Why Poland
Why Poland ?
In the times of economic turmoil, the ship sailing under the Polish flag has remained stable.
In 2011 Poland recorded the largest inflow of foreign capital among the Central and Eastern European Union member countries. In 2013 Poland ranked first in Central and Eastern Europe; in terms of investment attractiveness (AHK Poland Edition 2013). The Poland was followed by, among others The Czech Republic and Slovakia. The survey included 151 companies operating in Poland, mainly in the services, trade, construction and energy sectors.
The study was based on 21 factors determining the foreign capital inflow.
Our investment attractiveness was influenced by: EU membership, qualification of employees, the quality of graduate education, the quality of and access to subcontractors and political stability.
In the survey the lowest-rated were: the safety law, the public administration, the fight against corruption and the tax system in Poland.
Poland is a country which may serve as an excellent base to coordinate business operations in Eastern Europe as well as in other countries in the region. It has absorptive internal market, ensuring a steady demand for the products and is less sensitive to economic fluctuations, which is an important advantage, especially in the times of crisis.
Additionally, Poland has perfect location, through which foreign investors can transport manufactured, using cheaper labor, goods to Western Europe. Another reason why more investors appeared in Poland is positive impression it had left in the consciousness of the international community after the crisis. As one of the few economies Poland survived the economic crisis relatively unscathed which convinced investors that the investment risk is lower than in other EU countries.
The rate of Polish export growth up to 2013 puts Poland in the forefront of European countries. During the period till 2020 Polish export will grow at a rate of 8-10% per year and in the next decade the average growth rate will be 7%. In our part of the world a better score will be reached only by Turkey.
In the structure of Polish export as the major group of exported goods remains machinery and equipment for industry and transportation. There will be increase in export of high-tech goods such as ICT equipment however export of goods produced by the traditional industries will decline.
The rapid economic growth of Asian countries will cause a significant increase in their demand, among other, for Polish products. It is expected that the increase in our export to China, India, Vietnam and Malaysia each year will be expressed by two-digit number. The pace will be maintained throughout the projection period, i.e. until 2030. (HSBC “Global Connections”)
Doing business in Poland
Poland has impressed the world. According to the reports on emerging markets Poland is offering one of the largest in the region increase of the revenues. Many companies are doing business in Poland because of the strong and attractive consumers market, strategic location and well educated workforce. According to the recent prognosis of the European Commission Poland’s GDP growth will reach 2.5% this year – the highest in the EU. Investors can choose to establish a company in Poland and sell product as well as gain numerous export opportunities and export to large markets situated in West and East of the continent and thanks to Poland’s central location – always within easy reach. LLC in Poland, branch in Poland – please check how we help you to invest in Poland’s unique business climate and potential. Contact us for further details. Do not miss out on the opportunities.
Introduction
In the times of economic turmoil, the ship sailing under the Polish flag has remained stable. Poland is the exclusive European country to demonstrate positive economic growth this year and the highest growth among OECD states.
Poland has thus confirmed that its economy and investment appeal have sufficiently strong fundaments to soothe turbulences of the times of crisis. European Union membership, absorptive internal market, educated workforce and investment incentive schemes have been attracting foreign investors to Poland for many years. In the times of downturn, Poland has gained another competitive edge: it remains the exclusive green point on the red map of recession.
Graphs illustrating GDP growth, export and internal demand levels across all European Union states depict red downward arrows, with one exception. Green upwardly moving indices are apparent on the map of Poland. For in the grim year of 2009 Poland provides foreign investors with a product in short supply. This product is called economic stability.
For the very first time in three years, research points out to an improvement in Poland’s investment climate. Investors have best assessed political and economic stability, availability of materials and workforce as well as levels of fiscal charges. Investments pursued in Poland feature a declining number of projects focused on simple repeatable activities by the production line to give way to those requiring technical knowledge, fluency in foreign languages and marketing culture. Over one third of the Polish investment portfolio in 2009 accounts for business service centers and R&D projects. Poland boasts enormous educational potential: every tenth European student comes from Poland.
Poland has a higher percentage of households which have boosted their expenditures against last year than those which spend less. Growing demand is only one of many factors which have safeguarded Poland against consequences of the down-turn. In addition, Polish economists point out to such factors as more restrictive than elsewhere banking policy, stable foreign debt level, a decline in prices of natural raw materials and smaller dependence of the economy upon stock exchange performance than, for example, in the US.
Paradoxically, in the year of crisis, set against its European partners, Poland has boosted its appeal. Its charm will become even more intensive, as until 2013 the Polish economy will be reinforced with an injection of EUR 67 billion. In fact, Poland is already the biggest beneficiary of EU funding.
