Ewa Bojar

English

Research Papers in Economics

1
Ewa Bojar
Lublin Technical University
Nadbystrzycka 38
20-618 Lublin
POLAND
Fax: (0-81) 525 93 85
e-mail: bojar@antenor.pol.lublin.pl
SMALL FIRMS JOINT VENTURES IN REGIONAL DEVELOPMENT.
1 Introduction.
Growing tendency towards integration in European Community is a serious chalange facing all better
or worse developed countries. It requires sacrifices from rich countries in favour of poor ones and the latter
have to make greater efforts in seeking their own ways to equalize economic differences between them and
the rich countries.
Regional policy and the problems of equalizing differences in the level of economic differences of
regions lie in the centre of international and regional interest.
East European countries cannot counot on quick integration with European Union.
They cannot fulfil the conditions posed by U.C. in short time. In addition to it the countries that
possess less developed regions create additional difficulties.
Regions have vital role to play in European integration. The integration tendencies of Lublin, BiaÕa
Podlaska, CheÕm voivodships deserve respect. They represent less developed  regions in comparison
with the other regions of Poland. Among the factors that decide on the qualification of regions are: the level of
development of economic structure, unfovourable demographic tenedency, disturbances in labour market, the
level of investment and the standard of living.
These voivodships are characterized  by greater then average recession in industry. The fall
of  production had considerable influence on the level of unemployment in the region. The low level of
participation in the investment in the region is observed in comparison with the whole country. The great
chance for these voivodships can create the cooperation with neighbouring voivodships of Belarus and
Ukraine within the fromework of Euroregion.
2 The role of joint ventures.
Joint ventures with foreign capital should be the first succesful step in the process European
integration between East and West. Joint ventures as a from of international cooperation attract interest of the
whole world. It should be propagated in Euroregion Bug because the creation of joint ventures should be a
beachhead for greater integration, the form of testing partners, enforcing them in convinction that Euroregion is
very attractive place for economic activity.
It is quite known now, that when East European countries establish joint ventures they will get a lot
of advantages. They compete in the attraction of the partners from the West because they know pretty well
that in this way they can gain modern management, new technology, know how and other expertises.2
One of the form of competition are legal regulations in these countries that describe the conditions of
establishing and functoning of joint ventures. These regulations ore still modernized.
One can get the impression that legislators from East European countries are more careful
about foreign investors than domestic investors.
They give foreign investors more comfortable tax, (custom ) duty and monetary conditions.
In general, legal regulations in Poland, Ukraine and Belorus have a lot in common.
These countries are also similar as far as unsaturated morkets, cheap labour force, the lack of new
technique and technology and first of all the lack of capital are concerned. Western investors don¢t favour this
part of Europe as the place of creation of joint ventures.
Joint ventures have not been fully used as a chance of development in this part of Europe. This
statement has been proved by the survey conducted  in the Lublin voivodships which is the strongest region
among five other voivodships that constitute the Euroregion of the river Bug. The survey tried to find the
answers to the problems whether joint ventures invest in this region, create new work places, reduce
unemployment, use up to date management methods offered by foreign partners.
3 Joint ventures in the Lublin voivodeship.
The shortage of possibilities for creation domestic capital should call forth the interest of foreign
investment mainly realised in the form of joint ventures.
When we look at the map we come to the conclusion that regions of Lublin, BiaÕa Podlaska,
CheÕm, Tarnobrzeg are dominated by western regions because they have only 323 joint ventures in
comparision to 32 888 in whole country which constiutes only 1 per cent.
Number of joint ventures.
31,12,1995 31,12,1996 31,12,1997
S.A. Ltd. Total S.A. Ltd. Total S.A. Ltd. Total
Poland 553 23533 24086 704 27918 28622 843 32045 32888
Including:
Warsaw voivodship 245 7826 8071 315 9154 9469 374 10315 10689
Euroregion Bug 9 343 352 13 428 441 18 522 540
Including:
Bialskopodlaskie 0 37 37 0 45 45 1 57 58
CheÕmskie 0 29 29 1 35 36 2 38 40
Lubelskie 7 222 229 10 258 268 13 310 323
Tarnobrzeskie 1 34 35 1 61 62 1 81 82
Zamojskie 1 21 22 1 29 30 1 36 37
The best position with regard to this problem has Lublin region. There were 323 joint ventures with
foreign capital in comparision to 19 registered 1990 with the growth of 1900 per cent. High dynamic of growth
of joint ventures is clearly seen in the city of Lublin.
About 10 joint ventures were registered by 1989, 19-by 1990,  97-by 1993 but 323-by 1997.
