The export potential of Eastern Poland

Podlasie has all the ingredients to develop exports not only in the agri-food sector, but also in the furniture and agricultural machinery industries. In order to tap its full potential, however, it needs to further improve its road and rail infrastructure and attract better cooperation from regional companies – such were the conclusions of the debate held during the Eastern Economic Congress.

Entitled “Industries calling the tune in the foreign expansion of the Eastern macroregion. Where to pin our hopes for the future? Regional leaders: case studies”, the debate took its point of departure from a handful of macroeconomic data showing that Eastern Poland, home to 21% of the country’s population, generates 9% of its exports and accounts for c. 15% of its GDP.

Antoni Stolarski, CEO of SaMASZ, estimated that the export potential of Eastern Poland might well be higher than these figures suggest. Exports represent 60-90% of total sales in many enterprises; in his own company, their share has reached 65% this year and is still expected to grow.

“Many companies in Podlasie show great potential for development in the agricultural and communal transport machine industry. As a consequence of the slump in sales in the East, we decided to enter the US market. Thus far, the move has proved successful and we are currently building a new factory, hoping to double production rates within 5 to 7 years”, said Antoni Stolarski. He then went on to add that the decrease of sales in Eastern markets was not a direct result of sanctions, because the latter do not cover agricultural machinery; rather, it had its roots in the devaluation of Eastern currencies.

Witold Karczewski, President of the Chamber of Industry and Commerce in Białystok and Deputy CEO of Contractus, pointed out that, in a sense, the Podlasie Voivodeship is rather untypical, because of its low population, which adversely affects its access to EU funds (as the allocation algorithm depends on the population) and, as a consequence, its infrastructural development.

“Our voivodeship largely relies on the agricultural sector; the mainspring of our economy is the agri-food industry and agriculture. Dairy plants bring in the largest money volume, in terms of exports. We produce and process 25% of Poland’s milk. At the same time, however, other industries are on the rise as well. In the lawn mower segment, for instance, our friend’s SaMASZ already ranks as one of the largest companies in Europe and continues to grow. Agricultural machines are our speciality, but growth can also be observed in the wood and furniture industries, including metal furniture, as well as in construction and boat manufacturing”, noted Witold Karczewski.

Karczewski emphasized that in order to better tap the full potential of Podlasie, it is necessary to further improve its road and rail infrastructure. He also pointed out that, on the one hand, the region needs more people, because the Suwałki Special Economic Zone is already running short on manpower (companies need to hire Ukrainian staff), but, on the other, it does not know how to attract and keep workers.

Katarzyna Rutkowska, CEO of AC, a company that delivers solutions for automotive LPG/CNG systems, commented that exports are higher in Western Poland because the region attracts a lot of foreign investment.

“Foreign investors locate their enterprises in the west of Poland because they hope to export goods produced with cheap skilled labour back to their own, so to speak, home base. It is more difficult for us; we are at a historical disadvantage and our environmental conditions are to a lower standard. Regional companies, to be sure, do not shy from trying to storm remote world markets, but we do need greater support from state institutions and local governments for our exports to grow, and we are counting on it”, said Katarzyna Rutkowska.

Anna Orzechowska, representative of the Polish Cluster of Construction Exporters, which brings together companies from Eastern Poland and beyond, pointed out that her cluster is living proof that entrepreneurs can cooperate with one another in seeking foreign orders.

“When the EU allocated its funds for 2007-2013 and the economic promotion program for Eastern Poland was first launched, the region was either completely or relatively unknown in the international arena. Nowadays, the Eastern Poland brand has begun to be recognised and popular. I believe that the region shows great potential and what is usually mentioned as its setback or failing, i.e. its low industrialization level, could prove to be an important asset, such as, for instance, in the healthy food sector”, said Jacek Bukowicki from the Enterprise Internationalization Department at the Polish Agency for Enterprise Development.

Antoni Stolarski commented that while there was a significant slump in sales in Russia and Belarus in 2015, after the first 8 months of this year, his own company’s sales to Russia already exceeded the total volume for the entire past year by as much as 80%. Katarzyna Rutkowska added that AC’s sales in the East have also increased despite the devaluation of local currencies and pointed to Kazachstan and Uzbekistan as potentially attractive new markets.

The CEO of AC also commented on its growing activities in South America (AC has a company in Peru, as well as being present in Brazil, Mexico and Argentina).

“These are extremely difficult markets, each with their own political problems; that much is true. After last year’s elections, Argentina is slowly emerging from its slumber, albeit with dire economic issues. The peso exchange rate has diverged considerably from the regulated government figure observed just a year ago and inflation currently stands at 30-40% per annum. These are the conditions that we need to face if we want to move beyond the narrow constraints of Poland and the closest EU countries”, explained Katarzyna Rutkowska.