Membership Benefits

95% of foreign investors in Poland would choose the location of investment again – these are the results of the Economic Survey 2012 of the German-Polish Chamber of Industry and Commerce. The 7th edition was carried out in cooperation with six others bilateral chambers in Poland (British, Irish, Canadian, Portuguese, Scandinavian and Swiss). The vast majority of respondents highly appreciated Polish workers!

For another year in a row, Poland was ahead of other countries it is competing with for investments in this region of Europe, which was reflected in the number of points awarded to it by investors for a total of 22 factors driving the inflow of foreign capital (4.64 points out of 6 points maximum). Four top-scoring factors of Poland’s attractiveness were its EU membership, and three HR factors, including qualifications, motivation and performance of Polish workers.

95% of investors: YES for Poland

Only 5% (9 companies) out of almost 186 companies which took part in the survey in February 2012 said their decision to locate their CEE investments would be unfavourable for Poland. Similarly, only 5% of negative responses were reported in 2011, however, compared to the previous editions of the survey, the number of companies which took part in this year’s edition was almost two and a half times higher (from 78 companies in 2011 to 186 companies in 2012). In 2010, the share of negative responses was much higher, i.e. 10%.

According to the respondents, Poland – with a total score of 4.64 points (4.80 points last year) – is ahead of this year’s largest regional competitors, i.e. the Czech Republic (4.15 points) and Slovakia (3.65 points). Both countries were also Poland’s most serious competitors in last year’s survey (2011: Slovakia 4.13 points, the Czech Republic 4.12 points). Estonia (3.51 points in 2012 vs. 4 points in 2011) and Slovenia (3.48 points vs. 3.72 points in 2011) ranked fourth and fifth, respectively, in the 2012 survey. Compared to last year, the total scores of Baltic states, namely Estonia, Latvia and Lithuania, were slightly poorer. Just as last year, investors awarded good ratings to China (4.27 points) and Germany (4.23 points), which were presented in the survey as benchmarks.

Premium for EU membership and Polish workers, fail for the fiscal system and administration

On a scale from 1 to 5, investors awarded most points to Poland for its membership in the EU (average score of 4.30 points) and HR-related factors such as qualifications (3.78 points), motivation (3.61 points) and performance of Polish workers (3.60 points). Other top-scoring categories were political stability of the state, quality and availability of local subcontractors, quality of higher education and availability of well qualified workers.

In last year’s edition, the highest-rated factor was membership in the EU, followed by Poland’s political stability appreciated by investors at a time of serious debt crises sweeping across parts of Europe. Other important factors were, like in 2012, workers’ qualifications, their motivation and performance.

The lowest-scoring factors driving the location of investments in Poland were country’s fiscal system and administration and the level of tax burden (2.54 points). In 2011, the poorest rated factors were infrastructure and invariably efficiency of the public administration. According to foreign investors, other weaknesses of locating investments in Poland included: poor transparency of public tenders (2.55 points), low effectiveness of public administration (2.57 points) and infrastructure (2.6 points).

Better infrastructure, effective and cheaper administration, stable finance and Polish currency among investors’ top demands

The surveyed entrepreneurs mainly quoted the following among the priorities of economic policy:

– development and modernisation of transport infrastructure (including in particular rail infrastructure and express roads),

– improvement of public administration efficiency and supervision of its costs,

– public finance reform (including public debt reduction),

– stabilisation of zloty’s exchange rate or, alternatively, introduction of the euro in Poland,

– combating corruption and increasing transparency of public tenders,

– legal deregulation of the economy and increasing transparency of the law,

– reforms of the healthcare and social insurance systems,

– flexible labour law and reduction of labour taxation.

Other important factors included:

– building an effective vocational education system and eliminating unemployment among young people,

– open dialogue with private businesses and support of small enterprises,

– control of public expenditure,

– economic promotion of Poland abroad and incentives for foreign investors,

– reduction of tax burden.

Current condition and forecasts for the economy and enterprises

In 2012, investors were more sceptical about the condition of the Polish economy as compared to 2011. 37% of respondents (13% less than last year) assessed the economic situation in Poland as good, 54% as satisfactory, 9% as poor (6.5% more than last year). Future outlooks were slightly poorer than last year, though still optimistic for most part: 25% of respondents believed the economic situation would improve, while 51% of them expected Poland’s economic situation to remain unchanged. However, the number of companies whose expectations for the Polish economy were pessimistic grew from 6.3% in 2011 to 24% in 2012.

