Could Eastern Europe Be the Next Tech Powerhouse?
While global attention remains absorbed by the ongoing conflict in Eastern Europe, a quiet innovation wave is transforming the region’s economies.
Central and Eastern Europe (CEE) is emerging as a fertile ground for cutting-edge technology, giving rise to a new generation of tech "unicorns" – privately held startups valued at over $1 billion. Romania’s UiPath, a leading force in automation, is helping businesses worldwide streamline processes and boost productivity. Poland’s Docplanner is revolutionizing healthcare with its AI-powered platform, connecting millions of patients with doctors. Croatia’s Infobip, leveraging AI, is seamlessly connecting businesses, governments, and citizens through advanced communication technology. Meanwhile, Bulgaria’s Payhawk is transforming corporate finance with its innovative approach to expense management.
These success stories highlight the transformative power of AI, fueling breakthroughs in healthcare, finance, and workplace productivity. The next revolutionary tech innovation could well emerge from a Warsaw startup incubator, a Bucharest university lab, or a Kyiv coworking space – all developed at a fraction of the cost of Silicon Valley ventures.
Some argue that this technological surge is happening despite the significant challenges facing the region. Others argue that these challenges are actually driving innovation. As CEE countries strive to maintain their competitive edge in traditional industries like auto manufacturing, they also grapple with post-pandemic financial pressures exacerbated by the EU’s revised budget rules.
AI has the potential to be a game-changer for CEE countries, generating immense value across vital sectors like healthcare and education. It can also empower governments to combat foreign interference and safeguard critical energy networks.
Notably, CEE countries possess a strong foundation for a thriving tech sector, boasting a critical mass of engineers and STEM graduates. Company valuations in the region soared more than sevenfold between 2017 and 2022. The share of outside-EU investment, steadily increasing, rose from 9 percent in 2022 to an impressive 21 percent in 2023, highlighting the region’s growing global appeal.
However, challenges remain. Recent research suggests CEE economies still lag behind their Western European counterparts in infrastructure and investment. With a population exceeding 150 million and a combined GDP of almost €2.5 trillion ($2.7 trillion), the region’s potential is vast. Yet, total private equity investment plummeted by 40 percent in 2023, reaching €1.7 billion.
"Despite the geopolitical turmoil, the region has demonstrated remarkable resilience," observes Sona Muzikarova, a non-resident senior fellow at the Atlantic Council.
The rise of populist parties poses another serious threat, potentially undermining responsible macroeconomic management and deterring partners and investors. Instead of addressing fiscal pressures through spending cuts, many CEE governments have opted to raise corporate and value-added taxes, prioritizing short-term relief over long-term economic stability.
To unlock its full potential, CEE countries need to take decisive steps:
1. Invest in STEM Education: A shortage of skilled professionals is the region’s biggest obstacle to becoming the next Silicon Valley. To support the burgeoning startups in biotech, finance, and robotics, a robust talent pool is crucial. While education is a public good, the slow pace of reform in CEE countries necessitates a greater focus from the private sector on human-capital development.
2. Embrace European Integration: Deeper integration with Europe can fuel innovation by facilitating the cross-border exchange of ideas, talent and capital. The European Commission’s AI Factories initiative, providing developers with access to computing power, data, and other resources crucial for training advanced AI models, is a positive step. Several CEE countries are also exploring structured technological partnerships with other European governments to promote shared strategic priorities.
3. Attract Foreign Investment: Despite geopolitical instability and a recent decline in private equity inflows, the region has demonstrated remarkable resilience.
CEE economies poised to play a pivotal role in Ukraine’s reconstruction must address infrastructure gaps, funding shortfalls, and regulatory uncertainties that could deter potential investors.
enhancing the region’s appeal is vital, not just for the tech sector, but also for advancing critical digital infrastructure projects, including 5G networks, data centers, and quantum computing facilities.
For CEE countries, the stakes are high. Embracing AI’s potential is crucial to avoid watching a generation of talented individuals seek opportunities elsewhere.
"Despite the geopolitical turmoil, the region has demonstrated remarkable resilience,” observations. — Sona Muzikarova
Disclaimer: Views expressed by writers in this section are their own and do not necessarily reflect Arab News’ point of view
## Could eastern Europe Be the Next Tech powerhouse? An Interview with Dr. Anna Petrov
**World Today News:** Dr. Petrov, we’re fascinated by the burgeoning tech scene in Central and Eastern Europe. You’ve spent years studying innovation in this region. Could you elaborate on what makes it a potential tech powerhouse?
**Dr. Anna Petrov:** ItS an exciting time for this region.While the world has been focused on the Ukraine conflict, a quiet tech revolution has been underway.CEE boasts a highly educated workforce, particularly in STEM fields, and a culture of resilience and adaptability.
**World Today News:** we’ve seen examples like UiPath, Docplanner, and Infobip – all accomplished unicorns coming from CEE.What is driving this wave of innovation?
**Dr. Anna Petrov:** Several factors contribute. First, we’re seeing an influx of foreign investment, particularly from Western Europe and the US. They recognise the potential for high returns at relatively lower costs.
**World today News:** Some argue this surge is driven by the need to overcome economic challenges.
**Dr. Anna Petrov:** That’s certainly a valid argument. CEE countries are facing economic pressures, but they also view technology as a key driver for future growth and competitiveness. AI,in particular,offers solutions across various sectors,from optimizing manufacturing to reforming healthcare systems. It enables them to “leapfrog” traditional stages of progress and unlock new possibilities.
**World Today News:** How are CEE countries leveraging AI specifically?
**Dr.Anna Petrov:**
Romania’s UiPath is a prime example, automating processes to boost productivity for businesses globally. Poland’s Docplanner, meanwhile, is revolutionizing healthcare access. These are just two examples of AI being utilized to address real-world challenges and create impactful solutions.
**World Today News:** What are the potential challenges facing this emerging tech sector in CEE?
**Dr. Anna Petrov:** There are hurdles, of course. Access to funding can be a concern, particularly for early-stage startups. Building a robust ecosystem, including incubators, accelerators, and venture capitalists, is essential for sustained growth. Moreover,retaining talent within the region is crucial to prevent a brain drain to more established tech hubs.
**World Today News:** What are your predictions for the future of CEE’s tech sector?
**Dr. Anna Petrov:** I’m optimistic. CEE’s tech scene is poised for continued growth, fueled by talent, innovation, and a growing pool of investment. With the right support and strategic initiatives, CEE could become a major player in the global tech landscape.
**World Today News:** Thank you, Dr. Petrov, for sharing your expert insights. This is an exciting story to watch unfold.
**Call to Action:**
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