Poland is one of the famous countries in Europe. It has area of 312,683 sq. km and Warsaw is its capital. This country has population of 38.3 million and is continuously increasing because of migrants (Index Mundi, 2016). There are different ethnic groups in Poland including Polish, German as well as Ukrainian, Armenian along with Belarusian. The national language of Poland is Polish and majority of the people are associated with Roman Catholic religion. The literacy rate in Poland is 98% that is why its workforce is highly educated. The workforce is employed in different sectors. 29% of workforce is employed in industrial and construction sector (
It was stated by Gorynia et al., (2007) that there is an impact macro environmental factor FDIs and some of them can negatively influence the operations of FDIs in host country. In addition, the major macro factors include political, economic, well as technological and socio-cultural. There are different factors present in Poland that enables the FDIs to work effectively and to attain their business objectives. Some of the factors in Poland may not be suitable for FDIs and can be a great threat for them. These factors are discussed one by one, as under:
Poland is considered to be a politically stable nation. There is proper law and order in Poland for transfer of power. The laws and regulations regarding FDIs are made by the government of Poland. It was stated by Zimnay (2010) that no politically motivated violence against foreign investment projects in Poland are observed in past few years. In addition, the government of Poland has made non-discriminatory rules and laws for the foreign companies, operating in Poland. It was mentioned by Zimnay (2011) that in Poland, both international as well as domestic investors must obey the laws regarding taxation, labor issues, workforce’s health and safety along with external environment. In addition, the tax system and laws relevant to FDIs are quite strict and strict penalties are imposed on minor mistakes. Acaravci and Ozturk (2012) mentioned that the inflow of FDI is highly dependent upon the political as well as economic conditions of host country and Polish government is encouraging as well as supporting the inflow of FDI and enabling the international investors to expand their businesses in Poland. The Polish government is supporting the realization of foreign direct investment in the form of public aid. In result, the FDIs play an important role in economic development of Poland by providing job opportunities, technology transfer, improving labor market. The particular system called “Support system Polish economy” is used by Polish government and support is provided in the form of grants for the long-term FDI programs (Degryse et al., 2012). Between 2007 and 2015, Poland’s government supported different FDIs including The Royal Bank of Scotland, Global e-business Operations, Orion Electric, Toyota Motor Manufacturing and many others. This indicates that the political conditions are in the favor of FDIs and there are huge opportunities for foreign investors to invest in Poland.
The economy of Poland is considered to be one of the fastest growing economies in the EU because of high rate of GDP growth and innovative workforce. According to CIA (2016) Poland faced economic recession in 2008 but since 2014, Polish economy is growing at a fast pace. In addition, the GDP growth rate in 2015 was 3.6%, industrial production growth rate was recorded as 5.4% and the country has 17.76 million labor forces. Moreover, unemployment rate in Poland in 2015 was recorded as 10.5% and inflation rate as -1%. It was stated by Jordaan (2012) that the purchasing power of people in Poland is increasing because of huge employment opportunities provided by national as well as foreign companies. The economic factors are quite favorable with respect to FDI. The foreign investor can invest in growing Polish economy and avail different benefits. It is important to understand that there are some challenges prevailing in Polish economy including poor roads and infrastructure, rigid labor code as well as heavy business taxes imposed by Polish government (Liargovas and Skandalis, 2012) However, the positive economic conditions can enable the foreign investor to enter and become successful in Poland.
It was stated by Rodriguez et al., (2006) that the FDI can be affected by economic, cultural as well as social and political background of host economy. In addition, it was also stated that the impact of culture on business practices and different factors including educational level, literacy rate, urbanization, demographics and sociological factors can attract foreign direct investments. The population of Poland is 38,523,261 among which 17.76 million is the labor force (
Poland is focusing on continuous research and development. There is wide range of R&D programs offered by the government of Poland and the foreign investors can also participate in these programs. As per U.S Department of State (2012), the workforce in Poland is well-educated and there are huge number of IT personnel, engineers as well as scientists and economists in Poland. In addition, Poland is focusing on technological advancements. This indicates the foreign investors investing their money can get benefited from technical workforce and use latest technologies in different sectors.
