Peter Stracar, CEO of GE for CEE: Prosper Locally, Compete Globally

Central and Eastern Europe (CEE) has been celebrating the 25th anniversary of the economic, political and social transition, which was followed by a uniquely successful transformation. The efforts of a quarter of a century have resulted in the reintegration of the region into the mainstream global economy.

2014-09-01 14:26:52

Significant, export oriented growth put most countries in the high income category, when compared on a global scale. Not bad for a region with such a tough communist history, one could rightly say. Can CEE now sit back when reading positive economic forecasts about its future?

Having worked in Asia and now back in CEE as GE CEO, I am strongly convinced that the region must stay vigilant. There is the need for a regional vision for the next phase of sustainable development in addition to thinking just on country or European levels. CEE should learn from its own recent experience while adapting best practices and refraining from failures of both West and East to successfully compete in today uncertain world. In this way we can avoid what the literature calls the „middle-income trap", invented to describe post WW2 transformation and growth. I say "we" deliberately as I consider GE a partner and even an accelerator in this much needed intellectual effort.

Nowadays world economy moved into another phase since 2008. As Jeff Immelt, GE president and CEO, said in 2009 "the global economy, and capitalism, will be reset in several important ways. The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner." Now, five years later, we can state that time has proved him right.

During this time we have come to realize how interconnected the economies of the world are. Wealth creation patterns and redistribution have also changed dramatically having a major impact on the living standards and raise of the middle class across society.

Nowadays governments, the business sector and NGOs should be looking for ways to steer through the tough times that tick both boxes: prosper locally and compete globally.

GE is one of the few truly global companies. Our experience, from working in more than 100 countries on infrastructure modernization and as an investor, tells us that collaboration between governments and key players is the best way to create and realize a satisfactory long term vision for the future. One has to find a couple of focus areas where a difference can be achieved first and then start execution. As CEE's largest US investor, this translates into the following three steps here.

Create a common CEE vision as an innovation hub

Accelerate growth by focusing on transforming of existing industries and adding new ones, using partnership between governments, local industry and international technology companies as a tool for modernization. Innovation can be added to the region's existing strong manufacturing base spanning R&D for global markets and piloting local applications, to the rapid deployment of advanced technologies to increase the competitiveness and efficiency of key industries such as energy, healthcare, transportation and the service sector.

A good example is the success of the vast automotive industry that has been established in CEE in recent years. Local suppliers thrive, local salesman offer these vehicles and countries pride themselves on their manufacturing achievements. However, a regional, joint "automotive valley" technology development competency offering that would build on the existing automotive cluster would be an opportunity for more high value added work to the region in the next phase.

Design a new CEE competency map

So far the region has managed to build on its strong industrial foundation, that has roots from the 19th century, and its well-educated, motivated talent pool. It is important to stress that people in the region are hungry for success. The automotive industry demonstrates how new competencies can be built through collaboration between local players and international giants with the support of governments. They have brought here much needed capital, technologies and corporate culture. After ditching their socialist era Zaporozeces, Ladas and Trabants many CEE citizens now drive modern cars with international brands that have been manufactured locally, mostly for export.

The region also has offered an opportunity for global technology companies like GE, which has built on existing competencies and added new global trends driven ones to serve its world markets as part of our supply chain. Currently we have 22 manufacturing plants here with exports of USD 7 billion and have started adding design and technology development to our local portfolio several years ago.

Building on local competencies, GE Aviation set up its first manufacturing operation in South East Europe in Romania, which now produces and exports jet engine parts for the new generation of GE aircraft engines. Also, through its new Oil & Gas production facility in Romania, the former Lufkin plant, GE delivers beam pumping units to customers in North America, the Middle East, North Africa and the Far East just to mention a few.

Rebrand, and sell the region

What is the current brand of CEE? A good location for cost efficient manufacturing. Times have changed since the start of the transition 25 years ago, and so have the region's advantages and offerings. It is time to create a new brand for the region which includes business friendly pro investment climate and innovation as well. It requires a change of our mindset to dare to do things differently. This will not come easily. As Edison, GE's founder, said, opportunity is missed by most people because it is dressed in overalls, and looks like work.

As for scale, the region has the power: some countries in the region might be small, but a regional approach would bring the desired volume for a new growth region to be created here: V4 (Poland, Czech Republic, Slovakia and Hungary), for example, would count as the 15th biggest economy in the world. And if you add the all post-communist countries GDP in the region, CEE would rank between India and China, yet with only 130 million citizens.

GE already looks at this region as an innovation hub in addition to hosting our strong manufacturing base. If I want to summarize the last 25 years, this Region has made GE more competitive and we have accelerated growth here. We work with the countries but have also been an active promoter of the regional approach as well. In order to help to surpass country level dialogues we have established a unique GEforCEE, a regional digital platform to discuss the economic prospects here.
In a few days from now, leaders from Europe and CEE who can make a difference will gather at the Krynica Economic Forum in Poland. This great annual meeting place was started just after the system change 25 years ago by visionary Polish leaders. I will be speaking at a plenary about: "Where the European Economy should be heading to?"

The 3000 expected participants will have a lot to say about how we want to secure a better place for CEE in the global game as a strengthening part of the EU. We have to work on this together. Are you in?