East bloc trade hung up on basic services Lack of hotels, phones, faxes stymies Westerners

September 22, 1991|By Ian Johnson | Ian Johnson,Special to The Sun

BERLIN -- Try making a business phone call in Hungary and you're likely to wait 20 seconds for a dial tone. Once you start dialing, you may get a busy signal after only three or four digits.

And that's when you're lucky enough to find a phone -- there are only 7.5 phone hookups per 100 Hungarians, a recent survey shows.

For Westerners used to closing deals with a quick business trip, a few phone calls or a fax, the daily hassles faced in Eastern Europe can be maddening.

Just ask British advertising man Alan Asbridge. After 15 years of doing business in Eastern Europe, he has never been more optimistic -- or frustrated.

"There are opportunities there that did not exist a few years ago, but everything is extremely slow. In many ways, it's slower now than ever," said Mr. Asbridge, whose Cambridge-based advertising firm was active in the East long before the collapse of communism.

Such problems affect all Westerners trying to do business is Eastern Europe, but they are especially troublesome for U.S. companies seeking long-distance trade. Last year, in fact, the U.S. share of the Eastern bloc market slipped.

The daily hassles of doing business in Eastern Europe can be traced to the region's overburdened infrastructure, which was designed to handle the few business people who made the trek East in the past. Now that the region is abandoning its centralized economies, the number of hotels, fax lines, phones and planes cannot keep up.

Mr. Asbridge and most other people familiar with Central and Eastern Europe agree that the problems are largely short-term. With almost all the former Communist countries making investments in telecommunications, roads, rail and hotels, the region could have a top-notch infrastructure within five years.

There is danger in waiting until business conditions are comfortable, however. The choice deals might be snapped up by then, meaning that people serious about doing business in the East feel they have to move now.

"You have to have a long-term perspective," said Bernd von Arnim, managing director of Deutsche Bank's operations in northeastern Germany.

Deutsche Bank and many other Western European businesses have established offices in the East, but U.S. businesses are losing ground, according to statistics compiled by the Institute for Economic Research, based in Vienna, Austria.

U.S. and Japanese businesses saw their share of the East bloc market drop by 17 percent and 24 percent respectively in 1990, while Austria, Italy and Germany posted gains of 19 percent, 13 percent and 5 percent. Germany, which has 44 percent of Western trade with the East, dominates the region.

Among the deterrents to U.S. investment and trade is Eastern Europe's poor telecommunications, Mr. von Arnim said.

With the exception of the former East Germany, which is acquiring a modern telephone system, thanks to West German investment, dialing and faxing in the region can be extremely frustrating.

A recent World Bank study on telecommunications problems in Eastern Europe, for example, concluded that "no further economic development is conceivable without a radical

improvement of the infrastructure in the field of telecommunications."

In its analysis of Poland, Czechoslovakia, Hungary, Bulgaria and Romania, the World Bank singled out the 1980s as the period when the region fell behind.

While the West was acquiring digital electronic systems, the East bloc nations were hardly able to upgrade their traditional systems, let alone invest in new technology.

The five Eastern European countries need to invest a total of about $25 billion to upgrade their telecommunications system, but they have invested only about 10 percent of that, making a quick improvement unlikely, according to the institute.

Hotels are another area that can be frustrating. A room in any Eastern capital can run $250, which would buy top quality in the West but obtains only second-rate service and comfort in the East.

"It's simply supply and demand. The comfort is poor, but there are so few rooms that one simply has to pay," Mr. Asbridge said.

Air travel is another problem. Because most airports are small and few airlines offer service, it still is not easy to hop on a plane and fly in.

Almost all trans-Atlantic flights have to be routed through a Western capital. Mr. Asbridge said that the preferred route for his North American colleagues is to fly directly to London or Paris, spend the night and then proceed the next day.

Even then, flights have to be booked carefully because not all Western airlines have daily flights and Eastern carriers still tend to be second-rate.

Still, Mr. Asbridge isn't deterred by the endless hassles.

"There's simply not the choice that one is used to, and you can't get as much done in one day," he said. "Having said that, however, there is business there for people willing to put up with a bit less sophistication."

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