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The Warsaw Voice » Special Sections » September 30, 2011
Privatisation in Poland: Investor's Guide
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Investment Climate: Poland Still Attractive
September 30, 2011   
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Surveys of investors and the latest data on foreign direct investment (FDI) show that Poland is holding strong as one of the most attractive investment destinations in Europe.

The global economic crisis has not discouraged foreign companies from investing in this country. On the contrary, Poland is increasingly popular with foreign investors. This is confirmed by international league tables and a growing influx of foreign direct investment.

According to the World Investment Report published by the United Nations Conference on Trade and Development (UNCTAD) in late July, Poland is the world’s sixth most attractive country for investors. Poland climbed to sixth place overall in the UNCTAD report from 11th place last year. China, the United States, India, Brazil and Russia are ahead of Poland in terms of attractiveness to investors, while Germany and Britain, for example, lag behind. Despite a decline in the FDI inflow to Poland in 2010, upward trends in this area can now be clearly seen. In the first five months of the year, the FDI inflow totaled 4.2 billion euros, or 62 percent of the total figure for 2010.

The annual 2011 European Attractiveness Survey released by the Ernst & Young consulting company in June ranks Poland third in terms of the number of new jobs created as a result of foreign direct investment in 2010. Foreign investors in Poland created a total of 12,400 jobs last year and the only countries to do better in this area were Britain and France. Poland was also the top country as regards the number of FDI projects in Europe; it attracted 40 percent more projects than in 2009.

According to Ernst & Young experts, one of the main factors that drew foreign investors to the Polish market was the impression Poland made on the international public during and after the global economic crisis. “Poland was one of the few countries to have come through the economic crisis in one piece, and this makes investors believe that the investment risks here might be lower than elsewhere in the EU,” says Duleep Aluwihare, managing partner at Ernst & Young Polska.

“Additionally, we have a very competent work force, particularly in large cities. And, because of a large number of students and graduates speaking many different languages, Ernst & Young decided to open its Shared Services Center in Wrocław this year. It will employ over 200 people.”

As far as FDI is concerned, Poland has recently specialized in business service centers. Data by the Association of Business Service Leaders in Poland (ABSL) shows that in 2010 the value of offshoring investment in Eastern Europe rose 15 percent, and, at an annual growth rate of 20 percent, Poland was the strongest center for offshoring investment in the region. According to ABSL experts, over the next few years Poland may become the largest center for advanced services for global business not only in the region, but across Europe. The conditions under which that can happen are clear: Poland needs to pursue a prudent and consistent investment policy, develop its human resources, and promote itself internationally as a leading location for foreign business service centers.

“Poland is still capable of attracting huge investments by large international companies,” Ernst & Young’s Aluwihare said.

“This is very reassuring, particularly in the light of the fact that, in the opinion of many experts, we do not offer investment incentives as attractive as other developing countries. Our clients suggest that incentives are a major factor when choosing a location for an investment, though not the most important one. Today, global corporations are fighting incessantly for talented individuals and market shares. It is thanks to its skilled work force and market scale that Poland places high in attractiveness rankings.”

Sławomir Majman, president of the Polish Information and Foreign Investment Agency (PAIiIZ), says that Poland’s investment attractiveness depends on a number of factors, including political and economic stability, which has been especially highly valued recently.

Stability is what investors need most and are especially looking for after the crisis, Majman says.

According Majman, one of Poland’s great strengths is its domestic market, which is significantly larger, more absorbent and diversified than those of other countries in the region. And what is particularly important, its potential has not declined as a result of the crisis, Majman says. Just the reverse, the contraction of other European markets has led to a relative increase in the strength of Poland’s internal market.

Another factor behind Poland’s investment appeal is its well educated population. Poland has more students than France, for example, Majman says. One in 10 students in the European Union is a Pole. This gives investors the opportunity to recruit highly skilled specialists in various fields on the Polish market.

“Interestingly, foreign investors list a stable and transparent legal and tax system among Poland’s important strengths,” says Majman. “Obviously, this system is not free from flaws, but it is predictable. And finally, perhaps the most important thing is Poland’s positive image internationally. Over the past two years, thanks to factors including reasonable behavior during the crisis, Poland has clearly raised its profile among big businesses and in the media internationally. The global economic crisis did not harm Poland. Our country was the only one in Europe to avoid a recession and the Polish economy grew at the highest rate on the continent.”

Due to Poland’s solid economic performance, the world’s largest corporations have significantly increased their confidence in this country. It is no wonder then that Warsaw ranks number 12 among top business locations across the world, according to a study by real estate services company CB Richard Ellis (CBRE). More than 150 multinational corporations have their offices in the Polish capital.

A report by international real estate services company CBRE entitled Business Footprints: Global Office Locations 2011 shows that many cities in emerging markets are attracting a similar number of international office occupiers to established business centers. According to the report, which compares the office presence of 280 major companies across 101 countries and 232 cities, 17 of the top 30 most popular company office locations are in emerging markets. The CBRE report names Hong Kong, Singapore and Tokyo as the most attractive business locations worldwide. CBRE’s research identified Shanghai and Moscow as the most popular business locations across all emerging markets.

The Polish capital is among the cities most attractive to international companies. Joanna Mroczek, director of Research & Consultancy at CBRE in Poland, said, “Warsaw is ranked as the fifth most attractive business location across all emerging markets; 150 (53.6 percent) of 280 international companies surveyed have their offices in the Polish capital. Warsaw is ranked as the 12th most popular business location overall, behind New York (11th) and Paris (10th). This shows that Warsaw is one of the most significant business centers in Europe. For the largest international companies, Warsaw is as important a location as the most economically developed capitals and business centers. Large corporations will be followed by smaller players on the market, which shows the development potential of Poland and its capital.”

According to a survey by the Polish-German Chamber of Industry and Trade, German businesses favor Poland over other countries in Central and Eastern Europe. This is important because Germany is Poland’s top business partner. An overwhelming 86 percent of German businesses that have invested in Poland would do so again, while only 5 percent would go elsewhere, the poll shows. That compares favorably with 2010, when the number of survey respondents who were unsatisfied with their Polish ventures was twice as high.

Why It’s Worth Investing in Poland
Multinational corporations often choose Poland as a destination for new investment projects in Europe. The number of such projects is growing steadily, especially in sectors such as automotive production, research and development, electronics and chemicals.

Foreign investors are attracted to Poland chiefly because of its stable economy. The global economic crisis did not harm Poland, which was the only European country to avoid a recession and its gross domestic product grew at the highest rate in the continent.

Poland offers investment incentives to foreign companies. One of the many possibilities is investment in a Special Economic Zone (SEZ). Poland has 14 such zones. They are designated for doing business on special, preferential terms. SEZs offer attractive tax breaks and well-prepared areas for investment, in addition to making it easier for investors to hire staff.

Apart from tax incentives offered by municipalities and various forms of assistance available in special economic zones, investors can benefit from EU structural funds. Poland is eligible for over 67 billion euros in funds from the EU budget between 2007 and 2015. The handouts aim to make the Polish economy more competitive.

EU funds are being used to finance the construction of new roads, airports and freeways.

Poland’s investment appeal is confirmed by the fact that foreign investors account for nearly 50 percent of the turnover on the Warsaw Stock Exchange. Foreign companies are also keen to take part in the initial public offerings of state-owned companies. This is best exemplified by a record number of orders placed by foreign investors to buy shares in the Warsaw Stock Exchange company. The number of orders was more than 25 times the total number of shares set aside for foreign investors.
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