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The Warsaw Voice » Business » April 23, 2008
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Poland Attractive to Investors
April 23, 2008 By Andrzej Ratajczyk   
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Last year foreign companies invested almost 13 billion euros in Poland. This year, the value of foreign direct investment (FDI) may be even higher.

According to preliminary data by Poland's central bank, FDI in Poland in 2007 totaled 12.83 billion euros. Last year's figure was lower than that in 2006, when FDI reached almost 15.1 billion euros. However, 3.1 billion euros of the 2006 total was capital in transit, or money that a foreign investor in Poland received from the parent company to be invested in another country. Preliminary statistics for 2007 do not show capital in transit as a separate item.

Paweł Wojciechowski, president of the Polish Information and Foreign Investment Agency (PAIiIZ), says that the value of capital in transit in 2006 as shown by preliminary statistics published last April was 20 percent lower than the final total for that year after the data was revised.

Compared with 2006, there was a clear change in the make-up of FDI last year, with a rise in the value of reinvested profit. "This shows that the Polish economy has become more credible," said Sławomir Skrzypek, head of the central bank. More than 85 percent of the FDI came from other European Union countries. As in previous years, France and Germany topped the league table, providing 17.7 percent and 17.2 percent of the total FDI respectively. They were followed by Austria, with over 8 percent, and Italy and Sweden, each with almost 7 percent. As usual, the largest investor from outside the EU was the United States, with an around 10-percent share, ahead of the Netherlands Antilles, South Korea and Japan.

With almost 13 billion euros in 2007 FDI, Poland kept its first place among new EU countries in terms of foreign investment inflow. "We are the unquestioned leader and have maintained this position for years," Skrzypek said. Poland ranks ahead of the Czech Republic, which attracted just over 6 billion euros, Bulgaria, with less than 6 billion euros, and Hungary, with around 4 billion euros. The remaining new EU countries, excluding Malta and Romania, attracted over 9 billion euros between them.

The largest amount of FDI was invested in manufacturing, business services, financial services, and trade and repairs-20 percent, almost 20 percent, over 15 percent, and almost 12 percent respectively.

According to the central bank and PAIiIZ, this year Poland may attract more FDI than last year. "The strong performance in attracting foreign investment to Poland should continue in 2008," said Wojciechowski. However, he added that the recent U.S. credit crunch may have an adverse effect on FDI flows in the global economy. Investors will be more cautious in making decisions to invest abroad. According to Wojciechowski, for the first time in many years the situation in the United States has had limited direct influence on the Polish economy, although it may cause a reduction in demand for Polish exports.

Even though Poland has not been affected by the latest turmoil on international financial markets, it is unclear what the situation will be like by the end of the year. "Poland looks like a safe haven. Trends emerging in the first quarter add up to a positive picture, but the uncertainty on global markets is a big unknown," said Skrzypek.

PAIiIZ data also indicates that the inflow of FDI to Poland is on the increase. In the first quarter, PAIiIZ processed 16 new investment projects. They are worth nearly 650 million euros in total and are expected to generate over 4,100 jobs. "If we multiply this by four we can see that this year we have a chance to handle more than 60 new investment projects worth over 2.6 billion euros," Wojciechowski said. In 2007, PAIiIZ handled 57 projects worth a combined 1.3 billion euros.

Eight of the new investors served by PAIiIZ came from European Union countries-three from Germany, and one each from Britain, Belgium, Portugal, Ireland and Sweden. The remaining investors are two companies from Japan, two from China, two from India, one company from the United States, and one from South Korea. The largest amount of money will be invested in the paper industry-almost two-thirds of the total amount planned. Companies operating in the chemical and automotive sectors will invest less-52 million euros and 41 million euros respectively.

While high-value investment projects in the chemical and paper sectors create a relatively small number of new jobs, the business process offshoring (BPO) sector creates the largest number of jobs despite relatively small investment. Companies that have decided to invest in business process offshoring in Poland this year may create 900 new jobs between them. Foreign investors in the automotive sector may provide over 840 jobs.

The FDI flow and investment attractiveness league tables confirm that the interest in Poland as a prime investment location is growing among foreign companies. Poland tops the Federation of European Employers' (FedEE) list of 31 European countries in terms of investment attractiveness. The list includes 27 EU countries as well as Iceland, Norway, Switzerland and Turkey. The FedEE takes into account 15 factors including access to labor, human capital, labor market relations, labor market flexibility, inflation and labor costs. According to the federation, Poland's strongest points include the availability of young workers, the presence of many women on the labor market, and the availability of temporary workers.

The country also ranks high as an investment destination in the European Attractiveness Survey 2007, published recently by consulting and auditing film Ernst & Young. Poland is in seventh place in the world. The list is topped by China and the United States. The most attractive European countries are Germany and Britain, but Poland is the unquestionable leader in Central and Eastern Europe.
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