Between January 2007 and September 2011, Warsaw was the destination for more than 250 inward investment projects, constituting almost one-fifth of Poland's total, according to data from fDiMarkets. Warsaw was followed by Wroclaw, which attracted nearly 100 projects, and then Poznań and Kraków, with about 60 inward investments each.

In some ways, Warsaw's FDI success came naturally. "Warsaw has never canvassed for investment projects in production, business process outsourcing or R&D centres – at least I have never seen any actions aiming to attract this kind of investment," says Adam Żołnowski, a director at PricewaterhouseCoopers and a former president of the Polish Information and Foreign Investment Agency.

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A country-wide attraction

A relatively cheap workforce compared with other European capitals, extensive office space, vast human resources and good infrastructure are key factors in attracting investment to Warsaw. Indeed, many countries have chosen the Polish capital as the base for their central and eastern European headquarters.

However, Warsaw's costs have been rising recently. "If a company [is looking] to reduce costs, it will not come to Warsaw as it is already too expensive," says Mr Żołnowski. This is playing into the hands of Poland's other large cities. According to research by McKinsey & Company, carried out on behalf of the Association of Business Service Leaders in Poland, about two-thirds of companies that have chosen to locate offshore or outsourcing operations in Poland have done so because of the country's low costs. So where are these companies opting to do business?

In a 2010 ranking by Global Services and Tholons of the top 50 emerging global outsourcing cities, Warsaw was in 28th place, whereas Kraków, a city in Poland's south, was ranked in first place. Global companies such as Capgemini, Google, IBM and Microsoft have located in the city, attracted not only by its cost-effectiveness, but also its high quality of life, rich history and academic culture.

Offering assistance

A recent report by global real estate services firm Jones Lang LaSalle entitled 'Onshore, Nearshore, Offshore: Unsure? A 2011 Central & Eastern European Perspective' notes that significant changes have become apparent in the past few years in the region when it comes to the public sector's attitude towards investors. Now, within many municipalities, there are special teams and departments doing city marketing for investors, searching for talent and accommodation. Also, local municipalities are increasingly willing to liaise with private-sector intermediaries, such as real estate agents and recruitment consultants, on behalf of investors coming into their cities or regions.

The Wroclaw Agglomeration Development Agency (ARAW) was a forerunner for investment agencies in Poland. It was launched almost six years ago as a partnership between eight local governments of Wroclaw to stimulate economic growth by attracting new investments to the area.

"The agency gives us freedom in preparing offers that are tailored to the needs of a specific investor,“ says Tomasz Gondek, deputy president of ARAW. "We are not restricted to administrative issues but we act as a consulting company, collaborating with municipal and non-municipal units. Together with the Wroclaw Academic Hub and the Wroclaw Research Centre EIT+, we are able to adapt the offer to an investor’s requirements within one day." 

The agency's efforts had almost immediate effects, with a number of large foreign companies – among them 3M, Capgemini, Credit Suisse, Google, Hewlett-Packard, IBM, LG, McKinsey & Company and Nokia Siemens Networks – entering the Lower Silesia region, of which Wroclaw is the biggest city.

"The strategy, which was originally adopted by Wroclaw, when its authorities said ‘We will grow along with our investors‘, has caught on and now been adopted by other cities," says Mr Żołnowski.

Clustered formations

Gdańsk started up the InvestGDA Economic Development Agency in 2008. Poznań, Szczecin and Lublin have since trodden a similar path. In August 2011, Lódz launched a commercial partnership aimed at promoting the city and neighbouring areas to would-be investors.

Both Poznań and Gdańsk have started a scheme where the local council pays for the training of prospective employees of companies planning to invest in the cities. InvestGDA is building the largest deepwater container terminal on the Baltic Sea, which will be developed into the Pomeranian Logistic Center. The project will immensely strengthen Gdańsk and the Pomeranian region as an important logistics and distribution centre as well as a logistics cluster.

Other clusters have already been operational: an electronics cluster around LG's operations in Wroclaw’s Kobierzyce region, which employs about 9000 people, and another around Sharp's facilities in Łysomice near Toruń, which provides jobs for some 5000 workers. There are automotive and energy clusters in Upper Silesia, and an aviation cluster near Rzeszów in the south east of Poland. Deloitte reports that there are already about 180 clusters in the whole country, with the number set to reach 250 by the end of 2012.

“Due to the fact that southern Poland is a region with strong traditions in the aviation industry, we easily found production specialists and experts to conduct research in our new Poland-based R&D centre," says Roman Staszewski, president of aerospace company Hamilton Sundstrand Poland.

Momentum from the east

Thanks to such investments and EU funds, the eastern part of Poland, which has historically been more agricultural and less developed, is finally gaining some momentum when it comes to attracting new FDI projects.

Bartosz Sobotka, a director at the Regional Investor Assistance Center in Lublin, says that cities in western Poland have better infrustructure than the ones in the east but this situation is slowly improving. "A new airport is now being built just 12 kilometres away from the [Lublin] city centre and only three kilometres from Lublin Special Economic Zone. The first planes will take off in mid-2012. An investment process usually takes about six to nine months. If an investor approaches us now the airport will be ready when they come here,“ says Mr Sobotka.

Jan Kidaj, president of Aliplast Aluminum System, which recently invested €20m in a new aluminium extrusion line in Lublin, says conditions to do business in the region are very good. "Access to workers is better because they are more motivated to work and they seem to care a lot for work."

"If a company is looking for suppliers in Ukraine or Slovakia, Rzeszów and the region are the right choice," says Katarzyna Chlebek from the Rzeszów Regional Development Agency.

Conducting business in Warsaw gives companies clout, but in times of economic slowdown, they have to be wise about the money they spend. This is where Poland's smaller, cheaper cities come in.