Łódź is a good example of a city that has undergone a substantial transformation after a period of post-industrial decline. Why do you think some cities manage to succeed in such transformations while others can’t?
In my opinion, there is no secret sauce. Very important is the general condition, the strategic position of a country. If this is right, the recipe is pretty simple, and it is based on several fundamentals. You need to have an idea, you need to know what you want and where you are heading, as banal as it may sound, but very few people seem to know that. Also, and it may sound like some TED talk, but it is also true, you need to grab and promote opportunities.
If you look at most examples of foreign direct investment [FDI], a decision is made on emotions, on knowledge, and on how effective someone was in promoting an idea in the city. A city is an idea, you need to sell it, and we, along with some other Polish cities, really wanted to drag our cities up as they were in a pretty bad condition. We really tried hard. It was our priority. We created the right conditions and the infrastructure, including legal infrastructure, to welcome this investment. Infrastructure always needs to be ahead of growth. So you need to make a bet on economic development, and fight hard for it, because competition for capital and jobs is unbelievably high.
What do you see as the unique selling points for Łódź as an investment destination?
A city’s government has some direct tools, but it has way more powerful indirect tools. It is similar in the US. For example, Austin is a big economic success. I remember when I used to live in Texas, Austin was, how to this say diplomatically, nothing special – but at some point, it began exploiting its potential. Every place has some unique selling point. You just need to define what you can do better, what you have that is unique, and sell it as convincingly and consistently as you can. In Austin, for example, the city defined its target as being more competitive than its counterparts in California, which were becoming super expensive and with rising taxes. In Austin, the authorities created conditions for businesses to move there, and with businesses come people, and with people comes housing, and with people and housing comes better schools and services. Then suddenly, a place becomes more attractive as a whole.
People migrate and people choose a place to live. The quality of places, to a large extent, is dependent on people, and people wanting to move there. It mostly comes because of economic factors. Many people want to live in New York because New York offers certain types of opportunities. If you move those opportunities to Des Moines in Iowa, these people would move there. This is simple as you may imagine, and that is what we have done in Łódź: we diagnosed what we are good at.
Location is very important here, from a logistics perspective. We defined some areas of cost competitiveness. We created a product out of the city, and we are putting an enormous amount of time and effort into selling it.
Łódź draws its strength from its openness to diversity, its geographical position and the continuous improvement of the quality of life in the city. It is a centrally located, large city free from ‘metropolitan tension’. Employers and employees appreciate the compact nature of the city, which provides them with the right work-life balance. Unique post-industrial urban spaces and high-quality co-working and office spaces stimulate creativity and foster integration. The city’s academic centres (17 public universities) are linked to business and the start-up ecosystem, and as such are a source of innovation and a high-quality talent pool, especially in IT, finance, the supply chain and life sciences.
Our competitive (in comparison with other large cities) cost of living makes Łódź an attractive alternative for young workers and entrepreneurs looking for comfort of work and a high quality of life at affordable prices. Łódź is also about openness. It was built on the traditions of the four cultures (Polish, Jewish, German and Russian) and on the spirit of entrepreneurship. No matter where you come from, if you have an idea and the energy to act upon it, you will quickly become part of the Łódź community.
Now, regarding the Ukrainian refugee situation, how many arrivals have you had in the city? How do they fit into the economic and workforce picture?
It is not an easy question, because the structure of the migration from Ukraine and the Ukrainian community here is changing rapidly and it is not stable. We have approximately 100,000 people right now, but it is subject to constant change because the structure of the Ukrainian community before the war was mostly male, and many of them went back to Ukraine because of the draft. So, right now, most of the refugees are women and children, so it is a totally different structure, and as bad as it may sound [because of the reason that brought them here], I really like the fact that there is such a big presence of a foreign community that is boosting our diversity with regards to both culture and innovation, as that brings a lot of added value.
I like places where cultures and people from all over the world live and work together. It impacts peoples’ mentality. I love to have a diversified, rich social structure as it creates a unique vibe that you see in places like London and Paris. It is something that some Poles may not want, but it is something they must work through. Remember, Poland was one of the most homogeneous societies in Europe, and right now this is something that will need some adaptation.
Poles have changed their mental approach [as a result of the influx of immigrants]. I think the war in Ukraine also caused a huge growth of empathy and understanding. It was a pretty big historic lesson for Polish people. Of course, I hope that all Ukrainians will have a chance to go back at some point and will feel safe in their country, but from Łódź’s perspective, this community offers a huge added value to us for many reasons, not only for economic reasons. A big gain for us with this refugee situation is that Łódź has finally became more diverse, both on a social and cultural level. We are less homogeneous, which is valuable and necessary throughout the whole of Poland. Of course, it is a big challenge for the public sector, but there is a huge understanding on a political and social level that this is an effort that we need to make.
