After enjoying 30 years of growth, Central and Eastern Europe finds itself in a classic chicken-and-egg quandary: to transition upwards from a low-cost outsourcing and manufacturing base it needs world-class talent. But to attract global talent and retain its home-grown experts it needs to offer sophisticated and rewarding ‘knowledge economy’ roles, appealing infrastructure and good quality of life.
Neither of these objectives can wait. It’s estimated that 18 million nationals have left CEE since the collapse of communism. Both skilled and unskilled workers have migrated, but graduates have done so more frequently, staying abroad for longer.
The region’s governments have no choice but to develop their economies and tackle their looming skills gaps in tandem.
“Politicians need to realise that, from young people’s perspective, countries need to compete for talent just like companies do,” says Andreas Treichl, CEO of Erste Group.
Earlier this year, Erste Group partnered with The Legatum Institute to produce the Central and Eastern European Prosperity Report – its third annual edition. The report highlighted talent migration as a key factor challenging the region’s ability to advance its economies. The solutions to this remain complex, varied and widely debated – from transforming university education, to supporting entrepreneurialism and recognising the importance of quality of life as a draw for talent.
Ondrej Vlcek is CEO of FTSE 250-listed cyber-security company Avast, one of Czechia’s international success stories. He believes CEE must reduce the reliance on FDI that has underpinned much of the region’s recent prosperity gains. Companies in the region need to move up the value chain and generate their own products and services rather than supply others.
To do this, he says, tertiary education needs an overhaul – something governments may feel less confident investing in while graduates continue to take their skills abroad.
Although there has been a dramatic increase in university uptake since 1989, teaching fails to address the needs of the market, and employers find that CEE students finish their studies without having learned to apply their technical skills to real-life situations. Graduates feel similarly unequipped. Only 38% of young people and 35% of employers agree that CEE graduates are properly prepared for work.
“Universities must shape up,” says Vlcek. “We have a great system to educate craftsmen, but we need to learn how to create products and market them globally.” He believes tech talent moves abroad to learn how to transform their hard skills into something useful in the workplace.
SUPPORT FOR ENTREPRENEURS
One of those tech-savvy expatriates is Razvan Creanga, Romanian-born CEO of hackajob, a UK-based start-up that also operates in Iasi, one of Romania’s largest cities.
Creanga agrees that establishing a better tech educational infrastructure at home is key (he cites the UK’s coding bootcamps as an example to follow), not just for the tech-minded young but also for older people needing to ‘skill up’ for the changing economy.
He left Romania 11 years ago to study in London. Once there, he discovered a thriving start-up ecosystem. To foster a more business-friendly dynamic in CEE, he feels policymakers and entrepreneurs need to engage with each other directly – and governments must take on board the feedback of expat entrepreneurs.
“In the UK, if I have a question, I can find a person to talk to in an hour. In Romania there are lots of incredibly smart people, but less of a network for entrepreneurs,” he says. His observation highlights the noted dearth of social capital in the region, a legacy of the communist era.
Creanga shares his experience with budding entrepreneurs, many of whom lack the knowhow to take their product to market effectively. “We need to take time to share what we’ve learned,” he says.
ATTRACTING TALENT FROM ABROAD
Both Creanga and Vlcek feel CEE governments need to reform a time-consuming and expensive bureaucracy that stifles homegrown start-ups and companies and deters outside talent.
“This region has done a lousy job at inviting people from other parts of the world,” says Vlcek. “In Avast’s Prague headquarters, we have almost 50 nationalities, but it’s a total pain in the butt to [hire from abroad].” He feels the system is “optimised to make it difficult” to hire skilled non-CEE workers.
Beyond the bureaucratic burden, attracting talent from abroad is hampered by ingrained perceptions about quality of life in the region.
Oana Toiu, co-founder of Social Innovation Solutions in Romania, feels policymakers haven’t sufficiently understood that they are in competition with other countries to attract the brightest and best.
“Highly skilled people are going to choose their destination based on the quality of life in a community: the quality of air, the quality of kindergartens, education and culture,” she says.
Andreas Treichl agrees. He cites Erste Group’s recent experience of hiring non-European AI specialists for its digital platform, George. The bank had hoped to locate most of its hires in cities such as Bratislava, Bucharest and Prague. But most were much keener to live in Vienna, despite higher living costs.
In the end it was about the best place to live, to have a family. The thinking, says Treichl, was “I may have 500 euros less a month, but I’d like to be somewhere with good education and medical care and everything else.”
Despite these challenges, Treichl sees CEE as well placed to compete with China and the US, provided economic realities are grasped. “This region has a fantastic opportunity to offer young people – if we get an infrastructure that young people actually like,” he says. “We need to build this region on our own and we have built the strength to do it, so let’s just do it.”