Special economic zones have been the backbone of Poland’s industrial development for the last three decades. Launched in 1994 to support the country’s transition towards a market economy, they proved a magnet for thousands of foreign and domestic investors.

Consultancy firm EY estimates that as many as 2000 companies began operating in the country’s 14 designated SEZs between 1995 and 2017. The zones generated 350,000 jobs and helped turn Poland into a manufacturing powerhouse on the doorstep of western Europe.


The Polish government, led by former finance minister Mateusz Morawiecki, has now embarked on a mission to upgrade the national economy and an overhaul of the SEZ system is central to that aim. A new Polish Investment Zone (PIZ) encompassing the whole country – rather than designated SEZ areas – seeks to make SEZ-style incentives available on a nationwide basis.

“The previous system was clumsy, not sophisticated,” Michal Bernat, a managing counsel with law firm Dentons in Warsaw, tells fDi. “The government now wants to move to a system designed for a developed country which seeks in a more selective manner to provide aid to investors that promote technological transfer and good jobs.”

The government hailed the PIZ system as a transformative game changer when it was introduced in late 2018, but since the reforms came into effect the results have been mixed.


Work cut out: prime minister Mateusz Morawiecki is leading reforms 

Work cut out: prime minister Mateusz Morawiecki is leading reforms 

New rules

Under the PIZ regime, the whole of Poland has become a special economic zone, allowing investors to choose any plot of land to set up shop and access tax incentives.


Under the previous system, incentives were limited to 14 SEZs – covering less than 1% of national territory – although investors did have the option to ask authorities to extend a local SEZ, this time-consuming procedure could take as long as 18 months.

"Territorial restrictions were often the cause for lengthy businesses and administrative procedures, which has often led to the abandonment of the investment,” then minister of entrepreneurship and technology Jadwiga Emilewicz said in 2018, unveiling the reforms.

The PIZ reform also introduced new quantitative and qualitative criteria designed to grant incentives in a more selective way and foster investment in eastern Poland over more industrialised regions in the western part of the country.

“Economically, we are a different country from the 1990s,” Mr Bernat says. “The government is paying more attention to the quality of the investment. They know that investment will come anyway and they don’t want simple assembly lines or BPO centres – or at least they don’t want them to access incentives.”

Mixed results so far

The new rules came into force in September 2018, so last year was the first full year of implementation. Results have so far been mixed.

On the one hand, the total number of projects permitted under the new PIZ regime stood at 400 in 2019, from 348 under the old SEZ regime in 2017, the last full year prior to the reform, according to figures by PwC Poland. On the other hand, total committed capital expenditure fell to 15bn zloty ($3.7bn) in 2019, from 19bn zloty in 2017.

“The government idea was to open up the system of incentives, and it expected a huge inflow of investment as a result of that, but that didn’t happen,” Rafal Pulsakowski and Jakub Sochacki of PwC Poland tell fDi.

“We recorded a minor increase in investment permits, but not something that can be really traced back to the new system. Results are not as brilliant as expected.”

Polish companies have appeared particularly keen to tap into the new PIZ regime. They generated 74% of the new PIZ investment permits in 2019, whereas foreign inventors generated the remaining 26%, PwC figures show. However, Polish companies generated only 44% of the total committed investment, against the 56% generated by foreign investors.

“The PIZ regime is working well for Polish small and medium enterprises (SMEs),” Witold Uhma, deputy head of audit at the Katowice SEZ, tells fDi. “Before it was rather difficult for them to get an investment permit and access aid, particularly because they couldn’t stay in the place they had been originally operating, but had to move assets and operations into an SEZ. It was not competitive for them. Now we are witnessing a situation where Polish SMEs are upgrading their local operations and accessing the PIZ incentives without any need to move elsewhere.”

From a territorial perspective, the PIZ scheme has so far fallen short of encouraging more investment into eastern Poland, with traditional Polish investment hubs like Katowice and Krakow retaining top preferences among most investors, PwC figures show.

“There are a lot of additional incentives to generate investment into eastern Poland, but so far we have not seen any major change in the geographical distribution of investment,” PwC’s Mr Pulsakowski and Mr Sochacki say.

“Incentives like the PIZ are important, but not decisive for investment decisions. What matters is the location of the land plot, its connections, the surrounding infrastructure, the availability of workforce. From this perspective, the best land plots are still within the old SEZs.”

There are a lot of additional incentives to generate investment into eastern Poland, but so far we have not seen any major change in the geographical distribution of investment

Covid-19 effect

The Polish government will have to wait for the PIZ regime to gain extra momentum as the Covid-19 crisis takes its inevitable toll on new investment. Before the pandemic, PwC was expecting the number of projects permitted under the new PIZ rules to grow by 10% in 2020, but “now it’s impossible to make accurate predictions”, Mr Sochacki says.

The crisis even postponed a series of amendments to the PIZ scheme that might have made it easier for investors to reinvest. At present, reinvestments, which make up about half of the country’s total FDI, have to abide by the same capital expenditure threshold established for new investments, which failed to impress many big businesses, Mr Bernat says.

“Reinvestment is really what the Polish system was all about,” Mr Bernat says. “It’s not that difficult for any country to attract a one-off facility bringing along little technological transfer. The investor would come, get the tax credit and leave at the end of the incentive cycle. What really attaches a company to the national territory is reinvestment – becoming a regular source of employment, tech transfer and fostering cluster development. From this perspective, the new system has not really adapted. If an investor commits to a large investment into a new facility, then we can expect reinvestments to be substantially lower.”

Poland’s policy-makers are upping their game to keep up with the tremendous growth the country has experienced over the last decade. The government expected the new PIZ reform to transform the quality and distribution of the investment eligible for tax incentives. So far domestic SMEs have answered the call, whereas foreign businesses have been less impressed. It boils down to politics to decide whether or not this is an optimal outcome.