Listen to this article
Across central and eastern Europe, governments are busily promoting themselves as tech and media savvy as they look to nurture new industries that are slowly developing around the region.
Aware they cannot rely on low-cost manufacturing and inefficient primary industries such as mining and agriculture to keep pace with their lofty economic growth targets, “start-up hubs” and “innovation clusters” have become buzzwords in any forward-thinking politician’s speeches. Every capital in the region seems to be selling itself as eastern Europe’s Silicon Valley.
The region needs innovation and a generation of technology-focused enterprises is imperative to avoid the “middle-income trap”, where incomes hit a ceiling.
Yet the role that governments should play is not so obvious. This month, in the basement of a hotel in Bratislava, the government inaugurated the Slovak Innovation Advisory Board, a collection of experts who will advise Slovakia’s economy minister on how best to help foster, develop and support start-ups.
The advice was mixed. Some in the group of multinational technology executives, investors and academics said government should stick to creating support infrastructure.
Some of these experts called for projects to mentor entrepreneurs. One thought the government should provide capital to fund small business.
Innovation is a delicate flower. Fail to nurture it and ideas without funding and encouragement quickly wither.
Incubate it too much, however, and companies become bogged down in bureaucracy and often pack up, move or are taken over.
And, while much has changed since the dark days of communism, many in the region’s entrepreneurial circles are worried that governments in central and eastern Europe are not famed for their natural pro-business policies.
Specific concerns are twofold. First, government involvement intrinsically brings national boundaries to bear, as national capitals aim to promote their offering over rivals. So while the Visegrad Four states, Slovakia, Czech Republic, Poland and Hungary, promise collaboration and, in theory, provide would-be businesses with 63.5m potential customers, an innovator in Budapest is unlikely to be encouraged by Hungary to team up with businesses in Warsaw.
At the Bratislava meeting last month, most of the executives, from the likes of Facebook, Google and HP, had a regional brief.
Despite this, they have to deal with four different economy ministers and four different policy proposals.
Second, innovators are sceptical about whether politicians are committed to fostering innovation or see it as a handy way to sell modern credentials to the public ahead of elections.
Slovak President Andrej Kiska was a successful entrepreneur before he was elected last year. As such, his support for innovation has been well received across the region.
But others without a business background are adopting his lead.
Fostering an innovative economy was a part of Andrzej Duda’s successful campaign for the Polish presidency this year.
Hungarian prime minister Viktor Orban has talked glowingly about the “birth of invention”, while crimping business sentiment and spooking foreign investors with policies such as taxes on the mainly foreign-owned banking and supermarket industries.
It may just be coincidence that the Slovakian government’s public push into the innovation space comes less than six months before an election.
Government, some businesspeople argue, would be best off tackling the legislation that holds back the region’s innovators as far too many laws dating back to before 1989 still hamper business development.
Poland, for example, spends billions of euros every year subsidising lossmaking coal mines. Yet it has still not passed legislation to make research and development investment tax deductible.
Belarus, perhaps Europe’s most restrictive economy, is a one example of where a different approach is working. The High Technology Park in Minsk has been a success thanks to a hands-off attitude from government, which commissioned it, granted tax and excise benefits to residents, then left it alone. Almost 150 companies there export more than 80 per cent of their business.
Much hope has been placed in central and eastern Europe’s post-Soviet generation, 20 and 30-somethings who have international dreams but little memory of how communist governments stifled private enterprise.
However eager they are to help, governments would be mindful to ensure those memories stay buried.