Discussion Papers 2008.
Socio-Economic Analysis of the Carpathian Area 110-115. p.
12 Industry in the Carpathian area
12.1 Industrial typology of the Carpathian regions
Central European space examined in the scope of research demonstrates a high
degree of heterogeneity in all respects; industry being one factor among several.
As elsewhere, development gradients apply, showing a shift from more advanced
activities concentrated in regions closer to the core of Central Europe (the Czech
Republic, Austria and Southern Germany), and less advanced ones in the eastern
border areas. The predominant gradient progresses from west to east, going in a
southwest-northeast direction in Poland, and in a northwest-southeast one from
Hungary to Romania and Serbia. Added to this is differentiation along the urban
dimension, with metropolitan (capital) regions benefiting from agglomeration
economies, as well as a high concentration of know-how, R&D activities and
advanced financial services. Except for the Katowice conurbation in Upper Silesia
and Kraków in Lower Poland, all of these double as capital regions. The next
level of the urban network, the large cities, which are regional centres, they are in
turn followed by small towns, the most typical non-rural settlement type in under-
urbanised Central Europe. Generally, an industrial typology can be constructed
along these two axes (Table 23).
Highly urbanised core regions have undergone significant tertiarisation since
the transition. While a growing emphasis on the service economy is a global phe-
nomenon, Central European post-socialist states experienced it at an accelerated
rate during the transition from industry-oriented planned systems to market
economies. Central regions were at the forefront of the change; while they were
previously among the most significant industrial regions4, the 1990s brought a
rapid downsizing and the disappearance of large firms as business (among them
financial) and consumer services replaced industry as the prime engines of
growth. The main question regarding industry was the question of its heritage –
i.e. brownfield redevelopment and combating unemployment. Nevertheless, while
the concentration of industrial employment has declined or stagnated in metro-
politan areas, they have been successful in keeping some of the most advanced
sectors, especially in knowledge-intensive fields such as pharmaceuticals, elec-
tronics, optics and certain types of chemistry. The supporting R&D framework is
another major advantage; public and private research institutions are overwhelm-
4 In 1971, the territory of Central Hungary concentrated 40% of national industrial employment and
32% of investments. By 1991, this had changed to 29% and 30%, and by 2004 to 26% and 25%,
respectively. In the same interval, Bucharest went from concentrating 18% of employment and
14% of investments to 13–11% in 1991 and to 13% of employment in 2004 (no data on investment
concentration was available for that year).
Industry in the Carpathian Area.
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INDUSTRY IN THE CARPATHIAN AREA
111
ingly established in metropolitan areas, while it is much less common in regional
centres and almost completely absent below this level. Slovakia and Hungary
show the highest degree of concentration here, whereas Poland, the Czech Re-
public, Romania and Ukraine have their (relatively speaking) significant lower
level of regional centres.
Table 23
Industrial typology in Central Europe
Geographic gradient
Core Peripheral
Higher
Service economy with high value Heavy industrial centres, old
added industrial branches
industrial regions
Urbanisation
Lower
Capital-intensive industry with a Labour-intensive small-town and
high FDI ratio and emerging
rural industry
networks
Source: Author’s construction.
Core regions with a lower urbanisation level – usually on the western borders
– benefited most from Foreign Direct Investment transfers. We can see this most
clearly in the Austria–Slovakia–Hungary cross border area, which has become a
recipient of machine industry investments. It is notable that unlike metropolitan
core regions, these areas lacked autonomous research, development and control
functions; their prime advantages being good accessibility, competitively priced
yet well-qualified human resources and an already established industrial milieu.
These advantages were fundamental in the first waves of capital inflow. With
increasing labour costs, and the catching up or reindustrialisation of more eastern
regions, their role had been gradually diminishing. Domański (2003) argues that
there is presently a shift from ‘costs’ to ‘markets’: cost advantages are replaced by
factors such as market access, the quality of local services, the availability of
skilled workforce and so forth.
Yet these factors are in themselves insufficient to maintain the current growth
dynamics. It has been argued (e.g. by Turnock 2001, Csizmadia – Grosz 2002,
Worrall – Donnelly – Morris 2003, Grosz – Rechnitzer 2005) that local produc-
tion systems and encouraging innovation are the long-term guarantees of retaining
competitiveness. Supplier networks, industrial clusters and the institutional back-
ground encouraging their formation (industrial parks, incubation centres, etc.)
were priorities for state industrial (and occasionally regional) policies, both to
encourage the location of new industrial investments, and to increase the em-
beddedness of already existing capacities. In multiple cases (e.g. Western Trans-
Industry in the Carpathian Area.
