Competing for attention
While most agreed that the future looks bright, participants also came to the conclusion that the government needs to do more to make Poland more attractive
Last year saw a record number of foreign investments come into Poland. According to the Central Bank's estimates, in 2006 Poland attracted R11.093 (41.65) billion worth of new investments - a 44-percent year-on-year increase. Those investments, which came from companies such as Sharp, Bridgestone, Toyota and Dell, have resulted in the creation of 15,500 new jobs.
The future looks bright for the country, especially since Poland won its bid to co-host the Euro 2012 soccer championships. "We expect massive investment in relation to Euro 2012 - no incentives are needed," the deputy director of the advisory services department at PricewaterhouseCoopers (PwC) Polska, Adam Żołnowski, said. Undersecretary of State in the Ministry of Economy, Marcin Korolec, believes that the soccer championships can benefit the whole country, not only the cities where the games will be played. "After Euro 2004 the whole of Portugal benefited. The same thing will happen here - the whole country will benefit from the publicity that Poland will get," said Korolec.
Cherry on the cake
Nevertheless, Żołnowski notices that competition for investments is getting tougher and tougher in the EU, especially following the accession of Romania and Bulgaria to the Union. A favorable location, proximity to markets, infrastructure, local resources and labor costs are all important, but the state has to be more active in attracting investors.
"If all these factors are the cake, then investment incentives are the cherry on the cake," says Żołnowski. He underlined that state aid and financial incentives to invest in Poland, in the form of tax breaks or grants, are crucial in the CEE competition for new investors.
With national resources limited, the bulk of the funds for financial incentives are expected to come from the EU budget. There are two EU programs available - one worth over R1 (3.75) billion for big projects, and a program worth R335 (zł.1,258) million for large-scale investments in innovation. However, Żołnowski underlined that both programs need EU approval, which Poland cannot take for granted. "In the case of big investment projects, which could result in the relocation of firms from the West to Poland, the European Commission isn't really keen on supporting that," he explained.
New challenges
Other challenges await Poland as a potential investment location in the coming years. Many of them result from EU policies. "Unfortunately we are witnessing a far-reaching liberalization of the EU's customs policy," Korolec said, claiming this could encourage firms to move production outside the common market. On the other hand, he points out that the Services Directive, which is to come into force in 2009, "will liberalize the movement of services, but will not be such a driving force as the initial plans might have been."
"The economic conditions and prospects are favorable but limited in time," Korolec said. "After 2013 the situation will be different," he added. That year is the last year of the EU's current financial perspective. Another benchmark will come in 2017 when the special economic zones will cease to exist.
Żołnowski has noticed that some companies are already choosing to invest in Bulgaria and Romania, which offer cheaper labor and higher limits on state aid. "We need to start building clusters of certain industries built on education, along with incentives coming from both the state and the EU," the PwC expert claims. Nevertheless, he is worried that once labor costs in Poland increase - and wage rises are already occurring - the country will face the problem of the relocation of investments from Poland to cheaper locations.
Reasons for optimism
However, the general director of Dell in Poland, Jacek Murawski, remains optimistic. The company is constructing a production plant in Łód - the firm's second plant in Europe - and he hopes that it will be active in Poland for at least the next 10 to 15 years. He points out that Dell's original factory in Europe, in Limerick, Ireland, is still functioning. "We have survived in Ireland more than 15 years by increasing productivity," he said. "Cost of labor is not as important as productivity," Murawski added.
Korolec agrees that the cheap labor factor will soon cease to be Poland's main advantage. What will Poland's new trump card be? "A young and qualified labor force," the Undersecretary of State replies, adding that Poland's young population gives it a great advantage among Europe's ageing societies.
Murawski also underlined the importance of large foreign investments in revitalizing whole regions. Calling it "the Dell effect" he points out that the computer-maker's investment in Limerick, which - as in Łód - included a logistics center, resulted in the rapid growth of the nearby Shannon airport. "That was thanks to cargo connectivity with the rest of Europe due to the logistics center," Murawski explains. "We hope for a similar impact on the region of Łód."
The problem of a shortage of labor doesn't worry Korolec. He expressed confidence that "a significant number" of emigrants will return to Poland one day, both richer and more experienced than when they left. "This will be a stimulus for the further growth of the economy," the Undersecretary of State said.
