There’s life in Transylvania

With big multinationals chasing low-cost labour all over new EU countries Romania and Bulgaria, one area in particular is set to boom: Transylvania. This spring, Nokia announced it would build a €60m research plant in Cluj, the region’s capital, employing 500 skilled local engineers. And with a government-designed industrial park offering tax-free space, Danish pharmaceutical company Ferrosan and others have also put down roots in Cluj.

What’s the attraction? Cluj is one of the country’s leading industrial and academic centres, with a central European sensibility; it has excellent infrastructure, and air, rail and road links to the rest of Europe. It has also managed to retain a sizeable percentage of its labour force.

“Companies want to go where it makes sense in terms of workforce,” says Jon Levy, an analyst at Eurasia Group, the international business and political risk consultancy. And companies are moving to Cluj as much for the quality of labour as for its price, he adds. “These aren’t people who are going to punch a keyboard for €2 an hour,” says Levy. “It’s the outsourcing of innovation.”

Monocle view
Business might be flourishing in Cluj but Romania needs to raise its game: investing in roads and rail is not enough. Bucharest needs to define its brand and deal with corruption.

Small but powerful EU state

To the limited extent that Malta has any sort of reputation, it’s as a sleepy sunbed for tourists too old for Greece’s islands and too posh for Spain’s beaches. But now that received wisdom is going to need rethinking. Malta, which joined the EU in 2004, hopes and expects that its adoption of the euro on 1 January 2008 will be the final step necessary for its arrival as a major economic player, reflecting its key geographical position between Europe, the Middle East and Africa.

“We’ve moved up the value scale,” says Anne McKenna of Malta Enterprise, the Maltese government agency that aims to attract investment into the country. “We used to have a strong textile sector, which became uncompetitive, so we now offer operations where there aren’t economies of scale, but there is high added value.”

Malta’s fastest-growing sector is pharmaceutical manufacture, but it is also making startling strides in such areas as aircraft maintenance (Lufthansa Technik is to begin servicing its wide-body aircraft in Malta), electronics and IT (Smart City, a fledgling sister to Dubai’s Internet City, hopes to welcome its first tenants in July 2008).

Malta’s location is a curse as well as a blessing, because its proximity to Africa also puts it on the front line of the EU’s battle to control illegal immigration. Its advantages, however – an English-speaking population, a traditionally strong work ethic, a tax system geared to tempt foreigners – could yet see it become the Taiwan of the Mediterranean.

Monocle view
Malta is also one of the countries that President Sarkozy would like to see join his proposed Mediterranean Union. Although some view it as a creation designed to placate the Turks over French intransigence regarding their bid to join the EU, there are obvious benefits for trading in the region. It would certainly help make Malta a more powerful political player.

A mecca for retail tourism

Haparanda is a town in northern Sweden, situated where the Gulf of Bothnia ends and the Swedish and Finnish borders meet. It has 10,300 inhabitants, one railway station and one Ikea, and it’s the fastest-growing region in Sweden. It came as a surprise to many when Haparanda emerged at No. 1 in Swedish business magazine Affärsvärlden’s annual ranking, measured by wage growth.

For residents, however, the 10.8 per cent increase was no surprise. Growth curves started pointing upwards in 2006 when Ikea opened its 16th Swedish store in Haparanda. Why there? The town has a catchment area of a million people within a range of 500km (including parts of Norway, Finland and Russia). Haparanda now sees a bright future in shopping tourism (sports store Stadium opened recently and electricals group Elgiganten will open in 2008). Private investment is flowing in and the construction industry booming. “We are creating a shopping area of 150,000 sq m next to highway E4 and the border. Within five years, we’ll have 1,500 new inhabitants – that’s growth of about 15 per cent,” says mayor Christina Lugnet.

Monocle view
The Gulf of Bothnia is an interesting area to monitor. Along with Åland (see Monocle issue 6), the city of Oulu is also having a major overhaul.

The biofuel boom land

Land is cheap in Bahia, a sprawling state in Brazil’s long-neglected northeast. So cheap, in fact, it is spurring a rash of foreign investment by farmers from the US, Europe and Japan who are eager to satisfy the surging demand for biodiesel fuel by converting millions of acres of barren scrubland into soy and sugar cane fields.

The effect on the local economy has been tremendous. It has grown by an average of 4.5 per cent over the past five years, and once-quiet towns are booming. The government is planning major infrastructure improvements in Bahia, including an expansion of the airport in the state capital, Salvador, and the building of a new airport in Ilhéus in the south.

Brazilian construction companies are also organising a mission to the UAE to attract investment for projects. Some of Bahia’s growth industries may have yet to be realised. Tropical tree plantations are appearing in western Bahia to offer a legitimate source of hardwoods for the furniture and flooring market. Diamond exploration has also begun in the central part of the state.

Monocle view
Brazil is the global leader in biofuels and is set to enjoy something of a gold rush over the coming years if oil prices remain high and demand for its products soars. But what will be the impact on food production?

Oiling the economy’s cogs

Until the 1990s Dung Quat was an unremarkable bay midway between Hanoi and Ho Chi Minh City in Vietnam’s poverty-stricken central region. Planners decided they could fix the region by introducing big industry, starting with Vietnam’s first oil refinery.

Total, LG and Zarubezhneft liked the tax breaks but not Dung Quat and they quit the project, but state-owned PetroVietnam stepped in and has spent €1.8bn on the refinery, which could start producing petrol as soon as 2009 (this route will also save the country a lot of money).

“It speaks of strong commitment to spreading the benefits of development, avoiding inequalities to the highest degree, even at some cost to pure economic returns,” says Dominic Scriven, director of Dragon Capital in Ho Chi Minh. “It is a flagship for the economically dynamic and internationally ambitious Vietnam,” says Andrew Symon, managing director of Menas Asia.

Meanwhile Dung Quat is coming together. Engineers are expanding the port and airport, and investors are moving in. Vinashin’s new shipyards are designed to build 100,000-tonne vessels. A €1.3bn Taiwanese steel plant broke ground in October – Doosan is building a €182m industrial equipment factory. Nguyen Xuan Hue, Quang Ngai provincial people’s committee chairman, counts 125 projects worth €5.6bn. More could follow in 2008 as Vietnam’s star soars.

Monocle view
Vietnam is set to benefit from large-scale regional investment – the Japanese, Koreans and Taiwanese all have ambitious projects in the country. And as Vietnam booms, Laos and Cambodia will follow.