In the modern world, technology has become the key to states' economic competitiveness and economic development. Investing in technology development and its dissemination has been recognized as a driving force of economic growth. New technologies providing more efficient methods of work, better resource management, including planning, implementation, control, and assessment of technical changes, open up new perspectives for human activity. They make it possible to improve quality, increase efficiency, shorten the time of product launches and satisfy new human needs. Increasing economic prosperity benefits society as a whole, as it provides greater satisfaction of human needs and a higher quality of life. FDI plays an important role in acquiring new technologies.

FDI IN POLAND: A BRIEF HISTORY

At the turn of the 1980s and 1990s – as a result of the liberalization and opening of the Polish economy to the world – Poland recorded high economic growth. It increased its competitiveness in global markets, which was accompanied by the dynamic development of modern technologies, increased employment, rising wages, and higher qualifications of the managerial staff. This was the result of transforming the socialist economy into a free-market economy, which made Poland one of the most inviting countries in Europe in terms of attracting FDI. Henry Hazlitt, a well-known American journalist who wrote on economic affairs for the New York Times and the Wall Street Journal, among others, once claimed that government-to-government aid rests on socialistic assumptions and promotes socialism and stagnation, whereas private foreign investment rests on capitalist assumptions and promotes private enterprise and maximum economic growth.

Taking a historical view on FDI, it is impossible to leave out pivotal moments in Poland’s economic development. Liberalization of the regulations on running a business activity by foreign investors in Poland, free-market reforms, and the resulting macroeconomic stabilization in the 1990s contributed to the dynamic growth of foreign-capital companies operating in Poland. Initially, the foreign capital-focused largely on the privatization of state-owned companies and production. Over time, more and more processes were transferred to Poland and it became an important destination for modern business process outsourcing (BPO). 

In the first years of the 21st century, there was a noticeable decline in the growth rate among foreign-capital companies operating in Poland. It was due to a number of factors related to the destabilization of the world economy: as an aftermath of terrorist attacks, deterioration of the macroeconomic situation in Poland and in the world, as well as the general destabilization in Central and Eastern Europe (CEE). Poland’s accession to the European Union in 2004 meant that once again the number of operating foreign-capital companies began to grow rapidly. The number of foreign capital companies in Poland grew steadily until 2014. From then on it started to decline consistently, which is explained by the deteriorating macroeconomic situation in the world and the unstable legal environment in Poland.

The crisis triggered by Covid is like a handbrake on a car – it hinders the investment movement and brings uncertainty – the enemy of business. In 2020, global FDI flows fell below $1 trillion, while after the 2009 financial crisis, they reached as much as $1.2 trillion. According to the United Nations Conference on Trade and Development, in 2021, it will be even worse. What’s surprising is that at a time when the global investment activity in the world has decreased due to the crisis related to the coronavirus epidemic, it has started to grow again in Poland. It is worth taking a more detailed look.

KEY INVESTORS

According to the indications of the f Di Intelligence report, in 2019, foreign investors implemented 373 projects in Poland, which gave them fifth place in Europe in terms of the number of attracted FDIs and third in terms of their value. Looking at the value of FDI which flowed to Europe in 2019, it can be seen that the UK prevails in terms of the value of invested foreign capital ($32.3 billion), with Russia being second ($23.6 billion). Poland was third on the podium with the FDI value amounting to $21.8 billion. A large part of FDI is in the real estate sector but the growth is driven by renewable energy projects.

Detailed figures indicate that Germany is the most important country exporting capital to Poland in the form of FDIs accounting for 21 percent of the foreign investments. Since the political changes, the total value of German direct investments in Poland has reached €35 billion. In 2018, German direct investments amounted to €1.58 billion. Companies such as Bayer, BMW, DHL, and Deutsche Bank are among the largest German investors in Poland. A large proportion of German investments concerns the automotive industry and BPO, especially in the IT industry. Americans are the second-largest investors (11 percent of investments) and there are over 1,500 companies with American capital in Poland. American companies’ assets in Poland are worth $54.5 billion. They have invested $24.4 billion in our country, but taking into account also the capital invested via entities registered in other countries, American investments in Poland may have reached even $62.7 billion. US companies have directly created over 267,000 jobs. The largest American companies investing in Poland include, among others, Amazon, Mars, Phillip Morris, Procter & Gamble, International Paper, and CVC Capital Partners. The French rank third in terms of the number of FDI in Poland (10 percent). The Netherlands (PLN 73.4 billion – 9 percent) and the UK (PLN 48.1 billion – 6 percent) are ranked fourth and fifth. For several years, Poland has been an object of interest for new investors, especially from China and South Africa. While companies from South Korea and Japan have been present on the Polish market for decades, China is still at the bottom of the rankings of investors in Poland. The capital participation of companies from the Asian economic powerhouse in Poland is gradually growing and at the end of 2018, according to Poland’s central bank (NBP) data, it reached the historical result of $942 million. Chinese investments account for less than half a percent of FDI in our country. It is true that Chinese companies are investing abroad, but at present, it is primarily the world that invests in China.

GOOD BUSINESS CLIMATE

Economic activity is not disconnected from the market. Poland competes for FDI with the Visegrad Group – a cultural and political alliance of Poland, Hungary, Czechia, and Slovakia. There is plenty to fight for. Due to the inflow of FDIs, the Polish economy is enhanced with new technologies. The quality of human capital is improving. As the staff dynamically acquires knowledge about working with new methods, the stimulation of competition increases the competitiveness of small Polish companies. It ultimately promotes the companies in global value-added chains – evenly distributed among various industries – and, in turn, provides the Polish economy with greater resilience to sector shocks. However, attracting foreign investments requires the creation of appropriate conditions.

Poland’s main advantages include its geopolitical position, large population – among which there are many English-speaking people eager to learn new technologies or methods of management, while the cost of the potential qualified workforce is still low – and an attractive tax system for enterprises. Moreover, Poland has a number of dynamic special economic zones (SEZs) and institutions supporting the inflow of FDI, such as the Polish Investment and Trade Agency (PAIH). At the same time, there are certain barriers and limitations that investors in Poland take into account. The Polish law restricts foreign ownership of companies in selected strategic sectors and limits the acquisition of real estate, in particular agricultural and forest land. In addition, from July 2020, government institutions evaluate foreign investments from outside the OECD in terms of public safety, order, and health. The World Bank ranks Poland 40th out of 190 countries in the Doing Business 2020 ranking, seven places lower than in the previous year.

The business climate in Poland is good. The authorities realize that the inflow of foreign investments increases the state’s tax revenues and that on average around a third of budget revenues from CIT and VAT are generated by enterprises owned by foreign investors. The number of employees in companies with foreign capital amounts to almost 2 million, which constitute about 12 percent of the total number of employees. What is worrying, however, is that FDI is not always viewed positively by society in particular by nationalists who believe that foreign initiatives are being implemented at a loss for domestic entities. Economics teaches, however, that foreign aid must be viewed as an investment, not an expense.