Successfully investing in Poland

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last updated on 23 June 2022 | reading time approx. 5 minutes

 

 

 

How do you assess the current economic situation in Poland?

Following the COVID-induced turbulences on global markets, the Polish economy has bounced back demon­stra­ting clear GDP growth since the 2nd quarter of 2021 and it continues to grow. Our country has many times recovered from international economic crises faster than other countries and it is still experiencing a large influx of foreign investments making us the regional leader. 2021 was a good confirmation of that as it was the record year when it came to foreign direct investments in Poland – totalling about 25 billion dollars which placed us third in the EU, after Germany and Sweden. 
 
In these difficult times caused by the Ukrainian crisis we can see businesses relocating from Eastern markets to, among others, Poland which belongs to the European Union and NATO, which in turn are perceived as guarantors of stability in the region. We have also gained workers from the East, which has increased their availability in certain professions.
 
Like other countries, we have been seeing soaring inflation and growing interest rates for some time now. They may slow down the economic growth in 2023. High interest rates make the cost of money higher in Poland, but many foreign business do not take out commercial loans here – they finance their investment projects within corporate groups.

How would you describe the investment climate in Poland? Which sectors offer the largest potential?

Poland still shows large foreign direct investments, and the investment climate seems to continue to be attrac­tive and conducive to a steady inflow of new foreign capital. Noteworthy is also the fact that Poland is a large domestic market with about 38 million consumers having easy access to the EU market. Labour costs and land prices are still attractive to investors compared to other European countries. Furthermore, following the pan­demic-induced turbulences, businesses have noticed the need to restructure by e.g. shortening supply chains, and Poland with its current potential has become a winner here. Consequently, Poland’s position as the leader of greenfield investments in Central and Eastern Europe seems stable.
 
The overall economic uncertainty in Europe and around the world, caused by external factors such as the war in Ukraine and the resultant economic sanctions, will most likely affect the investment climate in Poland. We can see businesses relocating from Russia, Ukraine and Belarus, and some of them will end up in Poland. The current geopolitical situation will also boost investments in certain areas, especially the power industry. New infrastructure will be necessary to obtain energy from new, including more eco-friendly, sources. Other indus­tries prone to dynamic growth include hi-tech and cybersecurity.
 
In the post-pandemic world, investors will most likely want to replace the human factor with new technologies as much as possible. This is the area considered to have the greatest potential in the market. Digital compe­ti­tive­ness will be an important factor in determining investment decisions. There is still a noticeable trend toward investments in countering climate change, namely renewable energy sources.  
 
No doubt, state aid available for businesses from most industries creates added value for investors in Poland. Developers of investment projects in the Polish Economic Zone, which covers the whole country, may enjoy income tax exemption for up to 15 years. The extent of the tax exemption is calculated by multiplying total investment costs or two years' labour costs by the regional aid intensity ratio applicable to a given location. The minimum investment expenditures eligible for support depend on the unemployment rate in the region of investment and the enterprise size (small, medium-sized or large).
 
As a result, small and medium-sized enterprises are in a particularly privileged situation here. This form of support is also increasingly used by companies that open Shared Services Centers in Poland.
 
Another attractive incentive for investors in key areas of the Polish economy comes in the form of government grants.
 
Regardless of the above, Poland is to be a huge beneficiary of the aid from EU funds which should be launched this year. This should be about 76 billion euro in the years 2021–2027, of which a part will be spent on business projects. Areas to be supported at the national level will include mainly innovativeness, entrepreneurship, infrastructure, environmental protection, power engineering, education and social affairs. Businesses may receive grants and preferential loans for research and development work, investments in ecological changes, including transition to renewable energy sources, as well as implementation of innovations and digitalisation.
 

What challenges do German companies face during their business ventures into Poland?

Business restructuring in the context of new investments is always a challenge. However, we receive consis­tently positive feedback on the support businesses get locally. I mean both state aid – support for investments, the general atmosphere and contact with local authorities – as well as workers who are often well educated, speak English and sometimes also German, especially in some regions in Poland.  
 
One of the challenges is Polish tax law and its frequent changes. Starting an investment project in Poland involves several key decisions that have to be made at the very beginning of the investment process and have profound consequences later on, such as which legal form is the most appropriate. This determines the future tax implications and the investor’s liability. 
 
When it comes to the labour market, Poland has low unemployment rate compared to other European Union Member States and some industries even struggle to quickly find workers, e.g. the construction and medical/care sectors. The huge influx of Ukrainian workers may, by some accounts, increase the supply of labour in Poland by 5 or 6 per cent. So, there is a chance to fill the gap on the labour market, especially, but not only, in low-qualification jobs in trade and services. 
 
The current inflation has raised prices of, above all, energy and fuel. Therefore, it is worth considering investing in renewable energy sources or cutting supply chains. Most certainly inflation will be the least concerning to enterprises which have sure customers for their products or services e.g. abroad because the risk of late payments in B2B relations will be lower.  
 

Poland is by far Germany's largest trading partner in Eastern European business and Germany's fifth largest trading partner worldwide. What opportunities does this present for Polish-German cooperation?

Enormous. This is the first time we have been ranked so highly. We have overtaken even such large economies as Italy, which proves that the importance of Poland for Germany's foreign trade is growing year by year. Polish companies already see an opportunity for establishing permanent relations with the German SME (small and medium-sized enterprise) sector. This creates opportunities for the development of many industries such as power engineering, digital technology, automotive or pharmaceuticals.    
 

In your opinion, how will Poland develop?

Since 2021 Poland has been successfully recovering from the havoc wreaked by the pandemic and lockdowns. The external situation caused by the war in Ukraine and the anticipated huge influx of money from the EU funds to Poland should significantly speed up the country’s reform as well as large and small investments in the energy sector. Renewable energy sources and other eco-friendly investments, e.g. in low-emission hydrogen production, should gain much significance. Optimistic scenarios suggest significant intensification of economic activity in some sectors, especially those favoured in the European Union, namely decarbonisation, power engineering, research and development of high technologies, digitalisation, robotisation and cybersecurity. 
 
The good news for the future of the Polish economy is that managers of large companies are paying more and more attention to the digital competencies of potential employees; here, Poland has a solid technical infra­struc­ture and a large pool of well-educated and talented engineers, IT specialists and technicians. The influx of Ukrainian citizens may boost the supply of workers in Poland.
 
Beyond doubt, the major challenge for the government will be to bring inflation under control and stabilise interest rates in order to maintain the economic growth achieved in the past few years. 

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