The traditional Polish way of approaching the crisis – material, realistic and conservative has created new prospects not only for Poles. It also created them for foreign investors willing to invest in Poland.
Poland is the biggest politically and economically stable country in Central & Eastern Europe and that creates chances for successful long-term investment. Poles account for 24 percent of the region’s population, and produce nearly 40 percent of its GDP. That is an indicator of the Polish economy’s potential.
Thousands of foreign companies already profit from investments in different sectors on the Polish market. The key reasons why they have decided to do business here are: strategic location, investment potential and human resources. Another important factor that increases the competitiveness of the Polish economy are investment incentives. Poland is a great country full of opportunities. Rich culture, traditions and lifestyle make Poland a fascinating, interesting and enjoyable country to live in.
Geography
Poland is located in the centre of Europe, and this factor alone should be enough to demonstrate the great potential of our country. Poland borders on Germany to the west (with a long border on the Oder River), the Czech Republic and Slovakia to the south (mountain borders), and Ukraine, Belarus and a bit of Lithuania to the east (romantic landscapes!) A small, separate fragment of Russia known as the Kaliningrad Oblast borders part of Poland to the north. The rest of the northern border comprises of the golden beaches of the Baltic Sea.
Government
Poland is a country with a well-founded system of democratic government. Our republic is a multiparty democracy with a two chamber parliament. The Head of State is the President, elected by a majority of the voters for a 5 year term. The upper parliamentary chamber is the Senate, with 100 senators; whereas in the lower chamber the Sejm, there are 460 members. Parliament is chosen by a majority of the electorate for a 4 year term.
The state’s internal and foreign policy is decided by the government, i.e. the Council of Ministers, whose activities are directed by the president of the Council of Ministers, i.e. the Prime Minister. The Prime Minister is chosen by the President, as are the ministers upon his recommendation.
People
There are more than 38 million Polish citizens. The majority of population lives in cities. By European standards, it is a relatively young society – 50% of citizens are under the age of 35 – with about half of the population professionally active (with the greatest number, 8 million, in the service sector, followed by industry and construction, 4 million, and agriculture and forestry with 2 million).
Stable economy
During the whole year 2009 Poland remained a bright spot on the economic map of Europe. While the GDP of all European countries has fallen by an estimated -5% in 2009, Poland’s GDP increased by 1.7%. When the whole Central and Eastern Europe suffered the most dramatic recession in the world with the huge drop of output, skyrocketing unemployment, a nearly paralyzed banking sector, and several countries facing a prospect of an open bankruptcy, Poland survived the global turmoil in good shape. The increase in unemployment was very limited, after some initial weakening the currency stabilized, the banking sector remained profitable without any governmental assistance, and the public debt, albeit growing, remains well below the threshold of 60% of GDP. Altogether, Poland successfully passed the most serious test of its economic fundamentals, showing an astonishing resilience to the global financial crisis and remaining the oasis of the growth and stability in the region.
Why the situation in Poland differs so significantly from the situation in other countries of the region? One may quote several important reasons.
Firstly, Poland still enjoys a good competitive position and a high attractiveness as a production site. On the one hand, the producers have unlimited access to the whole European market, on the other the costs of skilled labor represent a fraction of West European levels. During the pre-crisis boom such a combination of factors led to huge FDI inflows. During a recession, investments go down everywhere, but the shifting of activity is probably still taking place: multinational companies cut more output in Western Europe than in Poland. As a result, after an initial drop, by the autumn 2009 the industrial output of Poland was already topping the pre-crisis levels.
Secondly, compared with all those countries of the region which could enjoy the same cost advantage, Poland has much bigger domestic market. Consequently, Poland is less dependent on exports than, for instance, the Czech, Hungarian or Slovak economy.
Thirdly, Poland’s macroeconomic policy before the crisis, even though sometimes criticized by economists as not optimal, was much more prudent than in many countries of the region, especially in the Baltic and Balkan states. The government deficit and debt were on a moderate level, and the central bank was pursuing a careful monetary policy, not allowing for a built-up of the disequilibrium.
Fourthly, the Polish banking sector proved to be basically healthy, profitable and resilient to global financial turbulences, while Polish firms and households are only moderately indebted. The praise for this should go partly to the remarkably prudent banking supervision in Poland. Further, the stabilizing role played by the foreign owners of the banks that control over 70% of the banking assets of Poland should be noted as well. Despite some initial fears, the foreign holding companies were ready to extend additional short-term loans to their Polish subsidiaries at the moment of the global turmoil rather than trying to transfer the liquidity abroad.
