Investors Loyal to Poland
September 30, 2013
Most foreign investors who have decided to invest in Poland are happy with the decision and plan to expand their operations here, according to the Polish Information and Foreign Investment Agency (PAIiIZ), which works to attract foreign investment to Poland. This is shown by the proportion of the total number of projects carried out by foreign companies in Poland that are so-called reinvestment projects—this percentage is much higher than the global average.
Reinvestment—or new investment projects carried out by foreign companies already active in Poland and using their reinvested earnings—has a significant impact on the inflow of foreign direct investment (FDI) to the country. According to Poland’s central bank, the National Bank of Poland, in recent years reinvestment has accounted for anywhere between 29 percent (in 2006) and 54 percent (in 2010) of the total number of investment projects carried out by foreign companies here. Worldwide, reinvested earnings account for over a quarter of global FDI flows. According to the United Nations Conference on Trade and Development (UNCTAD), in 2005-2011 the figure ranged from 23 to 34 percent. The only exception in both Poland and globally was the crisis year 2008, when reinvested earnings accounted for only 15 percent of global FDI flows worldwide, with Poland reporting an outflow of FDI.
The Polish Information and Foreign Investment Agency says it has handled a total of 78 reinvestment projects since 2010.
“They account for 41 percent of all projects and their total value is 2.3 billion euros. This shows that investors feel good and secure in Poland—a state of mind that is not that obvious at a time of crisis. In terms of value, 58 percent of the foreign investment projects handled by the PAIiIZ come from reinvested earnings, which effectively disproves the stereotype that foreign investors are bent on taking their profits out of the country.”
Anna Polak-Kocińska, vice-president of the board at the PAIiIZ
According to a reinvestment climate survey carried by the American Chamber of Commerce (AmCham), American companies deciding to expand their business in Poland take into consideration factors such as access to highly skilled labor, the country’s central location in Europe, competitive business costs, an investment-friendly climate, Poland’s large domestic market, and support from the government and local authorities.
Foreign companies decide to reinvest their earnings in the host country because there is less paperwork and less risk than when entering a new market, the costs are lower, and it is possible to use an existing network of suppliers and subcontractors. “If foreign companies develop their presence in a host country this is the best evidence of that country’s investment attractiveness,” says Iwona Chojnowska-Haponik, director of the Foreign Investment Department at the PAIiIZ. “An investor operating in a country not only keeps developing and is a source of new investment, but, more importantly, is followed by suppliers and subcontractors, and works intensively with local businesses. That’s why reinvestment is so important.”
According to Chojnowska-Haponik, reinvesting earnings is beneficial for both the investor and the host country because reinvestment means lower costs in attracting an investor and a shorter investment process. “In the case of companies entering our market, the investment process lasts about two-and-a-half years. In the case of reinvestment, this period can be half as short,” Chojnowska-Haponik said. “Reinvestment is also associated with the technological development of the country. When the first stage of a project is a production plant, research and development centers are very often the next stage.”
One example of a foreign company that, after carrying out a first project in Poland, decided to follow up with further investment is car equipment manufacturer Faurecia. After launching its first factory in Grójec, the company opened nine other plants—in Wałbrzych, Legnica, Jelcz-Laskowice and Gorzów Wielkopolski—which employ more than 6,300 employees between them. Also, many companies that work with the PM Group, an international design firm managing the implementation of investment projects, decide to carry out further projects in Poland. “Reinvestment projects by companies such as Mondelez International, 3M, P&G and Weyerhaeuser often exceed their initially planned budgets and the value of greenfield projects by companies just entering Poland,” says Con Murphy, managing director of PM Group in Poland. “They are a great value added for the development of individual regions and Poland as a whole, and that’s why it’s worth supporting the development of companies already active in Poland in all kinds of ways and offer them support commensurate with their reinvestment costs.”