Hyundai's gentle let-down
"We would strongly recommend investment in Poland without reservation to any potential foreign investors," writes Kim.
The assessment came with the news last week that Hyundai-Kia Motors had chosen Zilina near Bratislava in Slovakia instead of Kobierzyce near Wrocław Poland for its new European automobile manufacturing plant.
Three months ago, Poland and Slovakia were the last two candidates on a shortlist of countries bidding to host the plant. In a run of embarrassing down years for FDI into the Polish automotive sector, this was uplifting news in itself.
Whilst Poland is now faced with the status of 'second best' in the Hyundai competition, in Hyundai's assessment the country is ahead of major rivals Hungary and the Czech Republic, two countries that have frequently stolen the limelight of major investments since the turn of the millennium.
The Hyundai study included a range of factors impacting its potential business operations, including political and economic stability, logistical costs, labor costs and incentive packages. Finally, it was decided that it would be marginally more cost-effective to operate in Slovakia.
Slovakia's chance for early NATO membership was prevented and its future EU membership put in doubt because of a seemingly anti-democratic government. Since a change of government over two years ago, and with the lowest business cost base in the new EU, Slovakia's international reputation has turned around.
During the mid-1990s, Poland received the lion's share of Foreign Direct Investment (FDI) into Central and Eastern Europe. A key element of this was investment into the auto sector, in the form of car assembly and construction plants.
In recent years it has seemed that Poland has been failing in what was once its greatest strength. Last year, Poland lost a PSA Peugot-Citoen production base to Slovakia. In 2001, it lost a Toyota-Peugeot investment to the Czech Republic.
Several analysts' reports complained that government about-turns on Special Economic Zones (SEZs) had destroyed Poland's FDI credibility.
The SEZs, areas of high unemployment with a manufacturing workforce ready to man new plants, offered investors 100 percent tax rebates. But EU membership disallows such arrangements, and potential investors found that they had been in receipt of empty promises.
Another failing had been that Poland's Corporate Income Tax (CIT) rate had been higher than its regional competitors'. Last year Polish CIT was reduced to 19 percent, a move publicly applauded by U.S. Secretary of State for Commerce Donald Evans during his visit to Jerzy Hausner in December.
Ladislav Logaj of CzechInvest, the investment agency of the Czech Republic, also indicated that Polish CIT reduction was a key reason why Poland was now in a position to beat his country in investment bids.
Poland's own investment agency was also criticised last year, prompting rationalization, reform and a name change from 'PAIIZ' to 'PAIiIZ'. In his letter to Hausner last week, Dong-Jin Kim singles out the agency for special praise for its contribution to the Polish bid for the investment.
At a press conference last week, PAIiIZ argued that Hyundai's decision was based on the poor state of road and rail infrastructure in Poland, as well as its higher labor and transport costs.
Other FDI losses over the last four years have also been attributed by Jerzy Hausner to the poor condition of Poland's logistics network, though clearly no conclusive change has been initiated during this time.
"If we had road infrastructure at the level of Slovakia's or the Czech Republic's, we would be winning tenders," said Andrzej Zdębski, president of PAIiIZ.
"The issues in our fiscal system and legal stability were very often on the agenda," Zdębski added to illustrate the Polish negotiations with Hyundai. "The Koreans were especially interested in binding tax law interpretations, which we had promised to implement into the Polish legal system by year-end."
PAIiIZ took the opportunity to mention that this month it plans to sign a minimum of three FDI contracts, worth up to zł.626.6 million (€130 million).
Hyundai plans to produce 200,000 'Kia'-branded cars annually from its new Slovakian plant. Kia was acquired by Hyundai around five years ago towards the end of the East Asian financial crash. Kia specialises in small cars, the mainstay of Central and Eastern European auto demand.
The next big investment decision that Poland is awaiting is that of Britain's MG Rover, which has been in drawn-out and highly secretive talks with Warsaw's Żerań plant. Analysts speculate that this could become the new location for the production of MG Rover's 'CityRover' model, a small car based on Indian Tata Motors' 'Indica'.
