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The Warsaw Voice » Business » December 19, 2013
Business & Economy
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Economic Success Story
December 19, 2013   
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Poland’s 14 special economic zones (SEZs) have attracted more than 20 billion euros worth of investment over the past 18 years, according to a report by consulting and advisory firm EY. However, the golden days of the zones are ending, because the rules for granting state aid across the European Union will be made more restrictive as of mid-2014.

The EY report, entitled Poland—A True Special Economic Zone, found that between 2008 and 2012 Poland recorded a cumulative GDP growth of 18.1 percent, far more than any other country in the European Union. One reason for this was a continuous inflow of foreign investment into the country. To compare, the EU economy as a whole shrank by 0.8 percent over this time. According to the report, Poland’s outstanding performance is in part due to its special economic zones, which are among the key instruments used to encourage investors. The most important benefit for businesses operating in SEZs is that they are eligible for a variety of tax breaks.

Since they were launched 18 years ago, the country’s special economic zones have continually grown and developed. Today Poland has 14 such zones, covering an area of almost 16,000 hectares. The SEZs have granted a total of 1,600 investment permits since they were established. They have helped create 186,000 new jobs and drawn more than 20 billion euros worth of investment. More than 6,000 ha of land is still waiting for investors to develop.

Due to the tangible benefits of the zones, their life span has been extended until the end of 2026. “Special economic zones are the biggest magnet for foreign investors, which is particularly important in a time of crisis,” says Sławomir Majman, head of the Polish Information and Foreign Investment Agency. “The country’s 14 special economic zones offering tax breaks are a real gem when it comes to the system of investment incentives in Poland. The extension of their life until 2026 is a good move. This decision by the Polish authorities has met with a wide and positive reception in European business circles.”

Paweł Tynel, a director at the tax advisory department of EY and co-author of the Poland—A True Special Economic Zone report, said, “Economic zones are not only a Polish invention, but this type of incentive system is not the same everywhere. In Poland it is more competitive. For example, in terms of tax exemptions, we offer conditions that should persuade foreign companies to invest in Poland.”

Polish special economic zones are highly rated by investors. According to the EY report, five of the country’s 14 SEZs are ranked among the top 50 special economic zones worldwide. The Katowice SEZ enjoys the best ratings: it is ranked number two in Europe and 11th worldwide. The top 50 list also includes the ŁódĽ, Wałbrzych, Pomerania and Starachowice SEZs.

Piotr Wojaczek, chairman of the Katowice SEZ, said, “Our position in the rankings is certainly a reason for satisfaction, though I do not think that our investors choose their investment destination on this basis. Still, I’m sure each of them will be happy to read that their choice has been confirmed by serious business reports.”

SEZs contribute to the development of regional infrastructure and specialized research. According to Deputy Economy Minister Ilona Antoniszyn-Klik, “companies operating in the zones create a good atmosphere and take their regions to a higher level.”

Krzysztof Krzysztofiak, vice president of the Kraków Technology Park, said, “Economic zones are in fact local business development centers; in many regions they are the institutions that are best prepared to create jobs.”

Even though the life span of the SEZs has been extended, investors will no longer be able to count on such a high level of support as before. Beginning July 1, 2014, the European Commission will change the rules for granting state aid across the EU, as a result of which the level of support for investors will be reduced.

State aid may take different forms. These may be investment grants, or subsidies; tax exemptions—either income tax or real estate tax exemptions; or preferential loans, which means loans cheaper than those granted along usual commercial lines. Yet another form are subsidies for companies creating new jobs.

In order to take advantage of the existing rules of support in the SEZs, investors need to secure a permit to do business in the zones by the end of June 2014. “Many investors take into account available state aid when making their investment decisions,” says Tynel. “Therefore, the decision to extend the life of the zones until 2026 sends out a great message for entrepreneurs. This decision—combined with the fact that the terms for granting state aid in the EU will not change until six months from now, plus the really positive economic data for Poland—can lead to many decisions to invest here.”
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