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Post-pandemic production relocation: an opportunity for CEE countries

Post-pandemic production relocation: an opportunity for CEE countries

The COVID-19 crisis has triggered a discussion on increasing supply chain resilience to foreign supply shocks. Before the pandemic’s arrival in Europe, a lockdown of factories that temporarily suspended manufacturing in China put the supply of intermediary goods at risk. In order to limit such risks, supply chain managers are likely to diversify their sources of supply. While China is not expected to lose its position of global supplier, the aftermath of the pandemic could bring opportunities for Central and Eastern European (CEE) countries in this diversification process, with a higher share in global supply chains.

Foreign trade and inclusion in supply chains already increased over the previous years. The process was supported by the access to European Union membership by most CEE countries in 2004. Furthermore, the educated workforce, geographical proximity to Western Europe, low labour costs, relatively good infrastructure and stable business climate attracted various investments. In recent years, the CEE region has switched to an “assembly line” for Western European companies, with the intention to avoid remaining in the lower value chain of production. The region could be well positioned in the after-crisis review of global value chains and their potential relocation. However, competing with lower labour costs compared to Western Europe is not sufficient. The CEE region has already made progress in enhancing its productivity by a wider usage of automation and “robotization”. Nevertheless this process is only beginning and further investments are needed to be in a favourable spot.

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