Zone investors left out in cold by new ruling
The government requested that the zones "not take in any new investors" in a letter sent by Tadeusz Donocik, deputy minister of the Economy Ministry. The move came in response to continued pressure from the European Union (EU) to drop the zones. Last week, the EU said during accession negotiations with Poland that the zones were anti-competitive.
The government's request has created uncertainty among companies that were in negotiations with individual zones to invest.
"This is a very bad decision," said Andrzej Kublik, a manager at Business Management & Finance, a consulting company that was in the process of bringing in a large automotive industry investor to one of the zones when the decision came down.
"Forget all this talk about whether the zones are fair or not," Kublik said. "The fact is these zones are a really good idea, and other countries do the same thing.
"We are now waiting for a clear timetable saying that up to this or that day, the government is welcoming new investors into the zones but after that, the game is over: People who are in by then get to play, and the others are out of luck," he added. "This decision, to just overnight say `no more investors,' was a great surprise to everyone."
Another company taken by surprise was U.S.-based Motorola, which is planning to invest in Krakow's zone. Although Motorola has said it will invest in the zone, it does not yet have the license to operate there. The license is the precise document that zones have been told not to issue until further notice, said Richard Lada, country manager and board president of Motorola Polska.
"We're following the situation, because we are concerned, but we are confident that everything will be worked out," Lada said.
Zone officials played down the uncertainty created by the Economy Ministry ruling, saying everything would be sorted out in due course. "This is just a temporary delay," said Piotr Wojaczek, president of the Katowice Special Economic Zone. "In 10 or 15 days, we should have a decision" from the government. However, Wojaczek said his zone's goal of attracting investment of up to DM 4 billion and creating a total of 25,000 new jobs is now in doubt. So far, the zone has attracted about DM 1.5 billion in investment that has created about 13,000 new jobs, he added. Wojaczek stressed that the government action should not endanger investment already present in the zones.
"I have no doubt that our zone, which has attracted so much investment, is safe," he added. "Our investors have nothing to worry about." The Katowice zone's most high-profile current investor is General Motors' German subsidiary Adam Opel, which has DM 600 million invested. Other high-profile investors in the Katowice zone include Isuzu Motors, which invested about $180 million, Delphi Automotive Systems, with $31.25 million invested, and Agora-Poligraphia, with about $7 million invested.
Investors in special economic zones pay no corporate tax for the first 10 years of their activities, and enjoy a 50% tax break for 10 years after that. The zones, which began to be established in 1996, were intended to bring investment to areas hard-hit by unemployment. To take advantage of the tax breaks, investors are required to employ a certain minimum number of workers, usually more than 100, or invest a minimum amount, usually ECU 2 million.
The Economy Ministry's Donocik requested zones hold off on admitting new investors after the government's economic committee (KERM) two weeks ago demanded a freeze of new investments in the zones until the government sets its official policy on their future, said Pawel Badzio a spokesman for the Economy Ministry. Finance Minister and KERM Chairman Leszek Balcerowicz received opposition to the zones from the EU.
"The EU says these tax breaks are harmful to competition," Badzio said. "We have to wait three or four weeks to have the government's official standpoint in the negotiations" on what will happen to the zones.
"Only then can we send a more clear message to investors," he added.
In addition to Katowice, other zones are located in Czestochowa, Kamienna Gora, Kostrzyn-Slubicka, Krakow, Legnica, Modlin, Mielec, Slupsk, Starachowice, Suwalki, Tarnobrzeg, Tczew, Walbrzych, Olsztyn, lodz, and Zarnowiec.
The government's request has created uncertainty among companies that were in negotiations with individual zones to invest.
"This is a very bad decision," said Andrzej Kublik, a manager at Business Management & Finance, a consulting company that was in the process of bringing in a large automotive industry investor to one of the zones when the decision came down.
"Forget all this talk about whether the zones are fair or not," Kublik said. "The fact is these zones are a really good idea, and other countries do the same thing.
"We are now waiting for a clear timetable saying that up to this or that day, the government is welcoming new investors into the zones but after that, the game is over: People who are in by then get to play, and the others are out of luck," he added. "This decision, to just overnight say `no more investors,' was a great surprise to everyone."
Another company taken by surprise was U.S.-based Motorola, which is planning to invest in Krakow's zone. Although Motorola has said it will invest in the zone, it does not yet have the license to operate there. The license is the precise document that zones have been told not to issue until further notice, said Richard Lada, country manager and board president of Motorola Polska.
"We're following the situation, because we are concerned, but we are confident that everything will be worked out," Lada said.
Zone officials played down the uncertainty created by the Economy Ministry ruling, saying everything would be sorted out in due course. "This is just a temporary delay," said Piotr Wojaczek, president of the Katowice Special Economic Zone. "In 10 or 15 days, we should have a decision" from the government. However, Wojaczek said his zone's goal of attracting investment of up to DM 4 billion and creating a total of 25,000 new jobs is now in doubt. So far, the zone has attracted about DM 1.5 billion in investment that has created about 13,000 new jobs, he added. Wojaczek stressed that the government action should not endanger investment already present in the zones.
"I have no doubt that our zone, which has attracted so much investment, is safe," he added. "Our investors have nothing to worry about." The Katowice zone's most high-profile current investor is General Motors' German subsidiary Adam Opel, which has DM 600 million invested. Other high-profile investors in the Katowice zone include Isuzu Motors, which invested about $180 million, Delphi Automotive Systems, with $31.25 million invested, and Agora-Poligraphia, with about $7 million invested.
Investors in special economic zones pay no corporate tax for the first 10 years of their activities, and enjoy a 50% tax break for 10 years after that. The zones, which began to be established in 1996, were intended to bring investment to areas hard-hit by unemployment. To take advantage of the tax breaks, investors are required to employ a certain minimum number of workers, usually more than 100, or invest a minimum amount, usually ECU 2 million.
The Economy Ministry's Donocik requested zones hold off on admitting new investors after the government's economic committee (KERM) two weeks ago demanded a freeze of new investments in the zones until the government sets its official policy on their future, said Pawel Badzio a spokesman for the Economy Ministry. Finance Minister and KERM Chairman Leszek Balcerowicz received opposition to the zones from the EU.
"The EU says these tax breaks are harmful to competition," Badzio said. "We have to wait three or four weeks to have the government's official standpoint in the negotiations" on what will happen to the zones.
"Only then can we send a more clear message to investors," he added.
In addition to Katowice, other zones are located in Czestochowa, Kamienna Gora, Kostrzyn-Slubicka, Krakow, Legnica, Modlin, Mielec, Slupsk, Starachowice, Suwalki, Tarnobrzeg, Tczew, Walbrzych, Olsztyn, lodz, and Zarnowiec.
