BusinessWeek: January 18, 1993

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 Economic Trends

YANKEES GO EAST--ON A SCALE THAT'S `STARTLING'

Despite continuing economic turmoil in the former Soviet bloc, U.S. companies are apparently taking the long view and plunging ahead with direct investment there. According to Mark Dixon, editor of New York-based East European Investment Magazine, which keeps tabs on investment in 28 countries, the number of U.S. deals concluded in the year ended in September jumped more than 100%, and their value soared sixfold.

As a result, the U.S. pushed Germany aside as the largest investor in the region, racking up 219 acquisitions, joint ventures, and startups valued at nearly $8 billion. That represents 30% of all foreign-investment deals monitored and 29% of the $27.9 billion value of such transactions. "The scale of U.S. involvement is startling," says Dixon, "in light of Eastern Europe's greater proximity to Western European countries and the economic and political ties it is forming with the European Community."

Indeed, aside from Italy, which invested $7.6 billion, the value of U.S. direct investment was more than double that of any other country. And the number of U.S. transactions was greater than those of Britain, Germany, and Italy combined--not to mention Japan, which posted only 22 deals in the region, worth a minuscule $8 million.

Although larger companies accounted for the lion's share of U.S. investment, the biggest difference between U.S. investors and their Western European rivals is that 70% of the U.S. deals were concluded by small and midsize companies. "Smaller American companies obviously feel that the huge potential rewards justify the risks," says Dixon. "Eastern Europe may be one of the few places in the world where a company investing only a few million dollars today could become a market leader in 10 years' time."

Even more than capital, he says, east European countries desperately need energy, managerial skills, and entrepreneurial zeal--qualities that "small American companies are eager to supply."

GENE KORETZ
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