VENTURE CAPITALIST TYPES TOUTED FOR EAST EUROPE

VENTURE CAPITALIST TYPES TOUTED FOR EAST EUROPE

Eastern Europe offers only limited opportunities for companies seeking quick profits, but investing there could be very worthwhile for those with a five- or 10-year horizon, a consultant who specializes in East European business said Tuesday.

"Those who want to get involved in Eastern Europe should have the mentality of a venture capitalist," said Jan Vanous, president of PlanEcon Inc.The depressed economies of Eastern Europe require skills similar to those employed by turnaround specialists in the United States, who assist companies seeking to reorganize under the protection of the federal bankruptcy laws, he said.

"There are quite a few operations in Eastern Europe that may be salvageable," Mr. Vanous told a seminar sponsored by the Conference Board, a business research organization.

Even when a factory makes products whose quality is inferior, a Western company could come in and make a profit by doing business with it, he said.

"The product may not be at a level where you could sell it to Bloomingdale's, but you could sell it to K mart, and maybe you could make more money that way."

He warned, however, that vertically integrated operations may be especially risky. Instead, companies should seek opportunities where they could obtain their supplies from outside sources.

The countries with the best chances of revitalizing their economies are East Germany, Czechoslovakia and Hungary, he said.

Mr. Vanous, whose firm is based in Washington, D.C., noted that drastic cutbacks in defense production in Eastern Europe will also create opportunities for Western investors.

"These plants can be had for practically nothing," he said. A factory that makes tanks can probably be converted to produce bulldozers.

John Hardt, an East European specialist at the Library of Congress, said there has been no word on how the Soviet Union and its former satellites plan to convert defense plants to production for commercial purposed.

He also warned that demilitarization will lead to more unemployment. Harald Malmgren, another Washington-based trade consultant, said that could in turn lead to higher crime.

Mr. Hardt suggested that companies may be better off waiting to invest in Eastern Europe because of all the uncertainties there. Mr. Vanous, however, said that depends on what kind of business a company wants to get into.

"In some cases, it's already too late," he said, citing West German

investments in East Germany's automobile industry. "In other cases, you will not miss the boat."

Geza Feketekuty, counselor to the U.S. trade representative, said companies seeking the big payoff should enter the market now, while those preferring to play it safe should wait.

But, he added, companies that do their homework and employ Americans with ethnic backgrounds in Eastern Europe, can go in now.

Mr. Feketekuty also indicated that East European countries that do not have most-favored-nation status will probably be receiving it very soon. That status entitles their exports to enter the United States at lower duty rates.

Both Mr. Malmgren and Mr. Hardt predicted that the United States will have to do a thorough reform of its export control laws if U.S. companies are to be competitive in Eastern Europe.

The basic philosophy in the European Community on export controls is similar to that initially espoused by the late President Dwight D. Eisenhower, Mr. Malmgren said: "If it's not a weapon, let them have it."