Automotive, banking top list of foreign investors
Significant investment last year in the banking and automotive sectors helped to knock several food and beverage producers from the WBJ's list of top 30 foreign investors.
Of the top foreign investors on this year's list, automotive companies occupy four of the 30 positions with Fiat and Daewoo placing first and second, respectively. Italian auto manufacturer Fiat regained its position as the top foreign investor in Poland, sliding past South Korea's Daewoo Motors. In 1999, Fiat's total realized investment in Poland was zl. 7.4 billion ($1.9 billion) and Daewoo's was zl. 6.05 billion ($1.55 billion). In 1998, Fiat's total realized investment was zl. 5.6 billion ($1.7 billion), while Daewoo's was zl. 6.3 billion ($1.8 billion).
The third biggest foreign automotive investor in the country was General Motors Corp. with its Gliwice-based subsidiary, Opel Polska. The American automaker jumped from being No. 15 last year to the No. 8 slot after increasing its total investment in its Polish operations from zl. 1.3 billion ($370 million) in 1998 to zl. 2 billion ($516 million) in 1999. Volkswagen's decision last year to plow zl. 397 million ($102 million) into a production factory for car and engine parts in Poznan helped the company make this year's list. Volkswagen slid in at No. 12.
Together the four car companies sunk zl. 15.9 billion ($4.07 billion) into Poland in 1999, compared to the zl. 13.5 billion ($3.85 billion) that Daewoo, Fiat and General Motors invested in 1998. Most of the new money was slated for both production operations and the manufacturing of auto components.
Janusz Kipigroch, chief expert (his official title) of automotive industry at the Industrial Policy Department of Poland's Ministry of Economy, said the automotive industry is "one of the most important (sectors)" in the Polish economy. Of the cumulative zl. 138 billion ($35.5 billion) of foreign direct investment that Poland had attracted up to mid-1999, more than one-sixth, or about zl. 23.4 billion ($6 billion), came from auto companies.
Rafal Pac-Pomarnacki, senior research specialist at the Polish Agency for Foreign Investment (PAIZ), said that companies such as Fiat and Daewoo have invested heavily in Poland to take advantage of cheap labor and the country's location as a transit point between Western and Eastern Europe.
As in the rest of Central and Eastern Europe, most foreign investment in Poland is geared to long-term, capital intensive projects, and the automotive sector is no exception.
"Generally, the automotive sector is special(ized) and investment is high, and it isn't possible for investors to open with below $50 million," Kipigroch said. "You need about $100 million (to start operations) and more than $100 million to keep the level of production, or (even) $1 billion."
The auto sector has expanded rapidly in recent years. Foreign investment in new and existing plants has caused auto production to more than triple in recent years from 200,000 cars in 1995 to 640,000 cars today, Kipigroch said.
Both Kipigroch and Pac-Pomarnacki said that Fiat and Daewoo would remain the two largest foreign car manufacturers in Poland. "(They) don't have to worry because they possess huge market share," Pac-Pomarnacki said. Fiat accounts for about 29% of the auto market while Daewoo has about 28%, said Wojciech Drzewiecki, president of the auto research group Samar.
The automotive sector has always attracted big investment. The biggest switch last year was the billions of zloty that poured into the banking industry. Banks and capital investment agencies occupy eight of the top 30 positions on the list with a combined total realized investment of more than zl. 22.2 billion ($5.7 billion). Privatizations, such as the sale of 51% of Bank Pekao to UniCredito Italiano and Allied Irish Bank's (AIB) purchase of Bank Zachodni for zl. 2.3 billion ($580 million), made the banking sector one of the most dynamic in terms of capital inflows.
Pac-Pomarnacki credits foreign banks for providing the capital, know-how and technology needed to improve Poland's financial sector.
The strength of the motor vehicle and banking sectors is evident in the fact that several dry goods manufacturers, beverage producers and providers of consumer goods and services have dropped off the WBJ's list. Among these companies were German hypermarket chain Metro, beverage distributor PepsiCo, Swiss confectioner Nestle, and tobacco product-maker Philip Morris.
The shift in the concentration of capital from food and beverage producers to the automotive sector can be attributed to changing consumer demands. Pac-Pomarnacki said that the food sector attracted many foreign investors in the early 1990s as a result of shortages. Nevertheless, he said that the food sector's contribution to Poland's foreign investment level is still significant on a cumulative basis.
