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from forgotten

Once a powerhouse of the textiles industry then neglected and forgotten by Polish authorities for decades, the city of Łódź has diversified and transformed itself into a hub for logistics, R&D, BPO, IT and advanced manufacturing. Sebastian Shehadi reports.

Located in the centre of the country, Poland's third largest city, Łódź, is also at the heart of a vast national revitalisation programme, partly funded by the EU to the tune of €1bn just for Łódź. The city, which celebrates its 600th anniversary in 2023, has come a long way from its origins as a small village.

Łódź's early development began in the 1830s. Its many streams made it ideal for the textile industry (eventually earning it the nickname ‘the Manchester of the east’). As the textile trade grew, Łódź attracted merchants and workers from Germany, Russia and the Jewish community and evolved into a highly multicultural community for its time. Its largest factories employed up to 12,000 workers, and some historians consider it to be the second fastest growing city during the 19th century after Chicago. 

However, Łódź’s dominance in textiles also contributed to its demise when, after the fall of Communism, Poland lost its Soviet markets. The country was flooded with cheaper goods from Asia, and Łódź’s textile industry collapsed within six months. With unemployment hitting about 30%, the city of 900,000 inhabitants also witnessed a mini-exodus.

Change of direction

Łódź’s industrious spirit, however, remained strong. Smaller Polish enterprises replaced the fallen Soviet giants. From the late 1990s onwards, it attracted foreign investment into manufacturing. Following the advice of consultancy McKinsey, Łódź’s strategy was to be a European hub for household appliances. 

This proved highly successful with the arrival of German and US sector leaders BSH and Whirlpool, respectively. Due to their success, as well as the city’s talent pool, these companies added business processes to their factories, such as logistics, R&D and IT. BSH and Whirlpool now employ about 20,000 people in Łódź. The city recently attracted Germany’s Miele, another giant in the sector, which will build a manufacturing plant.

Łódź’s many universities also played a role in the city’s rebirth. “Our young, educated and open-minded people facilitated a change in mentality. People realised that they could do more than just textiles or industry. This process of diversification started largely thanks to young engineers. We now have large modern sectors such as R&D, IT, BPO and shared services centres [SSC], which employ more than 20,000 people right now,” says Łódź mayor Hanna Zdanowska.

Down to business

As Europe’s leading location for BPO/SSC, Poland is expected to employ more than 300,000 people in the sector as early as the first quarter of 2019, according to the Association of Business Service Leaders. Łódź hosts 20% of the country’s business services centres.

The city is also benefiting from Poland’s wave of foreign investment over the past decade. Following 2017’s record high, greenfield FDI into Poland is on track for another stellar performance in 2018, according to greenfield investment monitor fDi Markets. Łódź already boasts many major foreign investors, such as Bosch, TomTom, Fujitsu and Samsung’s Harman. Despite this diversification, the city still enjoys a substantial proportion of industry in its agglomeration, with factories producing steel, white goods and hi-tech engineering parts.

Łódź’s unemployment rate has hovered around the 6% mark over the past few years, similar to the national average. As the third largest city in Poland, and 13th largest non-capital city in Europe, Łódź’s population stands at 700,000 (about 80,000 of them students). However, unofficially the number is closer to 900,000, including as many as 70,000 unregistered Ukrainian inhabitants.

The hidden city

Walking around Łódź can feel like a stroll through the 19th century. There are chimneys at every angle, and it is impossible to miss the beautiful red-brick factories and eye-catching period homes.

“Łódź is basically the only big city in Poland that wasn’t destroyed in the Second World War, for better and for worse," says Adam Pustelnik, director of Łódź’s Investor Service and International Co-operation Bureau. "As a result, the city did not benefit from the massive, decades-long post-war funding that took place to reconstruct Warsaw and Kraków’s historic centres. The destruction of war in Wrocław, which also saw a huge flood in 1997, also [sparked] massive investment,” 

Between the world wars, Łódź was sidelined due to its lack of ‘Polishness’ and cosmopolitan make-up (the aforementioned German, Russian and Jewish citizens). Transportation lines bypassed the city that is now one of Europe’s most promising logistics hubs.

“For many decades Łódź was forgotten. [To this day], when foreigners think of Poland they think of Warsaw, Kraków, Wrocław and Gdańsk. Where is Łódź, the third biggest city in Poland?” says Andrzej Kuczyński, project management office director at TME, one of the largest global distributors of electronic components, which was founded in Łódź. “For a long time, there was no political will to invest here. Now it’s our time. Łódź’s Mayor Zdanowska has really helped raise our profile over the past eight years. Development and investment have [come in very quickly].” 

Moreover, as the city became the epicentre for household appliance production, logistics and much more, its aged or non-existent infrastructure has developed rapidly. The century of neglect also ended with Poland’s EU entry, which spurred huge amounts of revitalisation funding.

“Łódź needs billions more in funding, an endless amount of money to revitalise its red-brick buildings. The city is [bringing it in] and we have the biggest revitalisation programme in Europe – with around €1bn dedicated to our red brick. However, this still meets only 20% of the need,” says Mr Pustelnik.

This article is sourced from fDi Magazine
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