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The Warsaw Voice » Business » October 22, 2008
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Global Investment Slowing Down
October 22, 2008 By Andrzej Ratajczyk   
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After hitting a record $1.8 trillion last year, foreign direct investment worldwide will slow down this year, according to analysts working for the United Nations.

The latest financial turmoil and slower economic growth in many countries have discouraged multinational corporations from investing. Poland will also record a smaller influx of investment this year, according to the latest World Investment Report published in September by the United Nations Conference on Trade and Development (UNCTAD).

Last year was a record year in terms of foreign direct investment around the world, with global FDI growing by almost 30 percent, according to the report.

"This was the effect of a high value of transactions in highly developed countries and a large amount of direct investment in developing markets," said Zbigniew Zimny, who works for UNCTAD in Poland.

The UNCTAD report shows that multinational corporations declare a willingness to invest mainly in the BRIC countries, meaning Brazil, Russia, India, and China, and also in the United States, Zimny said. He added that despite a temporary drop in global FDI flows this year "the growth trend will continue in the medium term."

In the report, Poland was ranked 12th among declared investment destinations around the world. Since Poland joined the European Union in 2004, FDI here has increased substantially and continues to run high. According to UNCTAD, last year FDI in Poland reached almost $17.6 billion, a little less than in 2006, when it approached $19.2 billion.

The quality of investment is improving, Zimny says. Technologically advanced projects such as research and development centers are having a growing impact on the development of Poland's economy.

Compared with other countries in Central and Eastern Europe, Poland still attracts the largest number of investors, according to UNCTAD. However, when FDI is calculated in relation to GDP or population, Poland ends up at the bottom of the list, Zimny said. Poland could attract more investment, he added, if it "fully utilized its potential." This process should be facilitated by economic reforms and infrastructure investments improving the country's investment appeal. Poland's competitive edge is chiefly due to its large market and excellent location in Europe, allowing companies to expand both further east and to other EU countries.

Paweł Wojciechowski, head of the Polish Information and Foreign Investment Agency (PAIiIZ), says that foreign investors locating their projects in Poland are chiefly drawn by the country's qualified work force and stable economic growth. The FDI influx this year could be smaller than in previous years, Wojciechowski says, but the number of greenfield projects should remain at about the same level. Foreign investment in Poland this year should come to 10-12 billion euros, or $14.7 billion-$17.6 billion, according to Wojciechowski's estimates. Most of this money is expected to be invested in the automotive industry, the electronics sector and service centers. Preliminary data from the central bank for this year show that FDI in Poland reached $9.8 billion by the end of July.

Although international businesses are investing eagerly in Poland, opinions on the country's investment appeal and the conditions for doing business here vary considerably. In terms of the ease of doing business, Poland still lags behind other countries in the EU. In the latest edition of the World Bank's Doing Business league table, Poland came in 76th. In the EU, only Greece fared worse. Top of the list was Singapore, for the third year running, followed by New Zealand, the United States, Hong Kong, Denmark, and Britain.

Ernst & Young's European Attractiveness Survey 2008 report shows that foreign investors eagerly include Poland in their investment plans. Poland is second in Europe in terms of new job creation and seventh in terms of the number of investment projects.

Companies around the world are especially interested in Asian markets. The world's 10 most attractive investment destinations include the United States, China, Hong Kong, Brazil, Singapore, and India. Poland was not listed among the 10 most attractive investment destinations in the world, although it was seventh in 2006 and fifth in 2005. However, Poland is second in Europe, after Britain, in terms of job creation.
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