Fifthly, Poland also benefited from the growing inflow of the EU funds that helped in increasing the scale of the public investment. As the biggest beneficiary of the EU structural policy, Poland receives a growing amount of the EU transfers every year – in 2009 it has been over 2% of GDP already.
Sixthly, the policy of the flexible exchange rate used by Poland proved to be a good protection shield during the financial crisis. Once the risk of the instability of the exchange rate evaporated, Polish exporters started benefiting from a reasonably weakened currency. With a weaker złoty, the Polish exports became more profitable, and imports more costly. Altogether, it improved the financial situation of the Polish firms and led to a smaller increase in unemployment.
However, the most important factor is the seventh one. Shortly before joining the EU in 2004, Poland went through a 4-year period of the most painful and deep restructuring of banks and enterprises, caused by a combination of the extremely tight macroeconomic policy, very strong currency, and the growing external competition. In 2000-2003, the unemployment increased from 10% to over 20%, productivity dramatically increased, the firms underwent the process of drastic cost reductions, and the banks made a huge effort to increase the quality of their asset portfolio. All the economic fundamentals of the country, connected with the macroeconomic equilibrium, safety and stability of the financial sector and the competitiveness of firms have been greatly strengthened. As a result, Poland was perfectly able to face the global crisis and withstand both the financial storm and the deep worldwide recession in an astonishingly good shape. One of the key factors that should also be mentioned was the high flexibility of the Polish economy. The employers and employees were able to reach compromises which resulted in the cuts in labour costs rather than in increased unemployment. Companies were able to adjust their operation in a way that allowed increasing the profitability of the enterprise sector in 2009, despite low dynamics of sales. Meanwhile, the banks, even though they suffered reduction of the profitability, were able to avoid losses and any need for a public assistance.
In a nutshell, the test has been passed. A major slowdown recorded in 2009 is likely to be only temporary. With the high level of competitiveness, strong economic fundamentals and high flexibility, Poland is perfectly able to benefit from the global recovery over the next years. Despite many problems that may still appear, the Polish economy is set to grow at a high rate.
Significant European Market
Poland is attractive to investors for many reasons, but at the top of the list is its 38 million domestic consumer market.
Poles form over one third of the citizens of the new EU member countries. Our country is the 20th largest market in the world, with its position being strengthened year after year by rapid economic growth and the subsequent increases in rates of pay.
The retail sales rate in September grew by 5.4% comparing to previous year and was the highest in the whole of the European Union.
According to the survey on investment climate in Poland, the size of the Polish market constitutes the biggest advantage of the country’s investment attractiveness. This factor was evaluated as good or very good by foreign entrepreneurs.
The report by the Ministry of Economy shows that small and medium-sized enterprises want to develop. More enterprises declare eagerness to start new investments and create jobs. Also a greater number of the enterprises expect their revenues to increase.
This all shows that investments in Poland are profitable, not only from the point of view of the export potential, but also, and perhaps primarily due to, the very large domestic market.
A state of growing influence
Preparations for Poland’s turn at the European Union’s rotating presidency set for the latter half of 2011 are in full swing. Its co-hosting of the Euro 2012 soccer championship with Ukraine will put the two countries firmly in the spotlight, providing opportunities to improve relations with one of the EU’s biggest and most fragile neighbors. Meanwhile, Poland’s economic strength during the global financial crisis has won the respect of its European peers. In short, Poland’s star is on the rise and its influence on European politics is growing, albeit slowly.
Some macroeconomic data on Poland:
LAND AND PEOPLE
AREA 312 000 km2
POPULATION 38.5 million inhabitants (or 40% more than the Czech Republic, Slovakia and Hungary combined).
RELIGION Catholics (94%)
CAPITAL Warsaw: 1,700,000 people
MAIN CITIES Łódź, Krakow, Wrocław, Poznań, Gdańsk, Szczecin, Bydgoszcz, Lublin, Katowice
POLICY
HEAD OF STATE Bronislaw Komorowski
Party: Civic Platform
Prime Minister: Donald Tusk
Party: Civic Platform
TYPE OF SYSTEM: Parliamentary Republic
PARLIAMENT: Diet consisting of 460 deputies elected for four years by universal suffrage
Senate consists of 100 senators elected for four years by universal suffrage.
ECONOMY
CURRENCY The zloty (PLN), 1 € = + / – 4.33 PLN (May 2012) Current price (National Bank of Poland)
GROWTH + 4.3% (October – December 2011)
INFLATION + 4.3% in 2011
GDP 360 000 million euros in 2011
UNEMPLOYMENT RATE 10.1% of the labor force (January 2012)
MINIMUM MONTHLY SALARY: 1500 PLN (about 360 €) since January 2012
AVERAGE MONTHLY SALARY: 3666 PLN (about € 880) in January 2012
