Central Europe is in the spotlight, for its startups and investment opportunities. Betting on entrepreneurial strengths is necessary but may not stop young people from moving elsewhere.


Special envoy for Western Balkans

Will Slovakia deliver a representative to a newly created post of EU Special Envoy for the Western Balkans? After confirmation of Oliver Varhelyi as the EU Commissioner-designate with the enlargement and neighbourhood portfolios, this would be a further indication of a strong level of engagement of the V4 with the Western Balkans region. Central Europe aims to keep enlargement on the EU agenda for the next European Commission.

The Slovak Republic was one of the six countries who signed a letter last week, in response to France, suggesting to give a membership perspective to both Albania and North Macedonia.

Earlier this year, the United States appointed Matthew Palmer as its special envoy to the region. The appointment came as concerns grew about the chances of success about a negotiated agreement between Serbia and Kosovo. The ongoing feud between the two countries is also a priority on the agenda of the EU High Representative-designate Joseph Borrel. Yet, the creation of a special envoy would give additional weight to the subject.

The current Foreign Minister of Slovakia, Miroslav Lajčak, is rumoured to fill the future post. Lajčak was already the EU’s High Representative for Bosnia and Herzegovina from 2007 to 2009 and served as Slovak ambassador in Belgrade in the early 2000s. While he is familiar with the region, Lajčak was criticised for his authoritarian management style and an unilateral imposition of changes to the Dayton peace agreement.

The Slovak candidacy certainly would find support in the other V4 countries. In an interview with Euractiv.pl, Polish minister Konrad Szymanski stressed how the integration of the Western Balkans is critical from a security perspective but also would benefit the European economy because of broadening the field of influence of European standards and regulations.

Last week, Olivér Várhelyi indicated he is in favour of accelerating the integration of the Western Balkans into the EU, despite issues over the region’s preparedness for entry as well as intra-regional political feuds. Moreover, doubts remain whether the  Hungarian Commissioner-designate will be the most suitable person to oversee the implementation of rule of law procedures in the Western Balkans.

CE startups in the spotlight

In Bucharest, the Central European Startup Awards brought awareness about the growing entrepreneurial potential in the region as well as success for different startups from the V4 countries. The Startup Awards are organised as an annual ceremony to choose a number of regional winners who subsequently take part in a global competition. Companies can win in a number of categories, related to their work or specific impact.

For instance, the Czech company Neuron Soundware was voted as best “internet of things” startup for its use AI methods to understand audio signals. Among others, they developed a technology that gives an early detection of broken machines.

Czechia also saw success for two more startups, Impact Hub Czech Republic (best coworking space) and Spendee (best fintech), solidifying its status as a tech centre with international ties.

However, Hungary received a similar a number of awards in the 2019 edition. Three Hungarian startups were lauded for health tech (SignAll), smart city solutions (Parkl) and being the best newcomer (TrustChain). The latter works on legally binding digital contracts with a right to sign verification and settlement automation.

Poland and Slovakia each had one award for a startup. Geckodynamics (PL) was awarded as a best software development partner for Software-as-a-Service products, while Bethereum (SK) was perceived as the most promising blockchain startup.

Central Europe is betting heavily on its entrepreneurial strengths, in part due to the vibrant tech scenes and the prominence of regional headquarters of international businesses in the V4 capitals.

However, in the long-run, the region may struggle to retain the best of its talents. In the field of artificial intelligence (AI), for instance, LinkedIn has noted the region’s large share of available young talents who are educated locally but then move elsewhere for work.

Asian investors are drawn by the V4

The Chinese Belt and Road Initiative generally comes to mind when thinking about Asian investment in Central Europe. However, recent years show that the region also attracts investors from other Asian countries, drawn by high yields, a favourable exchange rate and access to a sizable EU market. In a recent report (pdf), Skanska, Colliers International and Dentons speak about “a wave, but not yet a tsunami” of Asian investment in Central Europe.

Until recently, the region accounted for less than 3 per cent of all capital spent by Asian investors outside their continent. This year the figure jumped to 9.5 per cent or approximately 7.7 billion euros. In absolute terms, the capital spent in the region is not much behind Asian investment in Germany. Much of the investment is spent on real estate property (offices) and industrial assets.

South Korean investors appear to be the most active in pursuing investment opportunities in the region. They have spent 544 million euros on Prague offices and nearly 400 million euros on office space and industrial assets. Smaller purchases were made by South Koreans in Slovakia and Hungary.

The Straits Times notes that Poland is an attractive destination because of the size of its domestic market, financial liquidity and uninterrupted economic growth.

A tightening economic bond with South Korea is palpable from the efforts undertaken by the Polish Investment and Trade Agency to woo additional investors from the country. JP Weber was instructed to compile a report (PDF) on investment opportunities in Polish electromobility and other sectors.

The JP Weber report states that 260 South Korean companies are operating in Poland, making South Korea one of the largest non-EU foreign investors in Poland. Many of these are active in the automotive, chemical and electronics sectors.

Dr Quincy R. Cloet is Managing Editor of Visegrad Insight

Eastern European Futures

In 2009, the European Union and six of its Eastern neighbours launched the Eastern Partnership (EaP) with the stated aim of building a common area of shared democracy, prosperity, stability and increased cooperation. A decade on, however, progress has been mixed.

Visegrad Insight is published by the Res Publica Foundation. This special edition has been prepared in cooperation with the German Marshall Fund of the United States and supported by the International Visegrad Fund.

Download the report in PDF