Rzeszów Rising

Though these preconceptions are not totally unfounded, it would be a mistake to ignore the region's tremendous progress in recent years. A great deal of work still needs to be done to make the it truly prosperous, but there is plenty of evidence that the Podkarpacie region is growing in investment attractiveness

Podkarpacie is the second-fastest developing region in Poland after Mazowsze, according to the Gdańsk Institute for Market Economics' (IBnGR) data from 2006. It is also a leader in terms of absorption of EU funds, as noted by the Polish Information and Foreign Investment Agency (PAIiIZ). The region's 50,000 students, currently studying at 18 institutions of higher education, contribute to the standing of Podkarpacie's capital, Rzeszów, as the Polish city with the second-highest percentage of residents (21 percent) with a tertiary education.

The region is home to leading Polish companies like IT firm Asseco and white-goods producer Zelmer, and has attracted investments by such international giants as Sikorsky Aircraft and Pratt & Whitney. Podkarpacie's allure is enhanced by two special economic zones (SEZs) - Euro-Park Mielec and Euro-Park Wisłosan. Steps are also being taken to nurture the R&D and alternative-energy sectors in the region - in April, Rzeszów was recognized by Velux, a manufacturer of windows and skylights, as a leader in the implementation of solar energy solutions in public buildings.

Economic woes

The situation in Podkarpacie isn't all sunshine and roses, however. Located in Poland's less affluent eastern territories, the region suffers from a range of socio-economic problems. In terms of infrastructure, it is only tenuously connected the rest of the country. Its unemployment rate, according to the most recent data from the Central Statistical Office (GUS), stands at around 16 percent, higher than the national average of 13.4 percent. Unemployment in a few rural regions reaches as high as 24.9 percent and some communities are handicapped by severe poverty and malnutrition.

This week PAIiIZ is launching the first stage of its strategy for the development and promotion of the regions of eastern Poland, in conjunction with the Ministry of Economy and the Prime Minister's Office. As noted by PAIiIZ's vice president, Grażyna Sićko, the first event, a conference in Warsaw presenting investment offers in these regions, will begin on May 17. This will be followed by a junket for representatives from local governments, SEZs and other organizations to the US city of Chicago, where they will meet with local businesspeople. A third event will be a congress of foreign companies whose owners are of Polish decent to be held in Warsaw on June 16-18.

PAIiIZ's Sićko stresses that, according to the general strategy for regional development, separate regions do not compete with one another for investors, but instead specialize and strive for recognition in certain areas. "As for Podkarpacie, the key industry to be developed and promoted is of course aviation," she says.

Flying high

The aviation industry appears to be a natural choice for the Podkarpacie region, where the tradition of aerospace manufacturing dates back to 1930. Grzegorz Sobczak, the editor-in-chief of Skrzydlata Polska, Poland's leading aviation magazine, stresses that the region was particularly powerful in the fifties, when it was a leading producer of Russian MIG 15 fighters and An-2 civil aircraft.

Today, 85 percent of Poland's aviation industry is situated there, according to Sićko. The biggest centers are located in Mielec and Rzeszów, where former state-owned companies were taken over by Sikorsky Aircraft and Pratt & Whitney (P&W), respectively. Now, instead of Russian MIGs, American F-16 fighter engines are being produced in the region, at P&W's Rzeszów plant. In addition, the region boasts a University of Technology which educates engineers as well as aircraft pilots.

At the heart of the aviation industry lies Aviation Valley (Dolina Lotnicza), an association of international and domestic firms and institutions, mainly from the aviation industry. "We are perceived as the only well-developed cluster in Poland, and we are also the only aviation cluster in the CEE region," says Andrzej Rybka, the director of the association. He stresses strong recognizability of the cluster abroad, as it has had coverage by such renowned titles as the Financial Times, or The Economist, as well as in top aviation titles, including Flight International.

Last year in September, Aviation Valley organized a conference in which some of the best known aircraft institutions were involved, offering a great chance for local firms to make important contacts. "In our organization personal contacts are of key importance," says Rybka.

High-tech hopes

Skrzydlata Polska's Sobczak stresses that foreign investors are most valuable when they invest in high-tech, rather than only production. Andrzej Rybka concurs. "We have reached a world-class level of production," he says, "now the time has come for the development of R&D."

In fact, a center for innovation and technology transfer, as well as for the stimulation of entrepreneurship, is being developed in the Podkarpacie region. By the end of this year, the Podkarpackie Science-Technology Park (PPNT) should have land available for investors close to Jasionka airport.

"In the first stage we will make 120 ha of the park available [for investment]," says Andrzej Szortyka, director of the management center of the PPNT department at the Rzeszów Regional Development Agency. "In total there will be 300 ha," he says, adding that although no contracts have been signed yet, negotiations are in full swing and interest in the park is enormous.

In March, the first part of the PPNT project - a program for scientists, graduates and entrepreneurs willing to test and develop their business models - was launched. "We have started a program that teaches young people to set up their own companies," says Szortyka.

Not just planes

"A kilogram of a plane is worth more than a kilogram of gold," claims Szortyka. Yet, aviation is not the only only industry developing in the region.

Bourse-listed firms such as chemicals-producer Magnezyty Ropczyce and Zelmer contribute enormously to the region's prestige. PPNT's Szortyka also notes the alternative-energy and IT industries as important in the region. "One of the five laboratories to be created within the framework of the [PPNT] program will focus on alternative-energy sources," he points out.

As for IT, according to Adam Góral, CEO of Asseco, Podkarpacie has always played an important role for his company. "We started our activity in Rzeszów and had our first successes there, that's why we want to share our success with Podkarpacie. We would like to create a center for IT specialists so that they do not have to search for work abroad," says Góral. This reflects the importance that R&D has taken on for the region.

"We are becoming a sort of a local Bangalore," claims Szortyka.

Becoming a Bangalore

Becoming a "Bangalore" might be an overly ambitious target at the moment, as the region still has a lot of work ahead. One of the most important issues for investors is having the appropriate infrastructure, both in terms of transportation and roads. This year will see the opening of a direct flight route between the US and Jasionka airport. Moreover, there are plans to turn the present A4 road from Wrocław to Ukraine into a highway and build another highway to the north. Another, rather remote plan is the creation of a direct train connection with Warsaw.

These investments may be sped up considerably after the recent choice of Poland and Ukraine as the hosts of Euro 2012. Adam Żołnowski, a senior manager with PricewaterhouseCoopers, notes that regions such as Podkarpacie will benefit even if they do not host any games.

Norbert Tomkiewicz, the director of the department of regional development at the Marshal's Office of Podkarpacie, agrees. "If Podkarpacie makes the right decisions and promotes itself before Euro 2012, it has a chance to attract tourists," he says.

Krzysztof Staszewski, the head of Pro Carpathia, an NGO for the promotion and development of the Podkarpacie region, is more cautious. He notes that so far the Podkarpacie region has had rather poor lobbying in national institutions such as Parliament. Staszewski points out the potential for promoting local food and the natural environment, adding that his organization has been involved in several such programs.

One final issue of critical importance is the role of local governments. "The local government of Podkarpacie is very active and well organized," says PAIiIZ's Sićko, pointing to its track record of very effective absorption of EU funds.

Both Żołnowski and Sićko believe that the eastern part of Poland will develop as part of a natural process, as the western part becomes saturated with investments and the workforce becomes insufficient. Tomkiewicz agrees to a point, but thinks the region needs to work hard. "This is our [opportunity]," says Tomkiewicz. "We need to make well considered decisions and investments in the right projects."