Poland is enriched with different types of national resources. There are different types of natural assets present in Poland that can be used by the foreign investors. These resources include minerals, crude oil, natural gas, petroleum as well as coal. These resources are being used by different sectors of Poland, especially manufacturing and energy sector. There are different factor endowments that have created competitive edge for Poland. Poland is an attractive country for FDI because of its land, labor force as well as physical and intellectual capital (Degryse et al., 2012). There are highly skilled labors as well as high professional workers present in Poland. In addition, Poland is focusing on effective education systems and there are more 460 academic centers with almost 1.8 million students in them (Ministerstwo Skarbu Panstwa, 2015). Due to high standard Polish educational systems are leading towards innovation, technology as well as creativity. The agricultural land of Poland is very fertile and the strategic location of country makes it highly attractive for FDIs. Poland is located at the junction of the East-West and North-South communication routes and enabling the foreign investors to invest in different Polish sectors. The communication and transportation facilities in Poland enable the smooth flow of information, goods and services in various parts of Europe. The main factor that highlights the importance of Poland’s physical location is its access to the Baltic Sea (Index Mundi, 2015). In addition, there are 4 major ports in Poland through which the freight reloading processes are carried out. The main assets of Poland include its strategic position, well-educated large population, EU’s membership as well as cheap labor force and vast business sectors. Thus, Poland is enriched with different types of resources as well as endowment factors that can enable the foreign investors to enter and become successful in Polish economy.
In Poland, the foreign currency can be exchanged through various exchange offices as well as commercial banks. In addition, the payments and transfers in convertible currency can be easily received and paid via different authorized bank to involve in foreign exchange transactions in Poland. Majority of the banks in Poland are given authority by the government to exchange foreign currencies. It was mentioned in the 2015 Investment Climate Statement report by U.S Department of State (2015) that the foreign investors in Poland have not to face issues or problems regarding remitting investment returns including dividends, capital return as well as interest and principal on private foreign debt. In addition, the foreign investors can easily make and get lease payments as well as management fees along with royalties through different banks. The external investors can easily use foreign currencies for accounts’ settling. It is important to understand that the full IMF Article VIII convertibility for current transactions is offered by Poland to foreign investors (Slusarczyk and Kot, 2012). Furthermore, different amendments were made in the Polish Foreign Exchange Law and it has complete compliance with the OECD Codes of Liberalization of Capital Movements and Current Invisible Operations. Poland provides relaxation as well as easiness to the foreign investors. They can easily convert or transfer various currencies for making payments for products or services and can transfer their shares out of the country after paying tax on profit earned thorough business operations in Poland (Madura, 2011). The international investors are allowed to withdraw their capital from Poland quite easily. However, there are some cases in which permit is required and full profits as well as dividend amount can be taken out of the country after getting a permit. There is an important term called double taxation treaty under which a Polish corporation (counting a Polish subsidiary of a foreign corporation) have to pay the withholding taxes to the Polish tax authorities before distributing the dividend amount (Medve?Bálint, 2014). However, the double taxation treaty is present between US and Poland. As per this treaty, a business concerns having its headquarters outside of Poland is liable to pay the amount of corporate income tax against income earned through operations in Poland. In Poland, there are different foreign exchange regulations that make non-bank companies trading in foreign exchange or working as currency exchange bureau to provide reports to the National Bank of Poland (
According to International Financial Law Review (2014), the government of Poland has made a strategy to attract the foreign direct investment for attaining different objectives including increasing innovative investment and to generate productive employment opportunities for the people. In addition, the government of Poland has made certain laws, trade policies as well as systems to improve the conditions of FDIs. Polish Information and Foreign Investment Agency known as PAlilZ is formed by Poland’s government. The duty of this agency is to handle the issues related with FDIs and to meet the needs of investors. Foreign investors can invest in Poland through FDI by:
It is important to understand a significant trade policy in Poland regarding FDIs. That is, entities from countries that are not included in EEA (European Economic Area) can only perform business activities through limited joint-stock partnership, limited partnerships as well as limited liabilities companies (Gorynia et al., 2014). In addition, these types of companies can be formed by signing bylaws and get registered in National Court Register in Poland. The elementary legal outline for starting and running businesses in Poland by the foreign investors is present in the Commercial Companies Code of Poland.
