The Warsaw Voice » Business » Monthly - October 24, 2002
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Willing to Invest
Wanda Jelonkiewicz By Wanda Jelonkiewicz   
The prospect of membership in the European Union, a large internal market and economic stability—these are the factors that attract foreign investors to Poland.

In the first half of the year, foreign investors invested $3.23 billion in Poland. The foreign direct investment (FDI) influx approximated the level in the respective period last year at $3.26 billion, reported the Polish Agency for Foreign Investment (PAIZ).

According to PAIZ statistics since 1993, the total value of FDI in Poland as of the end of June this year reached $61.6 billion. This amount includes investment projects of value exceeding $1 million as well as the estimated value of smaller investments. PAIZ figures include banks, financial and non-financial contributions and reinvested profits.

"It seems that this year's bottom line, contrary to earlier pessimistic forecasts, will not be worse than in 2001, when $7.15 billion was invested in Poland," said Antoni Styrczula, PAIZ president. In his assessment, the relatively weakened influx of investment capital into Poland was mainly caused by two factors: a slowdown in privatization and the implementation of several large projects during an earlier period. In 2000, FDI in Poland reached a record level of $10.6 billion, but that was mainly due to the large privatization contract worth $3.2 billion concluded with France Telecom.

Despite a less than favorable economic situation in the world, Poland has managed to maintain its leading position in the region in terms of attracting foreign investment. In a ranking prepared by A.T. Kearney consultants, Poland ranks 11th, the Czech Republic 14th, Hungary 16th, and Russia 17th. Out of every $10 invested in Central and Eastern Europe, over $3 were invested in Poland.

Data from the UN Conference on Trade and Development (UNCTAD) indicates that in 1991-2000 global foreign investment grew steadily from $156 billion in 1991 to $1.49 trillion in 2000 and then plummeted in 2001 to $736 billion in the wake of the global economic recession and consequent drop in the number of mergers and takeovers. However, the crisis did not affect Central and Eastern Europe: despite the drop in the total amount of investments worldwide, the flow of investments into the region reported an increase. Investors are tempted by countries with lower production costs, but in the case of Poland an added lure is the prospect of the country's EU accession.

Investors are increasingly more interested in production activity in Poland. This is beneficial for the economy, and implies the transfer of new technologies, creation of new jobs and faster economic growth of individual regions of the country. Foreign-capital companies currently account for as much as 60 percent of Polish exports.

In the first half of the year, 31 percent of FDI was in production activities, 27 percent in finance and 20 percent in trade and services. Greenfield investments in Poland are increasingly more popular. Remaining investments are reinvestments connected with the continuation of previously started projects.

In the first half of the year, Belgians invested the largest amount at $487 million. French investors placed second with $462.5 million, followed by the Dutch with $391.5 million. International corporations which did not indicate their country of origin invested $337.6 million, while German firms $306.3 million.

FDI mainly came from EU member countries, which accounted for 81 percent of the total capital invested in Poland. Only 4 percent of the capital came from North American countries, and 3 percent from Asian countries.

The largest investor in the first half of the year was the Belgian bank KBC, with $442 million invested in banking and insurance. The European Bank for Reconstruction and Development (EBRD) placed second with $239.6 million, the Dutch firm ITI Group NV third with $150 million in media and entertainment, the French bank Credit Agricole fourth with $146.8 million in banking, and the British firm GlaxoSmithKline fifth with $139.5 million in pharmaceuticals production.

The ranking of largest investors looked somewhat different in terms of the total value of investments in Poland from the beginning of the systemic transformation. French firms remain at the top of the list and account for 20 percent of the invested foreign capital, American firms place second with 14 percent, German third with 13 percent, Dutch fourth with 9 percent and Italian fifth with 6 percent.

The list of leading foreign investors prepared by PAIZ includes 920 firms from 30 countries at present. The most numerous are German investors (212 firms), American (126 firms), French (89 firms), Dutch (76 firms) and Italian investors (59). The first Czech and Hungarian investors have also appeared in Poland.

Data on FDI in Poland for the entire year will take into account this year's largest privatization transaction: the sale by the Treasury in mid-October of 85 percent of the stocks of the STOEN Warsaw energy distribution company for zl.1.5 billion, or about $365.9 million, to the RWE German power concern.

Next year's FDI for Poland is difficult to predict. It could be slightly higher due to the planned privatization of large enterprises, such as Południowy Koncern Energetyczny, the Wydawnictwa Szkolne i Pedagogiczne publisher, Bank PKO BP, the Ruch newspaper distributor and the PZU insurance firm. Some of them are expected to attract foreign investors. It will also be important that the date of Poland's entry into the EU in 2004 remains a realistic possibility, as for many investors the membership prospect is a significant argument for investing in Poland.