by the admission of the several central Europe countries which have brought different resources which will continue to be shared among the member states. This can only mean that the bloc will remain influential in the global economy. The competitive nature presented by the integration will ensure quality production while at the same time encourage innovative mechanism which will contribute positively towards further industrial development in the region.


Abramowitz, M (1986) Catching Up, Journal of Economic History, Vol 46 Havlick, P (2003) Restructuring of Manufacturing Industry in CEEC, Prague, Economic Paper No. 1 Landesmann, H (2000) Structural Change in the transition Economies, UNEC. OECD (2000) Economic Outlook No. 67, Paris, OECD Smith, C (2007) International Trade and Globalization, Stockfield, Anforme Petrako, G and Morgenroth, E (2008). The Impact of European Integration on Regional Change and Cohesion, Routledge Roger, W and Pichelman, K (2003) The EU growth Strategy, Review of the international Economics