Alien invasion
After the first quarter of this year, Poland has racked up over zł.5 billion in foreign investments, resulting in the creation of some 18,000 jobs. For a country with unemployment at 18 percent, such a cash and entrepreneurship injection is invaluable. Among the government's ideas to hit its target of $10 (zł. 32.4) billion in FDI by year's end are changes in the status of PAIiIZ, creating a Sejm subcommittee for FDI, and extending Special Economic Zones (SEZs).
Foreign investors have gotten a rough ride in Poland in the last nine months.
First, it was the unfortunate statement of the freshly installed Finance Minister, Teresa Lubińska, who told the Financial Times that supermarket chains are an unproductive investment that is not needed in Poland. Then, the row over the Pekao-BPH merger stemming from the pan-European tie-up of the Italian lender Unicredito with German HVB turned into an assault on the foreign business-friendly chief of the central bank, Leszek Balcerowicz. The anti-foreign business rhetoric resulted in a wave of negative press about Poland abroad, and fears arose that the political climate could scare away foreign investors.
Waving the banner
"The new government came to power under the banner of change but the revolution got carried away. I just came back from a week-long trip to promote Poland and believe me, it is very difficult to convince American companies to invest in Poland when they hear that foreign investments are not in line with Poland's national interest," says Roman Rewald, chairman of the American Chamber of Commerce.
Recently, however, the government seems to be making some efforts to change its bad PR - Prime Minister Marcinkiewicz started business negotiations with Unicredit's CEO and a new subcommittee was established last week in the Sejm to work on projects aimed at attracting foreign capital to Poland.
Committee meeting
"Our objective will be to identify the barriers that foreign investors have to face and to eradicate those barriers by introducing new legislation," explains Ryszard Wawrynkiewicz from Law and Justice (PiS), who is a member of the Sejm commissions for economy and public finance and now also the new FDI subcommittee.
"Soon, works on draft laws on the extension of SEZs, the establishment of the Polish Agency for Economic Promotion [PAPG] and investment incentives will be finished. I hope they will be sent over to the Sejm and that we will manage to pass them," he adds.
According to Wawrynkiewicz, in order to improve conditions for investors, the idea of a one-stop-shop should finally be implemented so that potential investors can contact a single institution on a national or regional level in all investment-related issues. This is not a new project - it was earlier promoted by Andrzej Zdebski, the former CEO of the Polish Information and Foreign Investment Agency (PAIiIZ).
SEZs makeover
One of the first projects to be discussed by the new Sejm subcommittee is an amendment to the law on SEZs, extending their total area from 8,000 to 10,000 square kilometers. The heads of SEZs all over Poland often complain that should a big investor such as LG Electronics appear at their door, they would struggle to find a large enough plot of land (five to 100 hectares) in any of the existing 14 zones. Although SEZs are only 40-60 percent developed, they are very fragmented.
"I would have nothing against turning the entire territory of Poland into one big SEZ," says the new CEO of PAIiIZ, Adam Żołnowski. "With our GDP still not exceeding 75 percent of the EU average, it's in Poland's best interest to provide incentives for investors."
Fresh blood
Żołnowski is young and teeming with ideas, but he is not a new person to the business scene. He was previously director of PAIiIZ's research department, represented Poland in working groups in the WTO and European Commission, and was general director of the Office for Competition and Consumer Protection.
Żołnowski took over the helm of PAIiIZ, a joint-stock company, on the eve of its transformation into PAPG, a government agency, which would enable it to open offices abroad. The law on the new institution is currently under review by the Economy Ministry. PAPG's tasks are to include the promotion of Poland, support for investors and exporters, and conducting and monitoring negotiations with investors and institutions.
More importantly, if the law is accepted, PAPG will have offices abroad, which will cooperate with or take over the responsibilities of the economic-commercial departments in embassies, or it will launch its own branches.
"The agency should be present in those places from which the capital flows, that is, the US (with more than one office), Japan, China, Korea and in Europe it would surely be France and Germany," says Żołnowski.
Scant resources
The PAIiIZ CEO is responsible for making sure the organization makes a smooth transition from joint-stock company to government institution. However, the resources he has to work with are scarce.
"PAIiIZ's annual budget amounts to zł.12 million, some $3.5 [zł.11.4] million [of which comes from] the Economy Ministry. We employ 111 people so 90 percent of the money is consumed by salaries. This budget wouldn't allow any agency to promote a country," Żołnowski says.
Still, he seems undaunted, and is predicting a bright future for his agency. Żołnowski is ready to replace his employees with younger, more enthusiastic workers and introduce a new system of remuneration, assuring bonuses for those who manage to conclude the best deals.
"We're going to be very pro-active. In offshore offices people should be very mobile, each employee would take a laptop, arrange two to five appointments with prospective investors a day, present possibilities and incentives. That's the way to do it," adds Żołnowski.
Business as usual
But while the new status of PAIiIZ still depends on passing the relevant law, and is still more of a project than reality, the agency is continuing negotiations with investors regardless of the political ups and downs. At the moment, talks are in progress with the American IT concern Dell, Japanese firm Sharp and another electronic equipment producer the name of which Żołnowski refused to reveal.
According to unofficial reports, Sharp is to construct a production plant worth $500 million (zł.1.6 billion) in Łysomice near Toruń, creating 10,000 jobs, while Dell could invest some zł.400 million in a computer assembly plant in Łódź.
VAT groupings
Another project close to the PAIiIZ CEO's heart is VAT groupings, which he would like to see introduced in Poland as part of public-finance reform.
"We would like to encourage investors to cooperate with us in convincing the government to introduce VAT grouping. For that, we would need investors' declarations of how many jobs they would be able to create thanks to VAT grouping and calculate for the Ministry how much the budget could gain or lose from such a regulation," explains Żołnowski.
VAT grouping allows for VAT-free trading between businesses of the same capital group operating in one country. This is provided for under article four of the Sixth EU directive on taxes but requires changes in Polish regulations. Hungary and the Czech Republic already apply VAT grouping in their territories. American Chamber of Commerce members from these countries, who are lobbying for the introduction of a similar solution in Poland, say it considerably boosts employment and investments.
Still, in order to implement this and other PAIiIZ projects, there's a need for new legislation, and politicians still seem more interested in the issue of early elections than eradicating barriers for business.
