Production line
In the middle of December Cadbury Schweppes, one of the largest confectionary and beverage producers in the world, made the decision to inject over zł.385 million into the Polish economy through a major chewing-gum factory investment. The deal capped off a great year for Poland in terms of attracting FDI. Poland's unstable political situation hasn't scared off investors, who continued to pump in the dollars, which both PAIiIZ (Poland's Foreign Investment Agency) and the Economy Ministry expect to add up to $10 (zł.32) billion this year - a 25-percent boost over 2004. While the country continued to attract foreign companies looking to build or expand logistics centers, accounting centers, and R&D facilities here, greenfield investments in production facilities such as Cadbury Schweppes' played the dominant role. According to PAIiIZ, Poland's five largest greenfield investments in 2005 were all large-scale, modern production facilities.
LG.Philips LCD
Kobierzyce, Lower Silesia - EUR 429 million
The signing of the LG.Philips LCD agreement was a huge victory for PAIiIZ, who had slogged through eight months of negotiations with the investor. The hard work paid off, as now the investment - LG.Philips LCD's first factory in Europe - will result in a windfall EUR 429 (zł.1,669) million direct injection over the next five years, and will create over 3,000 jobs. It is estimated that by 2017, the state budget will earn zł.1.2 billion from the deal, and that the investment will result in the indirect creation of around 12,000 new jobs.
Already Poland is seeing the benefits. Just two-and-a-half months after signing the LG.Philips deal, Poland concluded agreements with six of LG.Philips' suppliers who followed their customer to Poland. Together, it is estimated that the suppliers will invest at least zł.1 billion and create 7,000 new jobs.
LG.Philips LCD will begin construction on a 66-hectare plot in the Biskupice Podgórne Special Economic Zone in Kobierzyce outside of Wrocław in the first half of 2006. The new plant is billed as one of LG.Philips' most modern factories, and will produce large LCD TV modules ranging from 19 inches to 42 inches. Initial capacity will equal about three million modules per year, but that will ramp up to around 11 million units per annum when the investment is completed in 2011.
In order to win the contract the Polish side agreed that road infrastructure, water supply and sewage systems servicing the plant would be built with the help of local government. Poland's Industrial Development Agency (ARD) will prepare the land for investment.
LG.Philips LCD's suppliers who also invest in the zone will receive zł.122 million in subsidies as incentives for their investments. According to Economy Minister Piotr Wóniak, the investors also received exemptions from the real-estate tax, CIT, Special Economic Zone fees and can purchase a plot of land for a symbolic EUR 1 (zł.3.89) each.
Michelin
Olsztyn - EUR 253 million
The second-largest greenfield investment of the year came from Michelin, which has been producing tires out of its Olsztyn facility since 1995. The French tire maker spurned advances from the Hungarian city of Nyiregyhaza, and decided instead to keep its E253 (984) million investment in Olsztyn, where it will increase production of tires for both cars and trucks at its current plant, as well as develop warehouse facilities. The investment will add some 520 employees to the more than 3,700 already working at the plant. It is hoped that the deal will help push the unemployment rate in the region down to less than 10 percent.
"The plant will be technologically advanced, which will be important not only due to technology and know-how transfer to Poland, but it will also positively affect economic development of the [Warmińsko-Mazurskie] region," said PAIiIZ's Sebastian Mikosz, who oversaw the Michelin project. "It is one of the poorest areas in Poland, with a high level of unemployment and a low level of technological expertise. [The investment] will indirectly create a large number of jobs in the region due to its high demand for components," adds Mikosz.
On the list of Poland's biggest investors, Michelin ranks 39th, and claims 33 percent of the domestic premium-tire market. The company exports its products to 60 countries around the globe, with over 70 percent of production going to EU countries.
Tire production is becoming a key industry in Poland, which has also attracted major investments from leaders in the sector such as Bridgestone and Goodyear. By 2013 the market in CEE is expected to grow by 60 percent. Michelin claims around one fifth of the global tire market, and employs over 125,000 people in 74 plants worldwide.