The assessment came with the news last week that Hyundai-Kia Motors had chosen Zilina near Bratislava in Slovakia instead of Kobierzyce near Wrocław Poland for its new European automobile manufacturing plant.
Three months ago, Poland and Slovakia were the last two candidates on a shortlist of countries bidding to host the plant. In a run of embarrassing down years for FDI into the Polish automotive sector, this was uplifting news in itself.
Whilst Poland is now faced with the status of 'second best' in the Hyundai competition, in Hyundai's assessment the country is ahead of major rivals Hungary and the Czech Republic, two countries that have frequently stolen the limelight of major investments since the turn of the millennium.
The Hyundai study included a range of factors impacting its potential business operations, including political and economic stability, logistical costs, labor costs and incentive packages. Finally, it was decided that it would be marginally more cost-effective to operate in Slovakia.
Slovakia's chance for early NATO membership was prevented and its future EU membership put in doubt because of a seemingly anti-democratic government. Since a change of government over two years ago, and with the lowest business cost base in the new EU, Slovakia's international reputation has turned around.
During the mid-1990s, Poland received the lion's share of Foreign Direct Investment (FDI) into Central and Eastern Europe. A key element of this was investment into the auto sector, in the form of car assembly and construction plants.
In recent years it has seemed that Poland has been failing in what was once its greatest strength. Last year, Poland lost a PSA Peugot-Citoen production base to Slovakia. In 2001, it lost a Toyota-Peugeot investment to the Czech Republic.
Several analysts' reports complained that government about-turns on Special Economic Zones (SEZs) had destroyed Poland's FDI credibility.
The SEZs, areas of high unemployment with a manufacturing workforce ready to man new plants, offered investors 100 percent tax rebates. But EU membership disallows such arrangements, and potential investors found that they had been in receipt of empty promises.
Another failing had been that Poland's Corporate Income Tax (CIT) rate had been higher than its regional competitors'. Last year Polish CIT was reduced to 19 percent, a move publicly applauded by U.S. Secretary of State for Commerce Donald Evans during his visit to Jerzy Hausner in December.
Ladislav Logaj of CzechInvest, the investment agency of the Czech Republic, also indicated that Polish CIT reduction was a key reason why Poland was now in a position to beat his country in investment bids.
Poland's own investment agency was also criticised last year, prompting rationalization, reform and a name change from 'PAIIZ' to 'PAIiIZ'. In his letter to Hausner last week, Dong-Jin Kim singles out the agency for special praise for its contribution to the Polish bid for the investment.
At a press conference last week, PAIiIZ argued that Hyundai's decision was based on the poor state of road and rail infrastructure in Poland, as well as its higher labor and transport costs.
Other FDI losses over the last four years have also been attributed by Jerzy Hausner to the poor condition of Poland's logistics network, though clearly no conclusive change has been initiated during this time.
"If we had road infrastructure at the level of Slovakia's or the Czech Republic's, we would be winning tenders," said Andrzej Zdębski, president of PAIiIZ.
"The issues in our fiscal system and legal stability were very often on the agenda," Zdębski added to illustrate the Polish negotiations with Hyundai. "The Koreans were especially interested in binding tax law interpretations, which we had promised to implement into the Polish legal system by year-end."
PAIiIZ took the opportunity to mention that this month it plans to sign a minimum of three FDI contracts, worth up to zł.626.6 million (€130 million).
Hyundai plans to produce 200,000 'Kia'-branded cars annually from its new Slovakian plant. Kia was acquired by Hyundai around five years ago towards the end of the East Asian financial crash. Kia specialises in small cars, the mainstay of Central and Eastern European auto demand.
The next big investment decision that Poland is awaiting is that of Britain's MG Rover, which has been in drawn-out and highly secretive talks with Warsaw's Żerań plant. Analysts speculate that this could become the new location for the production of MG Rover's 'CityRover' model, a small car based on Indian Tata Motors' 'Indica'.