Also, forecasts concerning business operations are more cautious as compared to 2011: 60% of respondents were planning to increase their turnover in 2012 (vs. 70% last year), while almost 40% expected growth in exports (vs. 45% last year). Only 10% of those surveyed did admit their 2012 turnover would drop (vs. 6% in 2011), and 5% expected exports to decrease (vs. 1.5% in 2011). Growth in the number of employees is expected by 39% of enterprises (36% in 2011), while growth in capital expenditure is forecasted by almost 35% of respondents (39% in 2011). 48% of companies expect their gross profit to grow in 2012, whereas 16% of respondents anticipate their gross profit would fall.

Only 61% of respondents: YES to the euro

The number of supporters of the common currency among the surveyed entrepreneurs decreased yet again, with 61% of them supporting the introduction of the euro (vs. 83% in 2011, 87% in 2010, and 96% in 2009). The share of those who reject the euro thus grew to 39%, which is almost twice as many compared to last year (17% in 2011)!

Structure of the respondent population

Among 186 of the economic survey respondents, 40% of enterprises were from the services sector, 24% from commerce, 16% represented the processing industry, 14% – construction, and 6% – the energy, water supply and waste management sector.

The smallest enterprises (up to 9 employees) constituted 20% of respondents, small companies (10 to 49 employees) – 29%, medium-sized companies (50 to 249 employees) – 30%, while large corporations (with more than 250 employees) accounted for 21%.

60% of respondents declared that 0–20% of their revenue was from exports, while 15% of the surveyed enterprises said their revenue was linked to exports at a level of 80–100%.

Among 186 of the survey respondents, the land of origin of companies’ capital was defined as:

- in case of 87 enterprises – Germany,

- 21         Poland,

- 12         Sweden,

- 9           Ireland,

- 6           Norway,

- 5           Denmark

- 5           Finland,

- 5           Switzerland,

- 2           Italy,

- 2           Netherlands,

- 1 investor each in case of: Austria, Belgium, Czech Rep., France, Spain, USA,

- 26  investors defined themselves as companies with mixed capital or stated no country of origin.

Survey administrators

The economic survey was conducted in February 2012 by the German-Polish Chamber of Industry and Commerce with assistance from 6 other bilateral chambers operating within the International Group of Chambers of Commerce (IGCC):

• British–Polish Chamber of Commerce,

• Irish Chamber of Commerce in Poland,

• Polish–Canadian Chamber of Commerce,

• Polish–Portuguese Chamber of Commerce,

• Scandinavian–Polish Chamber of Commerce,

• Polish–Swiss Chamber of Commerce.

http://www.enterprise-ireland.com/en/Irish-Success-Stories/Irish-Success-Stories.html#irishsuccessstories

Irish firms look to Poland in search of new markets

03:56, 11 March 2012 by Liam Nolan

Warsaw: home to Poland's financial hub. Photo: Bloomberg

Less than a decade ago, Poland seemed to provide a never-ending source of labour for Ireland's bursting-at-the-seams economy but, back at home, their own economy continued to chug along steadily, making progress in the background.

The Polish government's push to modernise its country's motorway network in time for Euro 2012 has attracted a number of high-profile Irish construction companies. Yet Irish business interests in Poland stretch well beyond the construction sector. Enterprise Ireland estimates that 160 Irish firms export to Poland and as many as 60 companies have a physical presence in the country in a number of sectors.

While other EU economies slid, one by one, into recession, Poland has been the only member state to avoid a slump. The country enjoyed a 4.3 per cent increase in real GDP levels in 2011, and the construction sector, kept busy with a string of public infrastructure projects geared towards Euro 2012, expanded by 11.8 per cent. Poland's Central Bank predicts a slight deceleration this year, but the economy will retain a steady growth of 3.1 per cent.

These sturdy levels of growth, direct air routes from Dublin and Cork to ten Polish cities and Ireland's large Polish diaspora, which facilitates a large network of informal contacts, has nudged more Irish companies to venture east to this country of 38 million inhabitants in search of new markets.

IT firms such as S3, Codec and Fineos, exploration companies San Leon and Rathdowney Resources and business outsourcing firm SWS, which employs 150 people in Lodz, offer just a small flavour of the Irish firms operating working bases in Poland.