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112
SOCIO-ECONOMIC ANALYSIS OF THE CARPATHIAN AREA
danubia in Hungary), local and regional administration showed a better ability to
manage these low-level systems than central intervention; in the federal state of
Austria, regions already have the competences required for these tasks.
Old Industrial Regions generally take a peripheral spatial position but have a
high urbanisation level due to development dating back to the 19th century or
socialist industrialisation policy (planned cities such as Nowa Huta, Tiszaújváros
or Ózd belong to this latter category). Here, transformation’s consequences were
often industrial depression as monofunctionality, the loss of markets and the in-
ability to compel large-scale producers to downsize or close down. Urban centres
with a strong chemical industrial base were more successful at weathering the
crisis, while metallurgy suffered worse and military industry was even harder hit.
The causes of depression, and policy responses attempting regeneration, are
close to Western European antecedents; the main differences were the extent of
the problems (due in part to the delay in their mamagement) and the regional
context. Monofunctional industrial structure often coincides with peripherality, as
heavy industrial plants were preferentially located in low-developed regions as a
policy instrument. With the decline of traditional sectors, these deficiencies were
once more brought into light. Coal and steel regions like the Jiu valley, Borsod-
Abaúj-Zemplén County or Košice in Eastern Slovakia are typical examples.
Ukrainian regions, whose centres are large cities5 surrounded by under-urbanised
peripheral areas, showed these symptoms to an even greater extent, as their
economies were linked to production systems supplying the entire Soviet Union.
Industrial regeneration led to mixed results. Growth based on traditional sec-
tors has was most notable in Upper Silesia (where it is coupled with investments
into machine, especially automotive industry, as well as advantages stemming
from the US conurbation’s metropolitan character), but also this is where compa-
nies could modernise their technology, invest in process innovation and possibly
diversify into higher-end products. Alternative activities based on the local
knowledge base also produced good results, and the presence of strong secondary
and tertiary technical education had a positive influence (e.g. in Ostrava or Ka-
towice). However, the main feature of industrial development in urbanised pe-
ripheral regions is still de-industrialisation, where services are incapable of re-
placing the economic role of industry. De-skilling, the loss of qualified human
resources to low replacement and out-migration, precludes redevelopment and
menaces with conserving the peripheral character of the areas under scrutiny.
Similar phenomena are noticable in Borsod, Eastern Slovakia and several Roma-
nian counties.
5 Lviv has 860,000 inhabitants, Chernivtsi 242,000 and Ivano-Frankivsk 204,000. Uzhgorod, with
111,000 inhabitants, is the smallest of them, and is closer to the under-urbanised peripheral type.
Industry in the Carpathian Area.
In: Socio-Economic Analysis of the Carpathian Area.
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INDUSTRY IN THE CARPATHIAN AREA
113
The final industrial profile is found in under-urbanised peripheral regions. It
may describe entire administrative units such as Transcarpathia, Ukraine, or en-
compass areas distant from regional centres. They have always been underdevel-
oped, located away from core areas and capital cities. Their industrialisation,
typically in the second half of the 20th century, was a conscious decision on the
part of development policy to modernise their economies. Since resources were
scarce and the main social problem to be solved was unemployment, labour-in-
tensive branches in light and food industries became the typical form of invest-
ment. These were created with modest capital expenditure, but they were able to
soak up labour surplus. While most of industry in the Carpathian area is semi-
peripheral in the world economy, these areas saw peripheral industrialisation even
in the national context, carrying over to the post-transformation period.
Peripheral industry, located in small towns and large villages, has been show-
ing continuing signs of stagnation. Undercapitalisation, fragmentation and market
loss remain persistent problems (although the process is more gradual than the
rapid collapse of heavy industry), while the local labour market also shows signs
of weakness. However, it is possible to see a resurgence of light industry
branches, notably textiles, on the eastern peripheries of Central Europe. Surviving
companies have sometimes been successfully integrated into continental produc-
tion networks; progressing from simple assembly to own brand and own design
manufacturing. This trend is most strongly noticable in Ukraine and Eastern Slo-
vakia; Polanďs largest textile centre, Łódz, is outside the current study area. Pe-
ripheral regions had also been locations of subsidiaries and production sites for
larger industrial companies in the past (Hungary and Poland pursued industrial
deconcentration policies to this effect from the 1960s and onwards), but the ma-
jority of these have since folded or greatly reduced operations. Romania, Ukraine
and Serbia show better survival rates, or more precisely attrition by gradual ero-
sion instead of an initial transformation shock.
