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Going West

Julie GregsonMay 19, 2008

A growing number of Polish entrepreneurs are setting up firms across the border in eastern Germany, reviving areas still struggling with the legacy of the collapse of communism -- and challenging stereotypes.

made in germany signs at a fair
Polish entrepreneurs are forcing towns such as Pasewalk in eastern Germany to spruce upImage: picture alliance/dpa

Forty-year-old Jaroslaw Wieczorek is one of the Polish investors who has taken the plunge. Already the owner of one factory in his home city of Poznan, he decided in 2006 to found a second in the small German town of Pasewalk, some 270 kilometers (170 miles) to the north-west.

It went into production less than a year later, making specialized tools and equipment for car manufacturers. Given Germany's reputation for precision engineering, some might think this is a case of carrying coals to Newcastle.

But there are a number of benefits to having a German base as well as a Polish one. "As a German firm it's easier to sell my products, there are some customers who only want products made in Germany," said Wieczorek.

Attempting to play on a level playing field

Advertising poster showing a Polish plumber
Poland has more to offer than good plumbersImage: www.tourisme.pologne.net

It is also easier to get a decent price. Many German businesses have outdated ideas about the cost of living in Poland.

"They think that everything is 20 percent cheaper and that they should be able to get things for 20 percent less, but it's not the case," the businessman complained.

When it comes to buying products from German companies, having a base inside the country means that he can cut out the middleman when acquiring components for his firm in Poznan. Many German wholesalers and manufacturers do not deal directly with their Polish customers, but are represented by agencies across the border.

While many German firms may have chosen to relocate abroad to save labor costs, wages in western Poland are only marginally lower than in the German state of Mecklenburg-Western Pomerania, which borders Poland. Wieczorek's firm, Romag Nord, has already taken on 18 German workers. And he has plans to more than double the size of his workforce.

In the depopulated border region, there is also no shortage of reasonably priced premises to buy or rent. This year, Wieczorek is planning to buy one of the two former slaughterhouse buildings that he currently rents in Pasewalk. Later, he intends to build a custom-built plant on undeveloped land.

"For us it's cheap here. Poznan is a city. Land prices on industrial estates there are much higher," he said.

Attracting city Poles to rural eastern Germany

Flags of Polish, German and EU flags
The border controls between Germany and Poland were abolished in late 2007Image: picture-alliance/ dpa

The price of real estate in Loeckwitz, 25 kilometers away, is also creating a lot of interest on the other side of the border. Some 200 of the town's 3,000 inhabitants are Polish citizens.

Project manager Jan Rybski moved here a year ago from Szczecin. He is currently overseeing the development of a "German-Polish settlement" targeted at middle-class Poles from nearby metropolitan areas as well as German retirees looking for the quiet life.

Rybski and his wife first thought of moving to Loecknitz when their son started attending the German-Polish high school there. At the same time, the businessman read about a plot of land that had been designated for development. The ground-breaking ceremony had taken place four years before, but only two houses had been built.

"I thought that it would have been developed long ago. In Szczecin, land and house prices have exploded over the last year. We can offer prices that are 20 percent lower than they are just a few kilometers away in Poland,“ said Rybski.

Breathing new life into a graying area

Hand over a Polish textbook
Over 100 Poles attend the bilingual German-Polish school in LoecknitzImage: picture-alliance/ZB

The Rybskis are not alone in wanting their children to go to the high school in Loecknitz, but striving to spare them the one or two hour-journey.

The project manager, who works together with a German construction company in Mecklenburg-Western Pomerania, emphasized the benefit for the region as a whole, and for Loecknitz itself.

"If we can attract 20 new Polish families with several children, that is an important economic factor. Some of them will most certainly also set up businesses. This is one of the few places in Mecklenburg-Western Pomerania where the population is growing. We are ensuring the future of a micro-region," he said.

Like Wieczorek, the Polish project manager only has praise for the support that he has received from German municipal and regional authorities and for the surprising lack of red tape. Faced with the specter of school and kindergarden closures and unemployment rates of around 18 percent, local politicians have been getting on their bikes and drumming up support in neighboring Poland.

More attractive tax breaks and subsidies

Pictures of NPD posters in Rostock in Mecklenburg-Vorpommern in 2006
Unemployment has also given rise to support for the neo-Nazi NPD in the regionImage: AP

Favorable German tax allowances and business subsidies are aiding the momentum. According to Adam Grendziak, from the Haus der Wirtschaft, a German-Polish business center in Szczecin, many self-employed Poles are also attracted to base their businesses in Germany because tax allowances are more generous. As a result, the number of Poles going West has grown in recent years.

Along with the low cost of land, engineering firm owner Jaroslaw Wieczorek was first attracted to the region because Germany's regional structures meant it was less complicated and time-consuming to access EU funds than in centralized Poland. Thanks to a mix of EU grants and German support for small businesses, he will be able to reclaim some 50 percent of the 600,000 euros ($930,000)that he has invested so far. Over the next three years, he aims to plough in an additional 1.6 million euros.

Getting the right staff has, however, turned out to be more of a problem than the Polish entrepreneur anticipated. Just as Poland has seen a mass exodus of qualified workers since joining the EU in 2004, many of this area's young and ambitious relocated to western Germany long ago. Many of those left behind have been out of the job market for years. As a result, their skills are out of date.

There are other problems. At the beginning of this year, there were a number of reports of buildings in Loecknitz being daubed with anti-Polish slogans and the tires of Polish residents' cars being slashed. In the 2006 regional elections, 18 percent of the town's electorate voted for the far-right NPD. While Jan Rybski is eager to downplay this as a protest vote, the get-up-and-go Poles do seem to be the source of some resentment.

Xenophobia is a problem in this region of Germany, according to Rainer Petzold, managing director of the German and Polish Business Development Society. The consultant, who is based in the border town of Frankfurt/Oder, has long been advising business people in Germany and Poland about the opportunities on the other side of the frontier. His enthusiasm that the areas should grow closer together is not shared by everyone.

"People here are afraid that something could be taken away from them. Their image of the Poles is one that was current in the media in the 1970s and 1980s. We will have to make sure that the frontier in people's minds disappears," he said.