Kenny Morgan, chairman of the Irish Chamber of Commerce in Poland, said that he has seen "a wide berth" of Irish companies enter the Polish market during the last three or four years. "As things took a downturn in Ireland, a lot of companies were looking at Poland. Some set up, some stuck at it and some went home," added Morgan.

In Warsaw, the country's financial hub, Headhunt Solutions and Sigmar Recruitment display Ireland's knack for exporting its prowess in the recruitment sector and, in February 2011, the Irish online currency exchange firm Currency Fair set up an office in the Polish capital, recognising the large market in remittances sent home by Polish emigrants.

"The number of Polish people in Ireland transferring money home is growing all the time, but we also deal with Irish nationals and companies sending money back to Ireland," said Pawel Stosik, associate director, Currency Fair Ltd, in Warsaw.

"It's a market that has surprised me," said Mike Hogan, the director of Enterprise Ireland's Warsaw office, who is originally from Nenagh, Co Tipperary.

"For small-to-medium-sized Irish companies, it's a manageable, emerging market on their back door, which is part of the EU and is still in growth mode," said Hogan.

Irish companies, of course, have never shied away from this tempting economy. CRH and Smurfit arrived during the early days of Poland's market economy, and Kingspan as well as engineering firms PM Group and Mercury have been plying their trade in Poland since the late 1990s. Irish developers came and mostly went, and a leading Polish bank, Bank Dachodni, was bought and sold by AIB.

The EI Warsaw office is often the first port of call for Irish businesses wishing to enter the Polish market. EI will help to identify potential Polish partners and offer a number of schemes that enable Irish firms to conduct initial market research in the host country. "We carry a neutral hat, so we're not viewed by Polish end-users as classic middle men trying to make a margin," said Hogan.

Kenny Morgan, ICC chairman and director of Trinity Corporate Services, a firm that offers accounting and administrative solutions to multinational corporations, has been living and working in Warsaw since 1996. He believes that the successive governments of prime minister Donald Tusk and the presidency of Bronislaw Komorowski have helped to create a receptive environment for foreign firms operating in Poland.

"The most significant symbol of Irish business presence in Poland was, for a number of years, AIB. Now that has disappeared, a number of other companies from construction and food exist for the majority," said Slawomir Majman, president of PAlilZ, the Polish government agency responsible for attracting foreign investment.

Majman placed the inflow of indigenous Irish FDIs at €220 million for 2011, but attributed €3.9 billion of FDIs to Irish companies formed as Special Purpose Vehicles (SPVs).

SPVs account for Irish-registered companies that have been formed for property deals or separate entities used by large Irish corporations for one-off investments. Majman said that over 400 small-to-medium-sized Irish companies are registered in Poland.

"They [the government] know that it's important for Poland to maintain foreign investment at a high level," said Morgan. Poland's corporate tax rate of 19 per cent may sound high to Irish ears, but is substantially less compared with many western EU states.

Some subtle differences do exist in the way that business is conducted. "Back home, there is a lot more trust, we'll shake your hand and get on with it. Here, you must have the documentation signed. The system works here, but it's different and there's no point in raging against the system," said Morgan.

Red tape is an accepted part of doing business in Poland and is a common complaint from many Irish companies. Firms can expect to wait up to two months to become fully registered, and accounts must be filed at the end of every month.

SIAC is one of a number of Irish construction firms currently engaged in Poland. The company is building a 35km stretch of the new A4 motorway that runs from Kryz to Debica in southern Poland, bypassing the city of Tarnow. SIAC signed the contract in July 2010, worth 1.4 billion zloty (approximately €356m) as part of a 50-50 consortium arrangement with the publicly-quoted Polish construction firm, PBG Group. Work is due for completion in the fourth quarter of 2012.

The company is also constructing access roads for a wind farm project near Gdansk in northern Poland for Danish group DONG Energy. In total, SIAC employs approximately 50 Irish nationals in Poland.

SIAC's financial director, Pearse Ferguson, said that the cost of raw materials has "risen substantially" in Poland over the last number of years and that "the market is overheating" at present. The high volume of road projects has made it more difficult to find resources and subcontractors, said Ferguson.