12.2 The changing spatial structure of industry in the Carpathian area
The role of industry in total employment shows a high level of variety in the study
area, and is furthermore in contrast with the de-industrialisation process which
Central Europe has undergone since transformation. As seen in Figure 11, Roma-
nian counties could be considered to be the highest industrialised where employ-
ment was concerned, and the same figure would be lowest in national capitals and
agrarian districts (c.f. the Hungarian Great Plains, Southern Slovakia and Polanďs
Świętokrzyski region). On the other hand, Romania also experienced the highest
Industry in the Carpathian Area.
In: Socio-Economic Analysis of the Carpathian Area.
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114
SOCIO-ECONOMIC ANALYSIS OF THE CARPATHIAN AREA
level of de-industrialisation after 1990–1991.6 Therefore, it is likely that a high
proportion of the secondary sector in peripheral regions or districts reflects an
absence of job opportunities in others. Old Industrial Regions are the opposite:
here, the highly developed urban network provides a better base for tertiary de-
velopment, and consequently, many of them are no longer leaders in their own
countries.
Figure 11
Industrial employment, % of total (2004)
Source: National statistical yearbooks.
Ukraine – 2005.
6 On the national level, the number of industrial employees in 2004 reached 100% of 1990–1991
figures in Slovakia, 94% in the Czech Republic, 67% in Poland, 64% in Hungary, 50% in Serbia
and Montenegro, and last 48% in Romania.
Industry in the Carpathian Area.
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INDUSTRY IN THE CARPATHIAN AREA
115
Diverse industrial branches follow different patterns of distribution. Mining
and quarrying, which has seen dramatic decline, is to be found in a few large con-
centrations (especially Upper Silesia, Gorj, Prahova and Dâmboviţa) as high costs
and shrinking demand made it uneconomical to preserve small capacities. Except
Upper Silesia, mining areas are modestly urbanised and have a peripheral char-
acter.
Larger metallurgical units are located in the urban centres of Old Industrial
Regions (Borsod-Abaúj-Zemplén County in Hungary, Eastern Slovakia, Mora-
vian Silesia, Upper Silesia, Hunedoara and Reşiţa). All of them have experienced
waves of downsizing (and in the case of Ózd and Miskolc in Hungary, close to
complete dissolution), but those that remained are being integrated into global
production networks and benefiting from increasing demand. In the case of
smaller, scattered combines in Ukraine and Romania, this process has not yet
been significant. Chemical industry’s patterns are similar, but they, especially
petrol chemistry, have been rather able to adapt themselves to market demands,
and declined less.
As opposed to metallurgy, the distribution of machinery production has be-
come more even; while the former became more concentrated because of clo-
sures, the latter was one of the primary targets of FDI transfers, leading to the
growth of previously smaller community close to the western borders (e.g. Győr-
Moson-Sopron, Komárom-Esztergom, Trnava and Trenčín). So far, continuities
have been stronger than change. An examination of Central European location
trends in the automotive industry (Worrall – Donnelly – Morris, 2003) proves that
inherited capacities are still dominant; and even new investments are located in
regions with a strong tradition in machine manufacturing.7
High value added and knowledge-intensive industries are almost purely met-
ropolitan, although some manufacturing functions have been also located in un-
der-urbanised core regions and, more recently, in Old Industrial Regions as well.
In addition to agglomeration economies, the availability of a highly qualified
workforce, R&D and advanced business services is crucial.
Textile and clothing (footwear etc.) industries are predominantly peripheral (a
traditional branch of small towns) or to be found in Old Industrial Regions, where
they were located to reduce hidden unemployment among women. Presently,
rising labour costs are resulting in their decline in western regions, while restruc-
tured combines on eastern peripheries are, again, starting to grow. Finally, food
industry’s distribution can be considered even; naturally, its role is stronger in
regions where other branches are weak or not present.
7 Greenfield sites were in the 1000 to 4000 range, with regards to the employment greatly
outstripped by Dacia in Piteşti (21,000), Bielsko-Biała (14,500) and Tychy (7,200).