For the eight countries in Central and Eastern Europe set to join the European Union on May 1 2004, this is a time of anticipation and preparation. Accession to the EU may mean an increase in foreign interest and investment, but it also means complying with new regulations and raising standards to meet high disclosure expectations.
For IR professionals in the region, this period leading up to EU membership is crucial. Now is the time to learn from IROs in other countries, benchmark with peers and discuss how the economic convergence with the West will affect the region’s companies and the investor relations profession.
The second annual IR Magazine Central and Eastern Europe Conference & Awards will be a forum for much-needed debate. The theme of the conference is ‘attracting international capital’ and it’s expected to attract over 200 IROs, fund managers, CEOs, stock exchange representatives and finance directors.
The conference is split into four sessions: the future of capital markets in Central and Eastern Europe; attracting foreign investment; managing international IR; and best practice IR. A range of panel discussions, debates, case studies and keynote speeches will provide insight into topics such as building trust with the international investment community, IR tools and technologies, investment strategies of the region’s large pension funds, the future of the domestic stock exchanges, investor guidance in a bear market, and international standards of minority shareholder rights.
One of the event’s expert speakers will be George Fenyo, director of IR at Hungary’s OTP Bank and winner of the best IRO award at our first Central and Eastern Europe awards event in 2002. ‘IR in Central and Eastern Europe is improving as a result of stronger investment, the coming EU entrance, and effort on the part of the companies,’ remarks Fenyo. He does, however, voice concern over EU accession: ‘Companies must find a balance between transparency and trade secrets in order to retain their position as market leaders. Also, the local public is not fully prepared for issues which are everyday issues in the West like management compensation and risk responsibility.’
Fenyo also comments that regulators and stock exchanges are muddying the waters: ‘They’re trying to converge to western standards but in some cases have created more complicated disclosure requirements than are warranted.’ Further contentious issues, according to Fenyo, are the increased cost of being a public company in the EU and the demand for corporate social responsibility information.
This award-winning IRO is also critical of the recent accounting scandals at many western companies. ‘If it is hard to have corporate governance accepted in the US and the EU, you can imagine how difficult it is in countries that have had 50 years of undemocratic rule,’ he points out. ‘The negative examples in the West do not encourage management in Central and Eastern Europe to believe in the western system of corporate governance.’
Ewa Piwowar, head of IR at BPH PBK in Poland, will take part in our international IR roundtable. She too comments on the challenges ahead: ‘The learning curve for IROs in the region has been extremely steep. Common corporate governance guidelines, securities laws and the consolidation of local stock exchanges will inevitably require further improvement in IR, particularly for cross-border and global companies.’
However, Piwowar hopes events such as this conference will raise awareness: ‘It will provide benchmarking tools and a forum for exchanging ideas,’ she says. ‘Hopefully this will contribute to greater confidence in, and better understanding of, the Central and Eastern European region by more mature market economies.’
Such confidence is not unfounded. A study by the Center for Economic Policy Research estimates that accession to the EU will bring an economic gain of E23 bn ($26.5 bn) to the region. For IROs dealing with this period of intense development, the race for capital is well underway.
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