Do you worry that the warm welcome to Ukrainians will shift the longer things go on?
We are now hearing some voices in the political debate claiming that the Polish state is suffering some costs due to its efforts to handle the refugee crisis, and also stressing that some other important topics in the country have gone sideways because everything is about refugees and Ukraine right now – but the truth is that the war in Ukraine will have a huge impact on Poland’s future. This is the first time since World War Two that, right on our borders, there is a full-scale war going on. Then there is the supply chains, and with the interdependence of economies and the dependence of Europe on Russia… the changes and effects of the war will be radical. So there can be little wonder that the political focus in Poland is on Ukraine, because it has to be. Our lives will never be the same again, but you can see that the longer all of this goes on, the more social tensions will rise.
Then there is the effect of inflation. This is partly a result of the global markets, partly a result of our government’s policies and partly a result of other factors. However, the discussion around Ukrainian refugees will be more and more diversified. It will be the job of politicians to explain that this is something that we will have to handle and that the costs that arise from the situation are necessary to take.
What can city leaders do to combat the rise in the cost of living?
There is no simple answer to this question. The situation is quite harsh. The Polish government has implemented some pretty risky policies to stop inflation, but no one has ever managed to stop inflation without experiencing costs. It is costly, financially, economically and politically, and I see the latter on a central level. No one wants to pay the bill for disinflation but someone needs to. Limiting inflation can happen through limiting the amount of money in the system and limiting several other processes. If you do not do this, if you will try to permanently supply the system with further money to ease the political costs of fight against inflation, you are entering a vicious circle and at some point somebody will have to say stop. Yes, the economy needs to cool down. Everyone has to suffer to some extent, because it is a tough process, but nobody wants to be the person to instigate that. We need to accept that growth will slow.
Do you see the inflation issue having much impact on your FDI efforts?
In the past, a significant amount of Poland’s investment attractiveness came through cost competitiveness. Poland has world-class talent because of the Polish education system and this German-style work ethic in the country. On the other hand, because of our lower cost base, we could offer this top talent along with other cost-competitive factors. Now the processes being done by foreign employers in Poland are becoming more and more complex and there is a huge shift in focus towards the quality of what is done in Poland, not necessarily only quantity. This means that salaries will grow (they will have to grow because of the high levels of inflation). Energy costs will also become a bigger factor, especially the industrial segment. However, this affects the entire continent.
So bearing in mind that we still have a lower cost base, and we offer great quality, in my opinion, none of this should affect FDI to Poland that much, because most of the these issues affect the whole of Europe, or even the world, so we are still on the map.
One big strength of Poland, no matter what you can say about the government or about Polish politics (which is as far right as it has ever been), is that our institutions are strong. We have transparent and solid public institutions, which I believe is our competitive advantage.
Is there anything that you want to mention that we didn’t touch on already?
One important thing, as brutal as it may sound, is that the war in Ukraine will have a positive effect on Europe in the long run. Why? The solidarity. The crisis has highlighted several poor strategic decisions that we have made as a continent, especially this dependence on fossil fuels, and on to a large extent Russian fossil fuels. Leaders have realised that it is the wrong direction to be going in and this has created a kind of solidarity spirit, and it has provided the motivation to become more resilient in the future. So even though the costs are horrific, and I never thought in my life that Europe would be at war again, the positive side is that I already can see that institutions are craving stability, and European unity will be way stronger after it than it was before.
The war has also brought to the attention of Europe’s leaders what is really important and highlighted to all the people how valuable international alliances are for Poland and new EU states such as Slovakia, the Czech Republic and the Baltic States. We feel totally safe and we are totally safe, mostly because of our memberships of Nato, the EU and many other alliances. I think this is a positive aspect because finally everyone has become aware that you can’t take such things for granted. It has been a wake-up call. We now benefit from our full sociopolitical economic stability and we prosper because of being in alliances with countries such as the UK, the US and Germany. I think right now it would be really hard to find a person in Poland who thinks differently.
To read about Lodz Special Economic Zones’s thriving start-up ecosystem, click here.
Lodz SEZ is running Re_source, an acceleration programme for foreign tech businesses that would like to expand into the Polish market, find potential clients and receive funding for soft-landing and product development. To find out how your business can receive up to €65,000 (300,000 zlotys) of non-equity financial support to set up in Poland, download the whitepaper below.