'News is not all bad' in old Eastern Bloc Tenneco-Romania deal is 'Exhibit A' at world parley here

March 05, 1996|By Jay Hancock | Jay Hancock,SUN STAFF

Romania has 30 percent inflation, a 60 percent top income-tax rate, an economy founded on profitless, state-owned factories and packs of wild dogs running through its capital.

Tenneco Inc. thinks it's a great place to do business.

Today, Houston-based Tenneco will announce that it has signed a $50 million agreement to build roads, construct a sawmill and eventually run an export company in the formerly Communist, Eastern European country, company officials said.

The deal is "Exhibit A" for the third day of the West-East Conference of Ministers of Economy, Industry and Trade, taking place in Baltimore. The intended lesson: Despite huge problems, Eastern Europe offers expanding economies, growing incomes and able workers.

"The news is not all bad," in the former Eastern Bloc, said Franklin J. Vargo, deputy assistant secretary for Europe for the U.S. Department of Commerce. "Trade is beginning to grow. Inflation is down. In most of these countries, you're finding half or more of the GDP is in domestic hands now."

Scores of trade ministers and business people from more than 20 countries are in Baltimore for the fourth annual "Muenster" meeting to promote trade between Eastern Europe and more-developed nations.

Much of the meeting's emphasis is on direct investment -- getting Western companies to build factories and open offices behind the former Iron Curtain. But as international trade commands increased attention in the U.S. presidential campaign, Clinton administration officials are eager to point out that it works the other way, too. Stronger economies in Eastern Europe could lead to added purchases from the United States.

The conference helps Americans "to really look at emerging markets around the world," said Ronald H. Brown, U.S. secretary of Commerce. "We know there is a simple equation, and that is, American exports equal American jobs. As we at- tempt to deal with the problem of wage stagnation, one of the ways we can deal with that is to focus on exports."

This is the fourth in a series of international meetings, first held in Muenster, Germany, and then every 15 months or so, that are intended to grease the skids of commerce between East and West.

The initial focus was governmental; a few public minions and ministers gathered to streamline rules, unify laws and otherwise focus on policy.

But the participation from private business people has steadily grown, and the Baltimore session seems as much of a networking and deal-making confab as a political process. Nearly 100 business people from 21 countries are trading ideas and giving government officials unvarnished suggestions about how to improve.

Perhaps some Maryland business deals could result, several participants said.

"Here we have an opportunity to meet with a lot of American companies," said Mircea Cosea, deputy prime minister of Romania. "Baltimore is a very well known city in Romania in terms of industry, the harbor, business life."

News reporters aren't allowed in the main sessions. "We really want to have some straightforward dialog," Mr. Brown said.

The consensus among U.S. officials and business people is that, despite progress, improvement in Eastern Europe is still badly needed.

The difficulties have to do with law enforcement, private property rights, taxes and contract enforcement. In some countries, a foreign company can't own land, U.S. trade officials said.

In others, "tax police" can raid your business without notice, and sometimes various taxes add up to more than 100 percent of your profits. High income taxes make it difficult to recruit managers.

As a region, Eastern Europe has attracted $28 billion in cumulative Western investment since the Iron Curtain fell in the late 1980s. That's far from the $200 billion goal that was set for the year 2000 at an earlier Muenster meeting. Tenneco intends to add to that with the $30 million sawmill-and-road project and another $20 million in working capital. The project is supposed to secure access to a remote section of Romania's Southwest, log it and mill the wood into lumber and furniture parts.

"Tenneco has been actively looking at taking advantage of these growing markets," said Dana Mead, chairman and chief executive of the Houston-based conglomerate. The Baltimore meeting "is an opportunity not only to meet with these other business people but also to meet with the ministers, which is so critical."

American participants said they're encouraged by progress in the former Eastern Bloc.

After falling by about 25 percent in the four years ending in 1993, the region's gross domestic product grew by 3 percent in 1994 and was expected to grow even faster last year and this year.

"There's a much more positive approach to doing these things than there was 18 months ago," Mr. Mead said. "The whole mind set is much different right now."

Pub Date: 3/05/96

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