Investing abroad: Escape from red tape

Polish firms invested some zł.2.6 billion in mergers and acquisitions on foreign markets last year, the daily Rzeczpospolita revealed last week. Experts have warned that this is a result of significant barriers to investment on the Polish market. Adam Smith Research Institute economic expert Kamil Kajetanowicz claimed an "unfriendly legal system, bureaucracy and high taxes, especially on labor," are driving Polish firms abroad. 

"Polish economic law is overregulated. Concessions and permits are needed for a lot of business activities. Obtaining a concession is very time-consuming and often expensive - no wonder entrepreneurs are tempted to invest their money elsewhere, in a country where they and their capital are treated as welcome guests and not as suspicious nuisances," said Kajetanowicz.

The leading investors on foreign markets were Dwory, which spent zł.736 million abroad, Złomrex, with zł.378 million, and Grupa Asseco, with zł.300 million. "Polish companies are starting to choke on the national market. They do not have to concentrate on restructuring any longer and thanks to the beneficial market situation they have funds and can think of development on a larger scale," Piotr Rudzki from PricewaterhouseCoopers told Rzeczpospolita. The value of mergers and acquisitions in Poland in 2007 amounted to zł.38.3 billion.

Kajetanowicz said that there is still room for Polish firms to grow on the domestic market, but they will invest abroad more heavily because of regulatory barriers. "Given that the situation is hardly improving, we can expect the foreign investments of Polish firms to rise in the coming years unless some radical - or, should I say, common sense - steps are taken."

He added, "Current Polish GDP growth is close to an impressive six percent per year. It is not difficult to imagine what growth we could enjoy if our companies were doing business and not struggling with the innumerable systemic obstacles."