There are certain rules as well as policies made by government of Poland regarding different sectors of country. The foreign investors are restricted to invest directly in different sectors of Poland including mining, financial services as well as energy sector (Hunter and
A foreign investor investing in Poland can avail different types of incentives as well as benefits. The Polish government provides number of aids to the foreign investor. These incentives include income tax and real estate tax exemptions as well as investment grants. The investors focusing on FDI in Poland can receive grants for various research and development activities, environmental protection activities as well as for logistics, for generation of renewable energy sources and many others (Bjorvatn and Eckel, 2006). In addition, the foreign investors can get their companies registered in Poland and can participate in different R&D programs. Poland has planned to invest 1.7 percent % of its
As per on World Investment Report 2015 given by the UNCTAD (2015), Poland is included in the top 20 host countries for accepting foreign direct investments in 2014. In addition, the report identifies that one of the basic reasons of high FDI inflows in Poland is its economic condition. The economy of Poland is improving from past few years and is considered as the most attractive countries in Europe for foreign direct investment. Poland is supporting FDI in the new technologies divisions, particularly by means of EU funds and grants (Hardy, 2007). The main investors in Poland include Germany as well as France and the Netherlands. The investors from these countries are investing in production, finance as well as trade sectors of Poland, resulting in job creation. For example, Amazon built a number of logistical centers in Poland in 2014 and created more than 4,000 new jobs for citizens. The inflow of foreign direct investment in Poland for past three years is represented in the table below:
Despite of huge opportunities in manufacturing sectors, the share of FDI in Poland is increasing in service sector. As per report provided by Polish Information and Investment Agency (2015), the number of FDIs in Poland is increasing in various sectors including automotive, R&D as well as IT and aviation and segments. As per report Santander Trade Portal (2015), Poland is focusing on constructive steps to improve trade across national boundaries and enforce legal agreements. The FDI trend in Poland can be observed from the tables below:
The above table shows that investing countries in Poland are European countries along with US, Austria and UK. In addition, these countries are mainly invested in construction, IT, communication, manufacturing as well as other mentioned sectors in the table.
The assessment regarding foreign direct investment in Poland shows that this country has fast-growing economy and is highly useful because of its strategic position. The political, economic, socio-cultural as well as technological factors present in Poland are highly useful with respect to FDIs. The laws, rules as well as regulations in Poland for FDIs are quite flexible. In addition, government is supporting FDIs by providing different types of grants and tax exemptions. Skilled, educated and competent workforce is great opportunity for FDIs to avail in Poland. Furthermore, the technological advancements and continuous focus on R&D in Poland shows huge potential for FDIs to grow in the country. Poland has competitive edge over other European countries because of its location, labor force, national resources as well as highly efficient intellectual capital. There are certain restrictions imposed by Polish government over FDIs. There are specific sectors in which foreign investors cannot make direct investments and licenses as well as permits are required. Moreover, the current trends of FDIs in Poland shows those foreign investors are focusing on service sectors including IT, real estate, communication as well as construction. The foreign investors are able to exchange different currencies in Poland with the help of different authorized banks and institutions. It is highly recommended for foreign investors that seek to invest in Poland:
Acaravci, A., & Ozturk, I. (2012). Foreign direct investment, export and economic growth: Empirical evidence from new EU countries. Romanian Journal of Economic Forecasting, 2(1). 52-67.
Blonigen, B. A. (2005). A review of the empirical literature on FDI determinants. Atlantic Economic Journal, 33(4), 383-403.
Bjorvatn, K., & Eckel, C. (2006). Policy competition for foreign direct investment between asymmetric countries. European Economic Review, 50(7), 1891-1907.
CIA. (2016). Poland. Retrieved from: https://www.cia.gov/library/publications/the-world-factbook/geos/pl.html
Degryse, H., Havrylchyk, O., Jurzyk, E., & Kozak, S. (2012). Foreign bank entry, credit allocation and lending rates in emerging markets: Empirical evidence from Poland. Journal of Banking & Finance, 36(11), 2949-2959.
