October 30, 2012 7:43 pm

The east: Image and reality combine to hamper progress for the ‘B team’

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Eastern Poland has long lagged behind the rest of the country in terms of development and its ability to attract both domestic and foreign investors.

The five, predominately rural, voivodships or provinces that make up the periphery are some of the poorest regions of the EU.

The reasons are partly historical – after Poland was partitioned at the end of the 18th century the eastern part of the country was ruled for more than a century by tsarist Russia. The western part of the country was administered by the rapidly industrialising Prussia.

That division makes many Poles refer to eastern Poland as “Poland B”, a backward, agricultural region, not the place to set up a business.

GDP per capita is up to one-third below the national average, salaries are lower than in other parts of the country and unemployment is higher.

The lack of transport infrastructure plays a crucial role. It takes three hours to drive the 166km from Warsaw to the largest city in the east, Lublin, the capital of Lubelskie province. The single carriageway road has hard shoulders, but it is also busy and at times nerve-racking when lorries overtake each other, sometimes in both directions simultaneously. Poland lacks motorways generally but eastern Poland has none. Only 7.5 per cent of Lubelskie’s roads meet European road capacity standards.

Unlike the booming cities of Wroclaw and Poznan in western Poland, you could not fly to Lublin either – because it had no airport.

Now, 10km south of the city centre a broad area of forest has been cleared for a runway and builders are laying out the pavement in front of a modernist white steel and glass terminal building.

Co-funded by the EU, Lublin’s new airport will start flights in December. In 2007-13, the EU has allocated €2.38bn to promote development in eastern Poland. It is expected that up to 300,000 passengers will use it in 2013.

“Building Lublin airport is truly a civilisation breakthrough for the city. The lack of air connectivity located Lublin among peripheral areas confirming its perception as ‘Poland B’,” says Michal Furmanek, from the city’s investor relations department.

The Lublin region’s economy shows significant differences from the more buoyant parts of Poland.

Agriculture provides work for 36 per cent of people, more than twice as high as the national average, while the share of public servants is 50 per cent higher than for the country as a whole, according to an Ernst & Young report.

Only Podkarpackie in southeast Poland has fewer private businesses. Lublin is clearly underachieving. The city has a beautifully restored medieval town, as well as universities that attract 80,000 students and a vibrant social and cultural life. “Lublin is a very nice place to live. It’s a very lively, young city with a lot of students. The quality of life when you have money is great,” says Andrzej Wodecki, from the Marie Curie Sklodowska university.

Yet many of those university graduates leave because of lower wages and a lack of opportunities. Unemployment among graduates is close to twice the national average. “Companies in Lublin are not innovative enough to give jobs to highly educated people so the best escape to Warsaw or Poznan,” says Mr Wodecki.

He advises Lublin’s mayor on innovation and says the city should take advantage of the increasing number of foreign students: there are now around 2,500, mainly from the US, the Middle East and Taiwan. Local companies should weld these overseas connections with the city’s youthful creativity to inspire local companies to go global with their products and services, he says.

Syntea, a local company that offers IT services and educational training, is already doing that. In February, it agreed a tie-up with Aptech, a Mumbai-based training and education services provider, to offer courses in aviation ground staff and cabin crew services. Chief executive Piotr Falek cites access to a pool of young educated people – the average age of his 150 employees is 30 – lower costs, and the good quality of life as the advantages of being based in Lublin. Transport links are the biggest problem, he said, plus the region’s image.

“There is a perception among Poles that this is ‘Poland B’. The first question we get from our customers is, ‘you have a good service but why are your headquarters in Lublin?’ In Polish minds business is associated with Warsaw. Now it’s changing, slowly,” says Mr Falek.

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