fDi Markets Newswire:

Home / Special Reports / How Łódź came back from the brink

Manufaktura

The central Polish city of Łódź faced ruin when the textile industry on which it was built collapsed. Almost 30 years later, it is a thriving destination that has found a way to turn its once-crumbling industrial landscape into a cradle of academic achievement and advanced manufacturing. Natasha Turak reports.

Visiting Łódź – pronounced ‘woodj’ – it is impossible not to be struck by the stunning architectural legacy of the city’s industrial past. Enormous former textile factories populate the skyline, and while many are currently abandoned, their red-brick grandeur makes for captivating surroundings. Once a painful reminder of past economic decline, these buildings now serve as both a reminder of the city's identity and a motivation to revive Łódź’s creative origins.

Poland’s third largest city and home to 700,000 people, Łódź's growth  sprang essentially from nowhere on the back of the textile industry, turning a small village of a few hundred inhabitants in 1800 to a city of half a million people by 1910. It experienced some of the fastest population growth in that time on a global level, comparable to the US city of Chicago. Settled by a mix of Poles, Russians, Germans and Jews with a feel for the industry, the central Polish city became known as Europe’s textile hub.

Following the fall of communism in 1989, textile factories supplying the Soviet bloc shuttered almost overnight and Łódź fell into economic ruin. Unemployment neared 30% and the population plummeted as residents sought work elsewhere. The city had hit a point of desperation, and some residents were even struggling to eat.

Fighting back

Łódź’s turnaround was incremental but striking. In the late 1990s, the Polish government launched a special economic zones initiative, which would establish 14 business sites offering tax and support incentives to private investors creating local jobs. Łódź Special Economic Zone (LSEZ), with its central location at the junction of north-south and east-west highways crossing Poland and its irresistibly low labour and land costs, began attracting the attention of investors as it pursued economic diversification.

The influx of foreign companies into Łódź in the mid-2000s was so remarkable that the New York Times ran a feature on the city’s impressive “wave of foreign investment” back in 2009, celebrating the fact that Łódź managed to stay afloat during the financial crisis. The recession had forced companies to locate where they could cut costs.

A stream of multinationals including Infosys, Fujitsu, Proctor & Gamble, Dell and ABB opened facilities in and around LSEZ. Beyond the cost savings and central location, only 130 kilometres from the Polish capital Warsaw, companies cited the healthy supply of human talent in areas such as IT, engineering and language fluency. Unemployment in Łódź is currently about 7.7%, its lowest level in years.

“We bet heavily on sectors such as BPO, R&D and IT, and these three sectors employ about 17,500 workers working in 70 different office centres [in Łódź]. This is certainly a driving force for employment of young graduates,” says the city's mayor, Hanna Zdanowska. She also highlights Łódź's household appliances industry, one of the biggest in Europe, which provides more than 10,000 manufacturing jobs. US supplier Whirlpool and Germany’s DHS are among the major players.

“Łódź was always very important for us,” says Zygmunt Lopalewski, Whirlpool's representative for eastern Europe. “Very good business results, growth potential and strategic geographic position were why we decided to be in Łódź. A huge number of talented and educated people were also among the drivers.”

What can still be improved, according to Mr Lopalewski, is infrastructure. “We believe the already constructed airport could have more connections with key European countries. We are also waiting for further development of the road and railway infrastructure. It's crucial for the growth of the city and the Łódź region,” he says.

Investing in talent

The city has made efforts to expand its logistics capabilities as part of its New Centre of Łódź initiative, which spans 100 hectares of urban regeneration. The new Łódź Fabryczna Central train station and several road and underground transport expansions currently under way are vital components of this.

“Aside from logistics, we have created a sustainable development strategy in co-operation with McKinsey,” says Ms Zdanowska. “Our strategy aims to support sectors largely based on the potential of young people, 100,000 of whom are students.”

The University of Łódź, Łódź University of Technology (TUL), the Medical University of Łódź, and the National Film School are among Łódź’s eight universities, many of which provide programmes combining scientific fields, management and languages.

“Often at the beginning of a company’s activity in this region, they come to the university director and see what the human and academic potential is,” says Dorota Piotrowska, deputy head of TUL’s International Faculty of Engineering. “We have many partnerships with companies, and this benefits both parties.”

Mikolaj Lugowski, head of the operations centre at Nordic financial services group Nordea, which employs 1500 people across three offices in Łódź, adds: “Looking at curricula, the one you find in Łódź is a very good fit for back-office and financial services. Łódź has a history of being a ‘sleeping room’ for Warsaw – people used to live here and commute to Warsaw for work. It’s changing now, and a lot of people are even doing the opposite route.”

Marcin Siech, Poland managing director for Swedish IT firm Cybercom, which employs 200 people in Łódź, agrees. “Łódź has been a major academic centre for years, providing well-qualified staff. It is also place where people feel a strong need to develop their city,” he says. “After the fall of the textile industry, the agglomeration was slightly forgotten. Nowadays, the city attracts investors from new technology sectors and this will definitely distinguish it in the future.”

Making a name

The challenge now, city representatives say, is boosting Łódź’s profile. “We need to fight stereotypes, because once an investor or visitor comes to Łódź, they start to believe in the city and see its potential,” says Magda Kubicka, development specialist at LSEZ. Her colleague, Jakub Wojtczak, agrees. “We just need sustainable progress, step by step,” he says. “We don’t need a revolution like we did 30 years ago.”

Part of this progress is Łódź’s bid to host the Expo 2022 world’s fair. Adam Pustelnik, director of the investor assistance bureau at the Łódź municipal office, notes that few cities have made as radical a change as Łódź has. “Because of historical circumstances, we’ve had to run twice as fast to fill the development gap,” he says. “This has given the city a uniqueness in terms of its spirit, ingenuity and development model. And the Expo 2022 project is coherent with the city’s revitalisation plans.”

Many of Łódź’s old factories stand reborn: one houses the LSEZ, others have been converted into high-end hotels and apartments, and yet another is home to Manufaktura, an expansive shopping complex fitted with restaurants, bars and even an outdoor beach volleyball court. The charming Piotrowska Street in Łódź’s Old Town hums with visitors and live music. ‘Off Piotrowska’, an abandoned warehouse-turned-edgy food venue, would make even London hipsters envious – at a fraction of London’s prices.                                                                                      

“The future of Łódź is going to be decided by its inhabitants, which translates into the labour force,” says Ms Zdanowska. “And development will occur where young people want to live, so quality of life is critical in this respect. All of these activities are aimed at improving the quality of the city and promoting further development. We have all that is necessary for that end along with fantastic young people, so the future is ours.”

This article is sourced from fDi Magazine
fDi Magazine

The fDi Report 2018: Free Download

The fDi Report 2018 promobox

Crossborder investment monitor

fDi Markets - Cross border investment monitor

fDi Markets is the only online database tracking crossborder greenfield investment covering all sectors and countries worldwide. It provides real-time monitoring of investment projects, capital investment and job creation with powerful tools to track and profile companies investing overseas.

Click here to find out more about fDi Markets

Corporate location benchmarking tool

fDi Benchmark is the only online tool to benchmark the competitiveness of countries and cities in over 50 sectors. Its comprehensive location data series covers the main cost and quality competitiveness indicators for over 300 locations around the world.

Click here to find out more about fDi Benchmark

Research report

fDi Intelligence provides customised reports and data research which deliver vital business intelligence to corporations, investment promotion agencies, economic development organisations, consulting firms and research institutions.

Find out more.