chapter  13
25 Pages

Regional promotion and competition: an examination of approaches to FDI attraction in the Czech Republic, Poland and Slovakia PawEŁ CaPik

Introduction The past two decades have brought about profound changes to the range of spheres of socio-economic life in Central and Eastern European (CEE) countries. Transition to a market economy, integration with the global economy and accession to the European Union (EU) have all offered significant opportunities, but have equally been sources of multiple challenges for public administrations at all levels of the administrative hierarchy. After initial years of considerable hardship and declining output, gradually these countries started recording successes in restructuring their economies, legal environments and institutional frameworks (Ivanička and Ivanička 2007). The period of initial downturn has been succeeded by growth years (curbed only recently by the global financial crisis), decreasing inflation, increased political stability and concurrent efforts fostering integration with the world economy. These changes have been taking place in the peculiar circumstances where globalization processes are reducing the significance of national boundaries and ‘regions more so than nations, become major competitors on the global market place’ (Stanilov 2007: 32). Recent EU enlargements have promoted such processes in two ways: (1) by increasingly empowering regions to shape their destiny in legal and administrative terms and partially in financial terms, and (2) facilitating the operations of international capital and consequently contributing to the creation of new cross-national regionalization patterns often with little regard for national borders. Both of these processes are aimed at encouraging the integration of new Member States with other areas of the EU, effectively contributing to an increased competitiveness of the Union, a daunting task considering the size of the areas and the scale and complexity of their problems (cf. Maier Chapter 11). The process of integration is obstructed by a number of difficulties, two of which provide part of the context for this chapter. First, the issue of socio-economic and territorial disparities discussed by Kule et al. in Chapter 12 and Maier in Chapter 11 characterize many of the most recent entrants. Second, the decentralization of

administrative powers and responsibilities, particularly those closely associated with regional development, has a very short history (Pallagst and Mercier 2007) and arguably is still far from being concluded. However, this does not mean that regional and local municipalities are not actively involved in bringing their territories in line with the rest of their respective countries (and subsequently the other EU Member States) and securing prosperous futures for their territories. While the specific ways of doing this vary from country to country, as illustrated by discussions in many chapters in this volume, some general directions can be identified. One of them undoubtedly has been the general openness towards multinational enterprises (cf. Tewdwr-Jones Chapter 3). In line with the wider principles established at the initial stages of transformation (e.g. the Washington Consensus) foreign multinationals were considered as one of the key means to achieve progress and lead to structural upgrade. Many countries, often with the support of EU funding, have established national investment promotion agencies initially as the main and the only agent in charge of attracting foreign direct investments (Young 2004). With the progressing decentralization (Gorzelak 2003), regional and local authorities have come to realize more recently the potential associated with the multinational enterprises (MNE). Many of them, either on their own initiative or with some external stimulus (e.g. creation of a special economic zone) have begun to actively promote their areas, with a view to attracting mobile companies (Florek 2004; Capik 2007). Simultaneously, MNEs started to recognize opportunities offered by CEE markets and become interested in efficiency gains opportunities (Artisen-Maksimenko 2000; Turnock 2005). Perceiving MNEs as a potential source of capital, employment and innovation, or in other words a quick solution to prolonged structural problems, regional authorities became increasingly interested in attracting mobile companies. Their attractiveness and growing popularity have inevitably led to increased competition between countries and between different regions within each of the countries. Numerous regional authorities have become increasingly active in promoting and marketing their regions in an attempt to beat the competition and attract higher levels of FDI. It can be argued that a determining factor in the success of any such promotional strategy is likely to depend on the extent to which it can be tailored to the specific territorial capital of a particular region. Yet most regional authorities appear to make little effort to understand the endogenous potentials of their territories, in most cases leading to a ‘onesize-fits-all’ approach in the strategies adopted, often in an attempt to mirror successful western experiences. However, emerging evidence suggests that regional promotion practices developed by those seeking to reinvent the post-industrial cities of the western economies require adjustments to make them more appropriate to the reality of places in CEE. One such area where the modifications are necessary and recently became more evident is the administration of promotion, including the engagement of formal organizations and inclusion of informal institutions. Regional authorities do not operate in a vacuum, and indeed over the past decade a considerable number of other public and private organizations have become directly or

indirectly involved with promotional activities. Whilst arguably the emergence of this wider promotion community can be seen as an initial stage in the creation of a competitive region, the evidence presented later in the chapter suggests that we should not hasten to draw this conclusion just yet. The set of institutions involved, as well as the extent of their involvement, varies from country to country. Nevertheless in general the group usually includes local municipalities, regional development agencies, associations of MNEs, and individual large multi nationals interested in expanding their supplier and customer base (Capik 2007). The scale and impact of local municipalities’ activities in this context have been elaborated elsewhere (cf. Florek 2004; Jarczewski 2007). However, despite the emergence of such a promotion community, it is the regional authorities responsible for territorial development who effectively remain at the centre of these complex policy networks. It can be argued that there are a number of practical and administrative reasons for this. Regional administrations link the tacit knowledge and ‘territorial capital’ of the different locales with the possibility to tap into the networks of national organizations and influence them. Furthermore, despite often considerable financial constraints and limited fiscal powers, regional levels of administration to a large extent design and implement development strategies, which more and more often include an explicit promotional element. It is therefore the promotional activities performed by the regional authorities that are the primary focus of this chapter. In general this contribution aims to advance the debate on FDI promotion and its selected procedures and mechanisms within the ‘place marketing’ framework in the context of emerging ‘epistemic communities’ of agents for FDI promotion. By doing so the chapter focuses on horizontal and vertical dimensions of the organization of promotional activities and selected strategic aspects of FDI attraction schemes, including but not limited to the identification and knowledge of national and international competition in regions of the Czech Republic, Poland and Slovakia. The initial part of the chapter discusses the conceptual issues of place promotion, highlighting inconsistencies and deficiencies in the current literature. Next the specific context of CEE place promotion is explored. The findings of the empirical research are presented in the latter part of the chapter which draws attention to the emergence of ‘promotion communities’, followed by conclusions and recommendations for further study. The presented discussion is a result of initial deskbased research complemented with study of the FDI promotional activities of regional authorities in the Czech Republic, Poland and Slovakia. Secondary data has been sourced from national statistical offices, national banks and national investment promotion agencies. Primary data was obtained in the form of a postal survey to all 38 CEE regional authorities (14 regional authorities in Czech Republic, 16 in Poland and 8 in Slovakia), all of whom responded. The chapter focuses on arguably the cornerstone of regional promotion, namely the strategic issues of organization and competition identification, in an attempt to shed some light on the emerging promotion community and to enhance the knowledge base for future policy decisions.