Grabara, J.K., Kot, S. and ?lusarczyk, B. (2014). Government importance in FDI development in Poland. Retrieved from: https://www.researchgate.net/publication/264933692_Government_Importance_in_FDI_Development_in_Poland
Gorynia, M., Nowak, J., Howak, J., & Wolniak, R. (2007). Motives and modes of FDI in Poland: An exploratory qualitative study. Journal for East European Management Studies, 132-151.
Gorynia, M., Nowak, J., Tr?pczy?ski, P., & Wolniak, R. (2014). The Internationalization of Polish Firms: Evidence from a Qualitative Study of fdi Behavior. Internationalization of Firms from Economies-in-Transition: The Effects of Politico-Economic Paradigm Shift, 39-66.
Hunter Jr, R. J., & CSV, L. V. R. (2013). Foreign Direct Investment 2013-2014: Destination Poland? An Update and Appraisal. Research in Applied Economics, 5(4), 13.
Hardy, J. (2007). The new competition and the new economy: Poland in the international division of labour. Europe-Asia Studies, 59(5), 761-777.
International Financial Law Review, (2014). FDI Report: Poland. Retrieved from: http://www.iflr.com/Article/3306940/2014-FDI-Report-Poland.html
Index Mundi. (2015). Poland economy profile. Retrieved from: http://www.indexmundi.com/poland/economy_profile.html
Jordaan, J. A. (2012). Foreign direct investment, agglomeration and externalities: empirical evidence from Mexican manufacturing industries. Ashgate Publishing, Ltd.
Liargovas, P. G., & Skandalis, K. S. (2012). Foreign direct investment and trade openness: The case of developing economies. Social indicators research, 106(2), 323-331.
Madura, J. (2011). International financial management. London: Cengage Learning.
Medve?Bálint, G. (2014). The role of the EU in shaping FDI flows to East Central Europe. JCMS: Journal of Common Market Studies, 52(1), pp.35-51.
Ministerstwo Skarbu Panstwa. (2015). Macroeconomic analysis of Polish Economy. Retrieved from: Available at: https://www.msp.gov.pl/en/polish-economy/macroeconomic-analysis/7004,Macroeconomic-Analysis-of-Polish-Economy.html
PAlilZ. (2016). Invest in Poland. [Online] Retrieved from: http://www.paiz.gov.pl/why_poland
Rodriguez, P., Siegel, D.S., Hillman, A. and Eden, L. (2006). Three lenses on the multinational enterprise: Politics, corruption, and corporate social responsibility. Journal of International Business Studies, 37(6), pp.733-746.
Slusarczyk B, and Kot S. (2012). State Aid for Foreign Direct Investment in Poland. The Business Review Cambridge. 20 (1), pp. 130-137
Santander Trade Portal. (2016). Poland: foreign investment. Retrieved from: https://en.portal.santandertrade.com/establish-overseas/poland/foreign-investment
UNCTD. (2015). World investment report 2015. Retrieved from: http://www.state.gov/e/eb/rls/othr/ics/2015/241708.htm
U.S Department of State (2012). Poland (3/22/12). Retrieved from: http://www.state.gov/outofdate/bgn/poland/197879.htm
U.S Department of State. (2015). Investment climate statement: Poland. Retrieved from: http://www.state.gov/e/eb/rls/othr/ics/2015/241708.htm
Wang, C., Hong, J., Kafouros, M., & Wright, M. (2012). Exploring the role of government involvement in outward FDI from emerging economies. Journal of International Business Studies, 43(7), 655-676.
Zimny, Z. (2010). Inward FDI in Poland and its policy context. London: Pearson
Zimny, Z. (2011). Outward FDI from Poland and its policy context. London: Pearson
Get in touch with our dedicated team to discuss about your requirements in detail. We are here to help you our best in any way. If you are unsure about what you exactly need, please complete the short enquiry form below and we will get back to you with quote as soon as possible.