The future of Europe is at stake, and the reasons extend far beyond such obvious challenges as the migration crisis and the political turbulence that led to Brexit.
For the last 12 years, the European Union’s share of global GDP has fallen from nearly 32 per cent to about only 23 per cent. Although it is difficult to imagine the continent once again becoming the centre of global manufacturing, the EU still has the tools to reverse this trend to some extent. We could take advantage of the Fourth Industrial Revolution — a wave of digital-era changes — to push the region into a period of sustained growth, through a combination of long-term policies, innovation and cooperation between governments and businesses.
Central and Eastern Europe has the potential to play a very substantial role in the continent’s future. For the past five years, the region has registered impressive growth in Information Communication Technology (ICT) as a share of its GDP (for instance, in Bulgaria it rose from 1.3 per cent in 2012 to 3.3 per cent in 2016).
Instead of competing within the region’s smaller markets, we could create targeted intelligent specialisation areas, drawing on existing areas of expertise as well as creating new ones. This way one country’s industry will be able to expand into the broader European market, without having to compete within the region.
CEE’s start-up scene
Just a quick look at the Central and Eastern Europe’s investment market will show you that Poland has a very well developed start-up ecosystem in a number of sectors, but with substantial value concentrated in marketing automation. There is already one “unicorn”, Allegro, and two more potentially on the way, in SALESmanago and Growbots. These are two of the most promising verticals with established know-how and success in today’s Poland.
At the same time, the Czech Republic and Romania have become real pillars of European cyber security, with start-ups such as Avast Software, Bitdefender and TypingDNA, while my home country, Bulgaria, already has its own ICT success in the software development company Telerik, which was acquired by Progress Software, in 2014, for $262.5 million.
In Slovakia, the advanced engineering company AeroMobil is developing the world’s first flying car and is expecting to start taking orders this year.
Fostering these areas of strength further and supporting them with focused education and talents from within the region would make a huge difference both locally and for the future of Europe.
I am convinced that with more in-depth study we can easily make a list of several specifications for each country and create strategies for regional development.
The fourth industrial revolution, with its new technologies, is going to be the guiding light on our path to a better future.
Luxembourg to Albania
However, industrial and economic innovation can’t be achieved without the required legislation and government support. Just as Luxembourg has become the first country in the world to introduce laws regulating the mining for resources in space, and as Estonia was the first country to introduce electronic citizenship, we have to think about the correct legislation to support the digital development of CEE. One possible example comes from Albania, where start-ups have the opportunity to launch themselves with zero taxes until a certain amount of revenue has been established.
We also need clear specialisation from the early school years in order to prepare our children for the needs of the future labour market. Nowadays very few people benefit from their knowledge of physics and chemistry and teaching our children to code (as is becoming mainstream) could be considered the same as training them to drive a cab — it is a skill that will not help them find a job after automation reaches its full potential.
We need to rebuild our education systems so they inspire critical thinking, creativity and teamwork, because these will be the skills that future industry will demand the most.
Achieving economic transformation of this magnitude will require not only legislative initiatives but also state support, in the form of subsidies and reductions in the administrative burden on the new businesses.
Advanced technology start-ups in Europe are on the rise and we need to support and invest in them, now, more than ever. This will be an investment in our common future that can be realised through new platforms for public-private partnership and targeted acceleration with the government’s support.
In many ways, industry in Central and Eastern Europe is still stuck in the Soviet age. In recent years the governments in the region have talked more and more about the re-industrialisation of their countries. However, instead of pouring money into new manufacturing capacity, states should support their brightest minds with more efficient programs for seed and next-round investments.
Intelligent specialisation should be reflected in a region’s educational systems as well as in its legislative frameworks. I sincerely believe that Central and Eastern Europe could empower a better future for the old continent. I believe in the human potential of this region which remains untapped. For me, our countries have a future that is much brighter than just being among the top outsourcing destinations. With the joint efforts of policy makers, academics and business leaders, we can draw this future together.
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The views expressed in this opinion editorial are the author’s own and do not necessarily reflect Emerging Europe’s editorial policy.