Central and Eastern Europe (CEE) remains a leading 'low-cost countries' (LCC) region for Western European markets, according to a new report from The Boston Consulting Group.

This, the report says, is particularly true for the automotive industry. Over 80% of all motor vehicles and trailers imported into Western Europe from LCC come from Poland, Hungary, the Czech Republic and Slovakia. Although China has an unbeatable cost advantage, it is not the leading import country for all industries.

According to the report, sourcing from CEE is economically viable for certain products. While leather, TVs and luxury clothing products are sourced predominantly from China due to their high cargo value in relation to size, steel is sourced mainly from Poland, primarily because of its relatively low cargo value per cubic meter. While 80% of leather and luxury clothes sourced from LCC in 2003 came from China, about 80% of automotive and steel products were sourced from CEE.

The also report dismisses the myth that the CEE region may soon become unattractive with the disappearance of the existing wage differences between CEE and Western Europe. Boston Consulting claims that this process will take several decades because of slow economic growth and lack of radical reforms in the region.

Lower wages, however, do not translate into lower productivity and poorer quality of manufacturing. A recent survey of international business executives conducted by the IMD business school, Switzerland, has revealed that Poland, Hungary, the Czech Republic, Slovakia and Slovenia have better skilled labour than the UK, Italy and China.

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