Abstract
After the collapse of communism, Central and Eastern Europe copied the Western economic model. Foreign, mostly West European capital inflow, $15-30 billion per annum, played an important role in economic transformation. It served the interests of Western Europe to create a "backyard" with cheap and well-trained labor force. Foreign investments were market and labor seeking, but also served complementary specialization and generated a dramatic structural and technological change in the transforming countries. The region became one of the fastest growing auto-making centers of the world.
High- and medium-tech industries took roots and even R&D centers established, although a high percentage of unskilled workers are employed in these industries. Low wage level played an important role in transformation and rapid growth. Some countries such as Hungary and Estonia spectacularly elevated, while less developed countries of the region are mostly subcontracting in labor intensive branches. It needs a longer time to strengthen and consolidate economic modernization.