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Adam Woźniak, of Polish business news daily Rzeczpospolita, reports on why the country's FDI levels dipped in 2018 after years of impressive growth.

The inflow of FDI to Poland is weakening. In 2018, investors announced 323 new greenfield FDI projects, down 6% on 2017. In the ranking of European countries that attracted the highest value of FDI, Poland fell to fifth position in 2018 from third the year before, according to The fDi Report. The report shows the latest data on FDI worldwide in 2018.

A 7% growth in capital investment in Poland is some consolation, with the figure reaching $15.3bn. Indeed, capital investment grew much faster in 2018 than it did in 2017, up by 49% compared with 2016. To a large extent, this was a consequence of Europe's economic prosperity: full production and plant capacities meant business entities were looking for new sites in which to expand their operations. For such companies Poland offers advantages such as an educated, highly skilled and motivated workforce, but experts warn that a less predictable economic and social outlook could dent the flow of investments into the country. Indeed, in 2018 four countries outpaced Poland with regards to growth by value of FDI: the UK, Spain, Russia and Turkey.

A question of perception

Sławomir Majman, vice-president of Trade Fairs Warsaw, believes that while few would question Poland's prosperity, perceptions regarding the stability of the economic outlook of the country are getting worse. “On top of that, the countries left behind by Poland a few years ago have [become] more active [in their efforts] to win new investors. [This is happening in] the Baltic states, the Czech Republic and Hungary,” he says.

Małgorzata Starczewska-Krzysztoszek, a lecturer in economic sciences at Warsaw University, believes that over the past three years legislation in Poland has been created too hastily. “There were many economic bills, or their updates, that were done in a rush,” she says.

Critics says that this is causing uncertainty about financial charges for companies as they try to plan investments, as happened in 2018 when a limit on social insurance contributions was introduced. 

Additionally, one of Poland’s major advantages for foreign investors – access to well-qualified employees at a relatively low cost – is becoming less compelling. “We are still attractive when it comes to costs but it’s getting much harder to get reliable employees: if they are available, they aren’t as qualified as businesses need,” says Ms Starczewska-Krzysztoszek.

In expansion mode?

“The market has been facing a drop in direct investments while, on the other hand, the interest of foreign investors in the M&A of the entities operating in Poland has been growing,” says Łukasz Karpiesiuk, partner at law firm SSW Pragmatic Solutions.

“Poland’s market and its business entities are so attractive that it’s easier to implement an expansion plan by way of acquiring, for example, a profitable family business that is relatively cheap in comparison with more global valuations, than to start something from scratch. This may be one of indirect reasons behind the drop in greenfield investments – we simply have such good targets for acquisition. On the other hand, the image of Poland is slightly dented: some parts of the regulatory fields are viewed extremely negatively by foreign investors.” 

Article originally published by Rzeczpospolita, in co-operation with fDi Magazine.

This article is sourced from fDi Magazine
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