The great divide
Although it's been nearly a century since Poland was reconstituted following the partitions, economic divisions between the country's regions remain. Numerous nationwide initiatives to create some sort of economic homogeneity have failed, leaving some parts much more attractive to foreign investment than others. Now, the divide looks to be deepening, as Poland's east languishes as an unattractive backwater and the EU's poorest region, while Lower Silesia hopes to cash in on yet more foreign investment with the help of a publicity campaign and a focus on industry specialization.
The Gdańsk Institute for Market Economics (IBnGR) recently divided Poland's voivodships into five categories of investment attractiveness, using labor costs, human capital, local authority involvement and the availability of transportation as the most important criteria. While Lower Silesia, Mazowieckie, Małopolskie, and Silesia make up the top echelon of the most attractive voivodships, Poland's 'Eastern Wall' voivodships - Lubelskie, Podkarpackie, Podlaskie, Świętokrzyskie, and Warmińsko-Mazurskie - comprise the group of least-attractive regions. The Polish Information and Foreign Investment Agency (PAIiIZ) estimates that in 2004, these underdeveloped regions attracted only 300 of the 3,128 total foreign direct investments (FDI) throughout the country.
Poor performance
The low quality of technical infrastructure is the most frequent reason local authorities in eastern regions give for their poor performance, arguing that the government is doing nothing to improve the situation. According to the newly-established Ministry of Regional Development, the total cost of pulling Poland's poorest regions up to the country's average level of technical infrastructure amounts to some EUR 1.36 billion (zł.5.42 billion). Other complaints include: isolation from major economic centers; an unfair regional-development policy; a lack of industrial traditions; and the regions' low level of development.
In an effort to address these concerns, the new government created the Ministry of Regional Development, which has come up with a three-phase plan to revitalize Poland's eastern regions.
The first phase - identifying and preparing various revitalization projects - has already begun. In the second phase, between 2007 and 2013, EUR 886 million (zl.3.35 billion) from the European Regional Development Fund will be spent on the most promising projects. Finally, between 2014 and 2020, the eastern regions will receive the most extensive aid, both from EU funding and Poland's budget. Before the aid can begin rolling in, however, the plan must first be accepted by Poland's Council of Ministers, and then sent to the European Commission for approval in September.
Shifting zones
Some argue that a stronger focus on Special Economic Zones (SEZs), designed to promote and conduct manufacturing or distribution activities on preferential terms, would be a panacea for the east's ills, but according to Marcin Kaszuba, former vice-president of PAIiIZ, not all of the 14 existing SEZs live up to expectations.
Lars Bosse, general director of the Polish-German Chamber of Industry and Trade, shares Kaszuba's opinion and says the SEZs, especially the five in Poland's Eastern Wall, haven't attracted enough investment.
"The SEZs were supposed to be a chance for the eastern regions to develop and catch up with the rest of the country, but it hasn't quite been that way. Not many investors appeared in them," says Bosse. "This is happening because what investors can get [in the SEZs] in the East, they can also get in Silesia or Małopolskie - and there they find better roads and there are more consumers."
Just three weeks ago, Poland's Council of Ministers decided to modify the SEZs in Łódź and Wałbrzych, and replaced grounds that were unattractive to investors with more desirable locations, immediately landing Poland at least six investments. Paweł Banach, from the Investor Assistance Center in the Lubelskie voivodship, suggests that the SEZ locations should be reconsidered and perhaps moved to other parts of the country.
According to PAIiIZ, the number of prospective locations offered for investment differs dramatically from region to region. By 2004 the Lower Silesia voivodship had prepared 65 grounds, all considered "Category A" (completely ready for launching an investment), whereas Podlaskie and Świętokrzyskie had no such sites on offer. In Świętokrzyskie and as well as in Lubelskie voivodships, the number of combined Category A and B grounds does not exceed 10.
Be prepared
Andrzej Wróblewski, Marshal of the Lower Silesia voivodship, believes that developed grounds are a great argument when angling for investments, but laments that it's an argument the eastern regions can't make. "After the [1999 regional] administrative reform, the newly-established local authorities in eastern parts of the country divided the land among themselves and sold some of them, so it is difficult to come to an agreement now," he says.
The situation is quite the opposite in the capital of Wróblewski's own voivodship, which recently won PAIiIZ's Golden Site award for excellence in developing sites for investment. "Thanks to this [awards] campaign, we became aware of the grounds in Kobierzyce [on the outskirts of Wrocław], where LG Philips recently invested," says Marcin Kaszuba.
That's not to say that Poland's eastern regions have no investment potential. Rafał Dutkiewicz, Wrocław's current Mayor, worked in Lublin for several years and he says that the city has nothing to be ashamed of. "Being an academic center, Lublin has high human potential, vibrant culture, industrial traditions and links with the East. It doesn't have an airport, but Warsaw is relatively close and the infrastructure is not as bad as many believe," he adds.
Road rules
The sad state of Poland's road infrastructure has meant many companies have decided not to locate here. But just last month the country landed one of the year's largest investments, precisely because of its roads. "Poland stole the show because of its wide road infrastructure," said Judith Pickering, director of the investment program at Cadbury Schweppes, explaining the reasons for the company's decision to construct a new pellet-gum plant in Skarbimierz near Brzeg, at a cost of EUR 100 (zł.385) million.
Still, even when infrastructure is of little importance and an SEZ lies waiting (the Eastern Wall has five of Poland's 14 SEZs), Poland's east remains an unattractive lure for many investors.
Kaszuba believes that state organizations such as PAIiIZ will never be able to give the respective regions all the tools they need to enhance their attractiveness. He says more consistent adherence to the rule of law and cutting red tape would be advantageous, and lie within local authorities' responsibilities. Elements such as a good command of foreign languages and a good rapport with investors is also a must.
The Economic and Commercial Counselor at the Royal Netherlands Embassy in Warsaw, Frank ter Borg, says that it will require more than just general macro-economic measures to improve the investment climate in eastern Poland. "Creativity and vision are needed," he emphasizes.
Specialization nation
Marshal Wróblewski believes the solution to low investment lies in finding a specialization: "We only had the Jelcz factory, but we decided to use our automotive traditions to attract new investors. We made contacts with car producers and finally we have Volvo and Toyota here."
Kaszuba agrees. He says that first local authorities should make a thorough analysis in order to find a specialization. "If we know, for example, that the Świętokrzysie voivodship has ideal conditions for tire production, we would do our best to promote that region as such. It's time to stop administrative thinking and be more business oriented."
Wrocław's Mayor, Rafał Dutkiewicz, shares that view, and believes that regions need to apply new marketing and public relations strategies. In cooperation with HP, Siemens and Volvo, the city organized the Teraz Wrocław campaign to attract the best students and young professionals to work and live in the city. The University of Wrocław and the Wrocław Technical University are adapting to the needs of investors, and plan new courses to educate and train prospective employees.
Dutkiewicz believes the eastern regions' time will soon come, since many businesses are moving eastwards, and because demand for goods and services in Eastern Europe is also growing rapidly.
Marshal Wróblewski says it's crucial to understand the big picture. "There's no point in rebelling against natural forces," he says, speaking of the shift in focus from West to East, but underlines that regions must also take an active role: "The only choice is to set sail and then cruise with the wind."
