Macedonia, Moldova, Bulgaria, Ukraine and Czech Republic are emerging locations in Central and Eastern Europe for engineering activities

Increased competition and rising pressure to cut costs are forcing companies to offshore key engineering activities to low cost locations such as China, Mexico, India and Eastern Europe. Previously, companies only offshored less complex, labor intensive and lower value added functions. However, current trends indicate a changing perception of offshoring to achieve operational excellence. Now activities such as designing, prototype building, value analysis and testing are also offshored to emerging locations.

Talent Neuron study determines emerging engineering hubs in Central and Eastern Europe such as Macedonia, Moldova, Bulgaria, Ukraine and Czech Republic offer greater competitive advantage and are becoming the next frontiers in offshoring. Skopje (Macedonia), Ostrava (Czech Republic), Sofia (Bulgaria), Plovdiv (Bulgaria), Chisinau (Moldova), Kharkiv (Ukraine) and Lviv (Ukraine) are the emerging engineering hubs.

Among the five countries Moldova has witnessed a GDP growth of 4.2 percent in the first two quarters of 2013, owing to an increase in manufacturing output by 9 percent. The GDP of Moldova is expected to grow by 3 percent in 2013. Similarly Bulgaria and Macedonia are expected to witness positive GDP growth. The graph below indicates the GDP growth among these countries.

Source: World Bank Database

The chart below indicates the major industries in manufacturing sector present in these countries:

Bulgaria Czech Republic Macedonia Moldova Ukraine
Metallurgy/ Metal Processing Automotive Food Processing Food Processing Metallurgy/ Metal Processing
Food Processing Electrical& Electronics Engineering Textile and Clothing Energy Engineering and Machine Building
Engineering and Machine Building Metallurgy/ Metal Processing Automotive Components Metallurgy/ Metal Processing Food Processing

Source: Talent Neuron Research

Indbus, KGL Sistems, William Hughes, Introscop, Kharkov Bearing Plant, Kharkov State Aircraft Manufacturing Company, UkrOboronProm, Dunarit, Dräxlmaier and Gebauer & Griller are some of the companies operating in these countries.

Talent Neuron Skills Framework indicates that Ukraine has the largest pool of talent; Kharkiv with 27,600 engineers followed by Lviv and Odessa with 19,200 and 13,750 engineers respectively. The graph below indicates the core engineering talent available across locations.

Note: Core Engineering domain includes functions such as Electrical/Electronic Engineering, Industrial Engineering, Manufacturing Engineering, Mechanical Engineering, Quality/Reliability and Certification, Stress Engineering

Source: Talent Neuron Skills framework

Among the core engineering functions industrial engineering accounts for highest engineering talent followed by manufacturing, mechanical and electrical/electronic engineering. The chart below shows the breakup of the core engineering talent across functions and locations:

Skopje (Macedonia) Ostrava (Czech Republic) Sofia (Bulgaria) Plovdiv (Bulgaria) Chisinau (Moldova) Kharkiv (Ukraine) Lviv (Ukraine)
Core Engineering 6,200 5,550 16,500 4,500 6,750 27,600 19,200
Electrical/Electronic Engineering 1,250 1,650 3,500 950 1,050 3,850 4,050
Industrial Engineering 1,700 900 3,100 850 1,550 7,750 4,400
Manufacturing Engineering 850 950 2,750 750 2,050 6,950 4,250
Mechanical Engineering 1,500 1,150 3,850 1,050 900 4,950 3,850
Others 400 350 900 250 450 1,650 950
Quality/Reliability and Certification 400 200 1,850 500 400 1,650 1,150
Stress Engineering 100 350 550 150 350 800 550

Source: Talent Neuron Skills Framework

Talent Neuron Cost index indicates that Macedonian and Moldovan locations offer a cost advantage of 60 to 63 percent compared to Ukraine and Czech Republic; whereas Bulgaria offers a cost advantage of about 47 percent compared to Ukraine and Czech Republic. The median salary for a core engineer in Ukraine is $23,750; $8,700 in Macedonia; $9,000  in Moldova and $12,000 in Bulgaria.

Note: Salary in thousands per FTE with 3-7 years experience in Core engineering domain

Source: Talent Neuron Cost Index

Talent Neuron risk assessment indicates Czech Republic and Bulgaria have low risk of doing business among the five emerging locations.

Government Incentives:

  • The Moldovan government offers a reduction in corporate tax for up to five years for companies investing over USD 250,000.
  • Macedonia offers incentives for companies investing in the Technological–Industrial Development Zones (TIDZs), which are centers of manufacturing activities. Investors are exempted from corporate income tax for the first 10 years. In addition companies are also exempted from payment of value added tax and customs duties for goods, raw materials, equipment and machines.
  • Macedonia government also offers an incentive of up to Euro 500,000 towards building costs based on the investment value and number of jobs created.
  • Czech Republic offers a cash grant of five percent on capital investment accounting to about USD 75 million in case of manufacturing projects. The government also offers a cash grant of 25 percent on the total expenditures of training and retraining people in selected regions.

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Image courtesy of [Evgeni Dinev] /

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