In 1992, the value of initial capital of registered joint ventures in Lublin amounted to 23,3 mln zlotys and the
participation of foreign investment constituated 70 percent
By the end of 1996, the value of initial capital amounted to 208 000 000 zlotys, while the domestic capital
amounted to 102 000 000 zlotys in Lublin voivodship.3
In the country these figures were 14384,6 million  zlotys and 4327,7 million zlotys.
In 1992, among foreign investors, German firms dominated with 34% and were followed by Italian
firms with 11,1%. These firms put in 2,5 mln together. USA which invested 9 mln zlotys (63,3 %) and
Belgium which invested 2,4 mln zlotys (16,6 %) lead with the regard to the amount of invest capital.
By the end of 1996 the biggest foreign capital came from Korea, Netherlands, Switzerland [look at the
table below].
Foreign inwestments in 1996  - Lublin voivodeship.
LARGENESS [mln zÕ] COUNTRIES
10  – 100 Korea
Netherlands
Switzerland
2. – 10 Germany
France
Austria
Belgium
less than   2 USA
Italy
United Kingdom
Denmark
Sweden
In 1992 the present small joint ventures registered in Lublin whose initial capital doesn’t exceed 10
mln zlotys dominate in Lublin. The firms of this size constitute nearly a half of all joint ventures.4
Sections of national economy in which were create joint ventures on the Lublin
voivodeship .
Lp. Sections of national economy 31,12,1995 31,12,1996 31,12,1997
Number % Number % Number %
1 Industry 67 30% 74 28% 85 26%
2 Architecture 20 9% 21 8% 24 7%
3 Trade 98 43% 126 47% 159 50%
4 Transport 4 2% 5 2% 5 2%
5 Other 38 17% 40 15% 48 15%
ALL 227 100% 266 100% 321 100%
When we consider if the capital invested by foreign partners stimulate the development of region we
can give the positive answer with the reservation that its role should be greater. The number of created joint
ventures has positive influence on realization of process of privatization and the influx of foreign capital
although small is the only source of financing the economic activity of enterprises.
The important aspect of establishment of joint ventures in Lublin region is the influence of this kind of
enterprises on the limitation of unemployment.
In 1992 joint ventues in Lublin employed 4144 which had given 32 persons in one enterprises on average.
Overvhelming majority of them were the enterprises with a small employment (from two to three
persons).
Having analysed the localization of joint ventures in the Lublin voivodship, we come to conclusion
that joint ventures were not interested in setting up their companies in the areas with high rate of
unemployment. 97 joint ventures are situated in Lublin i.e. 74% of all joint ventures. The rate of
unemployment for Lublin is 12,8%. The above analysis has proved that despite the dynamic rise of founding
joint ventures in the Lublin region, newly created work places have little effect on reduction of the rate of
unemployment in this area. Joint ventures are not eager to look for employees through employment agencies
but freguently they outbid employees in existing companies by giving them higher wages.
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
31,12,1995 31,12,1996 31,12,1997
Other 
Transport
Trade
Architecture
Industry  5
In the future the task of recruiting unemployed and responsibility of their professional development should be
clearly assigned to joint ventures and this process will be expected from them on a larger scale than it has
been done so far.
Small and medium size joint ventures should be fully used as a factor of the development of any
Euroregion. The rising number of  small and medium size joint ventures should definitely meet the needs of
the comtemporary economy. Such joint ventures are usually responsible for up  to date production processes
introducing new technologies  and methods of management.
In the present highly – developed economies we can observe that the economic rise is experienced
in the areas where there are leading academic institutions, laboratories and research centres.
The process of cooperation between research centres and industry should be strongly enhanced by
the well developed network of investors and entrepreneurs, who are open to adopt and stimulate new
solutions in order to improve products and services.
Unfortunately in the  Euroregion of the river Bug it has been observed that the communication
between 5 universities of Lublin and existing companies is very limited.
 Another important economic target that is ahead of joint ventures in the Euroregion of the river Bug is
creation of a network between Poland, Belarus and Ukraine based on new principles.
It would be desirable to have a support of the western capital that would stimulate the quality of goods
that are meant for the markets of Ukraine and Belarus. It is important because the Polish companies have
been spoiled  by the easy entrance on the undemanding markets of the above countries supplying them with
poor quality of products
The existing joint ventures haven¢t played a sufficient role in the development of the Lublin region yet.

Small firms joint ventures in regional development

http://www-sre.wu-wien.ac.at/ersa/ersaconfs/ersa98/papers/449.pdf

Small firms joint ventures in regional development

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