Being a stable country with considerable potential, Poland is one of the most desirable investment locations in Europe. Its improving infrastructure and educated workforce are not the only factors contributing to the country’s business potential. What else might convince foreign investors to choose Poland?
In 2014, Volkswagen decided that their new commercial vehicles plant would be located in Września, Wielkopolska. The production facility will be constructed in the Wałbrzych Special Economic Zone on a plot of 220 ha, its area comparable to the size of 300 football pitches. It is estimated that the plant will employ around 3,000 people. Additionally, Polish and foreign suppliers will be located in its vicinity. The plant is scheduled to be opened by the end of 2016. The investment cost is PLN 3.37 billion.
The company has received public aid in the form of grants from the state budget, property tax exemption and corporate income tax exemption on the basis of a permit to conduct business activity within the Special Economic Zone. The total amount of aid granted will not exceed PLN 125 million. “Volkswagen's investment shows that our market has an edge over neighbouring markets. However, it should be noted that no major investor would come to Poland just because they were granted substantial state aid,” says Tomasz Olszewski, Head of Industrial CEE, JLL.
When choosing a location, investors take into account a number of factors. In many respects, Poland compares very favourably with its neighbours. “Our country is located in Central Europe, at the intersection of the North-South and East-West trade routes. From the point of view of, for example, the logistics industry, Poland’s location is a tremendous advantage,” says Tomasz Olszewski, JLL. The country’s improving road infrastructure is another major strength. “Many locations in Poland can be accessed quickly and conveniently. It is worth noting that the new infrastructure contributes to the development of interesting locations, even though ten years ago they were seen as unsuitable for investments. Thanks to motorways and express roads, it is possible to invest in entirely new areas,” emphasises Olszewski.
There is plenty of warehouse space in Poland – in this respect, it is the eighth largest market in Europe, and also the cheapest one. The country has fourteen airports; its railway infrastructure is constantly improving. Poland’s access to the ports of the Baltic Sea is not without significance either.
According to the “Made in Poland” report prepared by PAIiIZ, JLL, EY and Hays Poland,human capital is one of the most important elements when choosing a location for an investment. When assessing the investment potential of a location, the three main factors are: costs of employment, availability of skilled workforce and availability of workforce in manufacturing positions. In this field, Poland outclasses its competition. It has professionals from every field, with various education and experience. However, as it is stressed by experts from the Polish Information and Foreign Investment Agency, Poland is not the cheapest labour market. In this respect, it ranks behind countries such as Romania and Bulgaria. “Taxes and work-related expenses are lower there. But Poland has another advantage, and a very important one. When it comes to work, we can boast one of the best quality/cost ratios,” says Angelika Wójcik, Head of the Production Investments Division, Foreign Investment Department, PAIiIZ.
Another advantage of investing in Poland is the fact that fourteen Special Economic Zones have been created there. Entrepreneurs who choose to build their facilities or logistics centres in these locations can take advantage of tax reliefs.
“In the case of Volkswagen’s investment, a major argument in favour of the investment area where the new plant is being constructed was that it is located within the Wałbrzych Special Economic Zone,” explains Marek Szostak, Deputy Director of the Foreign Investment Department, PAIiIZ. The efforts to get Volkswagen to invest there are a perfect example of the joint involvement of the SEZ authorities, local authorities and the Ministry of Economy. The public parties have worked together and established the Września Economic Activity Zone, which has provided well-prepared land with all the necessary utilities and road connections. The municipality has also introduced appropriate changes to the local spatial development plan. Moreover, the county governor’s office has undertaken to develop a training centre to train employees for all investors in the zone,” says Marek Szostak, PAIiIZ. The example of Września shows that investors can largely count on the flexibility of local authorities and their openness to any suggestions made by the investors or the Polish Information and Foreign Investment Agency.
Last year, Poland lost a “battle” over a major investment. The most noteworthy automotive investment of the recent months will be located in Slovakia. This is where Jaguar Land Rover will build its new plant, investing about PLN 6 billion. The production facility will be located in Nitra, the fourth largest city of the country, 100 km east of Bratislava. It will produce up to 300,000 cars a year, starting in 2018. It will be the first plant of Jaguar Land Rover in Europe outside of the United Kingdom.
Why will this major investment be located outside of Poland? “By the end of the negotiations Slovakia offered such a large amount of public aid that any further proposals on our part were no longer necessary,” argued Janusz Piechociński, the then Minister of Economy and Deputy Prime Minister, just after the decision was announced. “Our goal is not to win the investor over at any cost,” he added.
According to unofficial reports, experts point to a different problem. Above all, there is a shortage of sufficiently large and properly prepared plots. Without such an offer, the investor faces too much risk, as the facility might not be finished in time. “When an investor wants to construct a plant, no matter its size, there is always a deadline for the completion of the construction, which has to be taken into account. It always allows too little time to complete all the works,” explains Tomasz Olszewski. In the case of such large investments, there are some additional requirements that come up along the way. For example, the investor may want the plant to be accessible by motorway or express road. Therefore, the road must be ready when the plant is opened. “It turns out that some plots cannot be taken into account at all, as they cannot meet these conditions,” says Tomasz Olszewski, JLL. “The larger the number of things that can go wrong, the greater the risk taken by the investor. And this risk translates into concrete sums. Therefore, an offer that puts the investor at risk must compensate for it in some way, for example, in the form of a higher tax relief or financial benefits,” say experts.
The Polish Information and Foreign Investment Agency acknowledges that there are only a few of plots which are currently ready for investments, but they are smaller than 100 hectares. “These sites are fully prepared for the construction of a plant. However, if an investor needed a larger plot, they would have to account for a longer preparation period. When it comes to plots larger than 100 hectares, you need to take into account the potential need to convert farmland or change the local spatial development plan. The administrative procedures tend to take a lot of time,” says Angelika Wójcik, PAIiIZ. When asked why there are no large investment plots in Poland, PAIiZ experts explain that the problem often lies in the choice of location. Many local governments are unwilling to designate an area that will have to wait several years to find its investor.
“Poland should invest in preparing large plots for major investors. Perhaps soon another foreign company will be willing to invest in our country and seeking to build a production facility or a logistics center in the shortest possible time. We must be prepared for this,” says Tomasz Olszewski, JLL.
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- Special Economic Zone in Poland