SIAC intends to stay in Poland for the long haul. "We've invested a lot of resources in our people and spent a large amount of time getting to know the Polish tax, legal and planning systems, which can be very bureaucratic," said Ferguson.

SRB, a joint venture company between John Sisk & Son and Roadbridge, is building three sections of the new A1 motorway south of Torun in northern Poland. The contract, which comprises 94km in total, is being built at a cost of 2.1 billion zloty (approximately €483m). Completion is set for two phases, in April and September 2012.

SRB opted for two local partners: PBG Group for the two northern sections, and the German-Polish firm Budbaum for the most southerly 30km section of motorway.

Paul Sullivan, director of John Sisk & Son Polska, said that the harsh Polish winters required the company to plan for "limited to no production" from mid-December to late February. Temperatures during the first two weeks of February dipped below minus 20 Celsius, far lower than the required temperature of minus 5 degrees Celsius needed to pour concrete.

Sullivan confirmed that Sisk is looking at new tenders in Poland, and aims "to build a business" in the country. He stressed that it was "essential to work with a local partner". Currently, the company employs 240 of its own professional level staff, which includes 50 Irish nationals and a number of senior Polish engineers who had previously worked for the company in Ireland.

Between the Irish Polish Business Association in Dublin and the Irish Chamber of Commerce and Enterprise Ireland in Warsaw, an established network of contacts is already in place for Irish businesses thinking of testing the Polish market.

Morgan, suggests that Irish companies thinking of setting up a working base in Poland should spend an initial six months to find the best structure before setting up a limited Polish company. "Do your homework. You should be prepared to spend a lot of time in Poland. An ideal scenario is if your company has a client in Ireland who is also here," said Morgan.

Irish exports to Poland, buoyed by closer links between the two countries, are also faring well, accounting for €638m in 2011, according to the Irish Exporters Association, a figure which encompasses exports by multinationals based in Ireland. Enterprise Ireland places Poland as the ninth largest importer of Irish indigenous products.

Irish food and drink exports to Poland accounted for €65 million in 2011, according to Bord Bia estimates, with shipments of food ingredients accounting for 41 per cent. Kerrygold butter, which can be found on the shelves of most major supermarkets in Poland, saw a 19 per cent growth in sales, Liam O'Neill, communications manager for the Irish Dairy Board, confirmed.

"The country is still in 'build-out' mode," said Hogan. "It's possible to introduce new brands in Poland because there are less preconceived notions of brand in place," he added.

Ever keen to foster Irish-Polish business interests, the Irish Chamber of Commerce in Poland organised a 'Flavours of Ireland' event in Warsaw at the start of February to promote Irish food and drink exports. At present, Irish products are stocked in Poland by top supermarket chains such as Piotr i Pawel, French-owned Carrefour and Auchan. Alma, a Polish gourmet supermarket chain, has also indicated its interest in stocking Irish food produce.

Irish-owned food group ABP is attempting to make a dent in the Polish beef market. The company acquired a slaughtering plant in Poznan in April 2011, but declined to comment on its activity in Poland.

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Drilling deep into a new frontier: San Leon in Poland

San Leon Group, a leading energy exploration company with headquarters in Dublin, started exploratory drilling of shale gas concessions in Poland in 2009. The group now holds 14 licence concessions in Poland, six of which are in the Baltic Basin.

San Leon contracted seasoned Canadian company Talisman Energy to drill six of its concessions in the Baltic Basin to the tune of $100 million in return for a 60 per cent share of the find.

San Leon Group chief executive Oisin Fanning said: "Poland has the largest amount of shale gas in all of Europe", something that "could turn Poland into a big net exporter of gas". At present, Poland imports 65 per cent of its gas needs from neighbouring Russia. Reducing the country's reliance on Russian energy has been an aim of successive Polish governments.

Analysts estimate that if Poland can at least extract 3 trillion cubic meters, the country would still have gas reserves of more than 200 times its annual consumption.

"We were the second shale gas exploration company in Poland, so we were ahead of the posse," said Fanning, who added that "there was a stampede" as other energy giants followed suit. Chevron, Exxon Mobil, BNK Petroleum and Polish energy giant PGNiG are just some of the companies also conducting test drilling for shale gas.

San Leon's 14 Polish concessions add up to 1.7 million net acres, the largest in Poland, and after three years of exploratory drilling, results are looking positive.

