Why Poland is a top FDI destination

The Polish economy has grown on average four percent a year since the early 90s.

(Euronews) In 2018, Poland will be home to Europe’s largest lithium-ion battery factory, poised to fill growing demand for electric vehicle (EV) components —a sector whose value is expected to top $240 billion USD in the next two decades.

Korea’s largest chemical company, Seoul-based LG Chem, is spending $1.63 billion USD on the EV battery plant in Kobierzyce – while creating 729 jobs.

Poland has built a reputation as a regional production hub for automotive

parts and accessories, counting GM/Opel, Volvo, Fiat and Volkswagen among its veteran investors. Free access to the 500 million-strong European market and an educated local workforce, are just two benefits that have drawn businesses across many sectors to the Central European country.

German automotive corporation Daimler has started building its first Mercedes-Benz factory in Poland, a €500 million new engine production plant in Jawor. Factors weighing in Poland’s favour included: location, size, shape, and logistics advantages of the site, along with top local human resources.

“Last but not least,” added Ewa Łabno-Falęcka, Ph.D., Head of Corporate Communication and External Affairs, Mercedes-Benz Polska, “the professionalism of our reliable Polish partners: the government and its agencies such as PAIH, as well as local government bodies and Wałbrzych Special Economic Zone.”

Such foreign direct investment has been steadily streaming in, with the economy growing on average four percent a year since the early 90s when Poland introduced market-skewed structural reforms to help it develop an open, free market economy.

Today, the nation boasts €176 billion in total FDI. This has helped invigorate its economy with a stable banking system — acting as a motor for domestic innovation and growth.

Poland’s success story

Outside the automotive industry, Poland has made great strides in securing significant investments from all over the globe, in a range of sectors — such as aviation, food processing, business service centres and business software research and development.

It ranks second as an FDI destination in Europe, by jobs created, surpassing even Germany. A big internal market, access to subcontractors and raw materials, skilled and efficient talent pool with foreign language proficiency, as well as central location and convenient time zone have all been magnets for foreign capital. So has a steady economy with plenty of growth potential.

The ‘Big Three’ (credit ratings agencies) have described Poland’s economic outlook as stable. And FTSE Russell has just upgraded its status — from ‘advanced emerging’ to ‘developed’ market.

For over 25 years, its diversified economy has grown continuously and doubled in its size, based on real GDP. In the wake of the 2008 global financial crisis, Poland was the only EU member state to evade recession, while its banks increased private sector lending to meet the downturn’s demand.

Central Europe’s shared services capital, rich in reinvestment

Poland, with its relatively low cost base and world-class human capital, has carved out an important niche for itself in high-quality shared services centres (SSC) and business service centres (BSS)

FDI in BSS in Poland is responsible for adding over 200,000 jobs to the market — many in the financial sector. Recently, some of those institutions have chosen Poland as a safe harbour for their back-office operations in the wake of Britain’s decision to leave the EU.

Multinational United States bank JPMorgan Chase is poised to establish an operational centre for its mid- and back-office positions in Warsaw, joining industry peer Goldman Sachs, which opened one in 2011.

Credit Suisse — one of six top investors in Poland’s business service sector, alongside Citibank, Nokia, IBM, Capgemini and Atos — set up an SSC in Warsaw in 2016. Crucially, the Zurich-headquartered multinational is a re-investor, having opened an office in Wroclaw over a decade ago.

In 2016, reinvestment, a key component of Poland’s FDI inflows, approached 42.3 percent in its totality. Ninety-two percent of global investors surveyed in 2017 by the Polish Investment and Trade Agency (PAIH), HSBC and Grand Thornton reported satisfaction with their decision to put their money into Poland, and said they would do so again. Among them, Xavier Douellou, Managing Director, 3M Poland has said: “Poland’s highly-qualified people and stable economic situation attract [interests] like 3M, which want to grow here to expand internationally." 

A business-friendly innovation hub for entrepreneurs, startups and SMEs

“Poland is open for business and offers a broad range of investment incentives,” says Wojciech Fedko, executive vice-president of PAIH.

Government grants, tax relief and access to European funds “are available on equal terms and conditions to foreign and Polish investors,” he adds.”We are here to guide investors through the business opportunities the country offers, helping them to manage the business risk of entering the new market.”

R&D is one of the seven areas the Polish government has targeted for additional support via investment grants to businesses. Local companies and institutions can also benefit from R&D centres and related collaborations, which enable technology transfer from multinationals to domestic firms.

In the same vein, entrepreneurship in Poland blends with cutting-edge tech industry knowledge to create a vibrant startup culture. Google opened one of its campuses in Warsaw in 2015. There, pioneering minds meet, up-skill and develop game-changing businesses — blazing a trail to the next Facebook or Brainly.

Independent incubators like the one in Kraków Technology Park (KTP) play a part in expanding budding businesses too. Its grounds are home to economic clusters as well — inter-organisational cooperations which Poland promotes under various themes, such as the Visegrád Group nations.

In addition, KTP is designated one of Poland’s 14 Special Economic Zones — where companies investing over €100,000 can optimise their expenditure through Corporate Income Tax exemptions, competitive land pricing and government support.

Bespoke advice for investors

Somewhere between multinationals and startups, small and medium-sized enterprises (SME) have found a business-friendly home in Poland — which ranks 27th overall among 190 economies in the World Bank’s latest Ease of Doing Business report.

American entrepreneur John Lynch — 2017’s FDI Poland Investor Awards ‘Expat CEO of the Year’ — has run promotional merchandise supplier SME Lynka in Poland for over 25 years. He has experienced its commercial growth and sophistication firsthand: “Poland has become a business-friendly country: relatively low taxes, less bureaucratic, lots of improvements in that area.”

The Polish government provides such decision-makers with tools like the Constitution for Business legal packet. Among its goals: to simplify the legal system, and promote non-adversarial commercial dispute resolution such as mediation. SMEs can also learn about financing schemes which focus on day-to-day operations and investments, respectively.

While both large companies and SMEs can benefit from the government’s R&D tax relief for wages and personnel, qualifying SMEs receive an additional tax deduction of 50 percent for their costs in obtaining intellectual property.

Perhaps one of the most important services offered by PAIH to both SMEs and foreign investors interested in doing business within the country is access to knowledgeable advisors on the ground in its foreign trade offices— in North, Central and South America, Western Europe, Asia, and the Middle East (with more to come).

From greenfield to brownfield projects, these experts can provide individualised support to entrepreneurs and small and large companies at every stage of investment.

Learn more about opportunities for investment and collaboration in Poland by visiting the Polish Investment & Trade Agency