Cadbury Schweppes
Southwestern Poland - EUR 100 million
Christmas came early for Poland when two weeks before the holiday Cadbury Schweppes announced that it would be investing EUR 100 (zł.385) million in a chewing-gum factory in the southwest of the country. Poland beat out the Czech Republic, Hungary, Latvia and Slovakia for the investment, which is the largest in Poland's food-products sector this year. Construction of the plant is due to begin soon, which, when finished, will create 300 workplaces, with the possibility of further expansion to 500.
The chewing gum produced at the plant will mainly be sold as export to European countries. Thus, logistics and infrastructure were the main factors influencing Cadbury Schweppes' decision.
"Poland stole the show because of wide road infrastructure," said Judith Pickering, director of the investment program at Cadbury Schweppes. Poland's central location in Europe was also a major factor.
Pickering says the choice as to the plant's exact location will come in the next few weeks. Three locations are being considered, including Kobierzyce, where Cadbury Schweppes already operates a facility, and where the company's first Polish-made products came off the assembly line in 1994. Only when a decision on the location is made will the exact amount of investment incentives in the form of subsidies, grants, aids and tax breaks be known.
The factory is expected to be one of the most modern in the world, and will begin production of sugar-free pellet gum in 2008.
Man Trucks
Niepołomice, Małopolskie voivodship - EUR 92.7 million
After losing several automobile-production-facility investments to its southern neighbors in the Czech Republic and Slovakia, many despaired that Poland would become the runt of the CEE litter when it came to auto-manufacturing investments. However, in August the tables turned when truck producer Man signed an agreement with Małopolskie voivodship officials to build its new factory near Kraków instead of in Koszice, Slovakia.
Convincing Man to continue producing in Poland (where it already has two factories, one for trucks in Starachowice, and the other for bus production in Sady, near Poznań) was no easy task.
"For the purpose of winning this investment the Cabinet changed the system of financial support for investment in the record short time of two weeks and over 19 days accepted a bill on establishing a multi-annum program of support for Man. In other words we gave up administrative thinking for business thinking," said the Deputy Economy Minister at the time, Marcin Kaszuba.
"Since the beginning, the Man investment was a priority above all priorities for the Polish government. It is especially important bearing in mind that over the recent years we recorded prestigious defeats in the fight for projects from the automotive sector, while at the same time Poland is a European center of suppliers in this sector," added Kaszuba.
Man will receive zł.52 million in investment incentives between now and 2028. The voivodship will also rebuild a railway near the site. Man stressed that the government's promise to help finance the investment, as well as revitalize the infrastructure, were key factors in the final decision to locate the factory in Niepołomice.
For their troubles, the Małopolskie government was rewarded with a EUR 92.7 (zł.356.2) million investment, which will generate some 650 jobs. It is estimated that the investment could indirectly create around 4,000 jobs in the region, where the unemployment rate is over 13 percent. The factory will be located on a 142-hectare site, and will produce some 15,000 vehicles yearly once completed in 2007.
LG Electronics
Mława, Mazowieckie voivodship - EUR 90 million
Poland's fifth-largest greenfield investment this year was also the investment that created the second-largest number of jobs in the manufacturing sector. In April LG Electronics signed a deal with the Polish government by which it would invest EUR 90 (zł.347) million by 2010 in a new TV-production facility in the city of Mława. The city benefited so greatly from LG's first investment there that signs leading into the city now read "Mława-LG Town."
Some 2,150 workers will be employed at the new factory, which will be located on a 38-hectare plot near the company's current facility.
As an investment incentive, the Polish government agreed to designate LG Electronics' production complex a special economic zone, which will give the company a corporate tax exemption until the year 2017. The government will also provide employment and education subsidies, as well as co-finance infrastructure improvements.
Another zone will be created near the plant to encourage investment from LG's subcontractors. Along with giving LG a stable supply of parts, suppliers' investments could bring another 5,000 jobs to the area.
The annual production capacity for televisions at LG's Mława complex is expected to rise from the current 1.5 million to three million in 2006, four million by 2007 and six million by 2010. If achieved, that capacity would give the company the number-one spot in the European digital-television market, which accounts for 40 percent of the worldwide market. Demand for digital televisions in CEE markets such as Poland is expected to rise rapidly over the next few years.
LG Electronics has also signed an agreement with the nearby Ciechanów University of Technology to offer LG-tailored educational programs, which will foster human resources to be utilized in a future research and development center.