During the past two weeks alone, the group has successfully completed exploratory operations at two of its Polish wells. Shale gas exploration is Poland's new newest exploration activity and so teething problems were always likely to crop up during the application process for concessions. Fanning believes that the application process "possibly took a little longer because the ministry was going through a transition from Polish to European regulations", but overall, the Polish government has been "seamless and professional" to deal with. "It was a learning process for both sides," said Fanning.

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Leading the search for lead and zinc: Rathdowney Resources

Zinc and lead deposits have enticed one Irish mineral exploration company to southern Poland. Rathdowney Resources, part of Canadian independent mining group Hunter Dickenson Inc, first arrived in Poland in late 2008 on a reconnaissance mission. It applied to the Polish government for an exploration permit in 2009 with the aim of exploring deposits between the towns of Olkusz and Zawiercie in the zinc-lead ore field in Upper Silesia.

In Ireland, the company is conducting a number of zinc and lead exploration projects in the midlands.

"We're geologists so we're always looking for opportunities around the world," said chief executive John Barry.

In 2008, the company saw Poland as the most logical location outside Ireland to explore. Rathdowney's chief geologist in Ireland, Mike Mlynarczyk, is Polish and one of the firm's technical advisers, Duncan Large, who is based in Germany, knew the lead and zinc deposits in Zawiercie very well.

The company began Project Olza, a $20m exploration programme, in June 2011 for deposits of zinc and lead, which will drill 40,000 metres in total. Rathdowney Resources Polska employs approximately 30 full-time staff on the job, mostly Polish geologists, and uses both Polish and foreign drilling contractors.

However, the application process in Poland didn't happen overnight. After initial site visits in 2008, Rathdowney Resources applied for a drilling application in 2009 and was eventually granted the much-sought-after exploration concessions in mid-to-late 2010.

Chief executive John Barry believes that the Polish government "needs to make the exploration process and ongoing permitting process for drill holes more streamlined in order to encourage people to invest in the country".

Waiting time aside, Barry said that the company came to Poland at the right time "when the zinc price had collapsed and not many companies were looking for zinc. We saw it as an opportunity to come in during the downturn into a world-class district".

"We've had a very good reaction from the local community," said Barry. "We keep them informed of what we're doing and set up a local website in Polish which explains the project and exploration process."

The company has also recently established a community relations office in the town of Zawiercie.

On the issue of operating in Poland, Barry is largely positive. "Poland is changing. It's a dynamic economy but there are still a number of vestiges of the old socialist system," he said.

Embassy of Ireland Press Release

Irish Ambassador Honours Poles in Ireland with Presentation of Bowl of Shamrock to President of Poland

On 15 March 2012, the Ambassador of Ireland Eugene Hutchison met with Jacek Michałowski, Head of Chancellery of the President of the Republic of Poland, to present a crystal Bowl of Irish Shamrock to President Komorowski in honour of the large Polish community living in Ireland and the warm bilateral relations between Ireland and Poland.   About 4% of Ireland’s population is Polish.

The meeting took place to mark the imminent St Patrick’s Day, Ireland’s national holiday, which will be celebrated worldwide on 17 March. 

The Ambassador also presented a letter of St Patrick’s Day greetings to the President and people of Poland.  In the discussion on bilateral relations, the Ambassador spoke about the improving economic situation in Ireland and about increased Irish economic activity in Poland.  The Ambassador and Minister Michalowski also looked forward to visit of many Irish fans to Poland for the EURO 2012 tournament when Ireland will be playing in Poznan and Gdansk.

Warsaw and Poznan Lit Up in Green for St Patrick’s day

The Ambassador also informed Minister Michalowski that both Warsaw and Poznan will be participating in Tourism Ireland’s global greening campaign this weekend. This initiative will see the  Palace of Science and Culture (Marszalkowska side) and the City Stadium in Poznan join the New York Empire State Building, the Leaning Tower of Pisa,   the Sydney Opera, the Moulin Rouge, Burj Al Arab in Dubai, London Eye, and other world-famous icons, by lighting up in Irish Green for St Patrick’s Day!

The shamrock is a famous symbol of Ireland and was used by St Patrick in the 5th century to assist in converting the Irish people to Christianity.

For further information or comment, contact  Eddie Brannigan, Embassy of Ireland, at 692 495 692