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More than a year after joining the EU, the question of how Poland can compete successfully in an increasingly competitive Europe remains at the forefront of public discussion about the country’s future. Public debate on this question has focused mostly on problems and barriers, often obscuring the fact that Poland has managed to attract an impressive level of investment since the early 1990s. With foreign capital inflow totaling USD 7.9 billion in 2004 alone, Poland is now second only to Russia among the 19 CEE states in attracting foreign investment.
The Embassy of the United States of America and the American Chamber of Commerce in Poland present here a virtual mini-tour of American investment in Poland. We have selected a representative sampling of businesses from several industry sectors, of various sizes, to illustrate to both investors and policymakers how foreign direct investment (FDI) has helped Poland’s development to date, and how investors in turn have benefited from doing business in Poland.
For over a decade, American investors have played a leading role in the Polish market. U.S. firms were the leading source of foreign investment in Poland from 1993 to 1997, ahead of investors from Germany, France, and Italy. Every year since, American companies have ranked among the top three FDI sources in Poland. In 2004, U.S. companies contributed 18 percent of FDI inflow to Poland, investing USD 1.43 billion.
American investment spans a wide range of sectors, including banking, trade, food, autos, and transportation and warehousing, to name only the leading sectors. As these stories show, the benefits of American investment are huge: thousands of new jobs, hundreds of millions of zlotys in tax revenues, the transfer of new technologies to Poland, advanced training for local workforces, improvements to industrial infrastructure, and large contributions to charities and community organizations. Through their success, American companies have also proven to be Poland’s best investment ambassadors, providing other companies with tangible proof of Poland’s potential.
This is not to say American investors have not had problems. They face irregular tax and customs enforcement, overly complex permit and licensing processes, onerous labor laws, weak contract enforcement, poor transportation infrastructure, and a perceived lack of concern for businesses’ needs.
These problems are common to other foreign investors, as well as to Polish companies, and they explain in part the drop in FDI Poland experienced from the 2000 high of USD 10.6 billion to 6.1 billion in 2002. Since EU accession, however, FDI in Poland has rebounded to USD 7.9 billion in 2004, the highest level since 2000. This represents a USD 1.44 billion increase in FDI from 2003.
The Government of Poland has recently taken steps to remedy the situation, beginning in 2004 with measures to lower corporate income taxes, simplify business licensing and permit processes, and strengthen the Polish Information & Foreign Investment Agency (PAIiIZ). We believe that these measures are a good start, and their vigorous implementation can make a difference. Also important is the Government’s public commitment to creating a healthy business climate.
The experience of the successful companies in this collection suggest several elements were central to their ability to succeed in spite of the challenges to doing business in Poland. The most common were:
- Choose a locale where government officials understand the needs of business and are willing to work with companies to resolve problems. The local tax office’s ability to understand business needs can be instrumental to success.
- Leverage Polish management, and its knowledge of local conditions and practices, with imported technologies and know-how.
- Make a strong commitment to Poland. Be determined to make the investment work, no matter what the obstacles, and be prepared to invest in plant, equipment, and human capital just as you would at home.
- Make it clear that the company has strong anti-corruption policies.
The stories collected here tell about particular investments and what they have done for the investors and for Poland: created jobs, raised buildings, invented new technologies, funded pensions, made money for investors. There is a larger story here as well, not just about particular investments, but about the possibility of larger economic success in Poland. A healthy investment climate can duplicate these stories many times over and bring Poland to the first rank of European economies.
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