POLAND: A PROFITABLE PLACE TO INVEST

downtown warsaw

Washington, DC, October 3, 2012

by Robert J. Guttman and Judit Kozenkow

“Poland remains one of the strongest performers in emerging Europe, and one of the most resilient economies to the euro-crisis,” comments London-based Capital Economics.

Poland’s successful economic performance over the past few years contrasts sharply with less robust economic growth from many of its European Union colleagues. With one of the most pro-American populations in all of Europe and a favorable business climate welcoming foreign direct investment (FDI) from US companies , Poland is a popular investment destination for Fortune 500 firms and many medium size companies.

American firms from ADM and Amgen to Raytheon and Westinghouse see Poland as a favorable and profitable place to do business. Poland is a European country that rewards entrepreneurs and has many similarities with businesses in the United States.

While Poland’s remarkable economic growth rate has slowed in the second quarter this year to 0.4 percent it still is outpacing most of the euro-zone nations of the European Union (euro-zone average growth rate is -0.2 percent).

As the Wall Street Journal recently stated, “Poland was the only country in the European Union that managed to avoid a recession after the global financial crisis and had remained relatively resistant to the woes in the euro-zone.”

Several positive economic factors have contributed to Poland’s economic success over the past few years.  “One factor that has kept Poland somewhat insulated from the euro-zone crisis is domestic consumer spending.  Poland had more than 4 percent growth last year while the rest of the continent was mired in negative or flat growth.  Poles have more discretionary income than ever before, and they’re using it to buy things in swank malls cropping up all over the country,” relates a recent broadcast on National Public Radio (NPR).

Poland has one of the largest populations of any of the newer members of the European Union.  Poland’s population of nearly forty million gives it a large and diverse domestic consumer market.

Also, Poland has made large investments in its domestic infrastructure leading up to its hosting the popular Euro 2012 soccer tournament a few months ago.

“Poland pumped money into gigantic ventures, including roadways and stadiums, ahead of hosting the Euro 2012 soccer tournament in June.  In all, it is estimated that Poland’s total preparations for Euro 2012 amounted to more than 5% of its gross domestic product” broadcasts NPR in a segment on Polish prosperity during the euro-crisis of its EU neighbors.

While the economy may have slowed somewhat in the second quarter of 2012 it is still growing at a good pace.  The chairman of the American Chamber of Commerce in Poland, banker Joseph Wancer states, “The fact that its (Poland) GDP is not 4 percent but it’s 2.8, should not be interpreted that it’s a catastrophe.  It’s still excellent and much better than in most other countries.”

There is room for growth in American firms investing in Poland.  Eric Stewart, the president of the US-Poland Business Council remarks in an interview in the Warsaw Voice this summer, “Poland is a shining star in Europe, supported by the fact that Poland is the only country in the EU or OECD which has had positive GDP growth over the past four years.”

“However,” continues Stewart. “our bilateral relationship has a lot of room for improvement.  While our trading relationship has tripled over the past 10 years, Poland ranks only 13th on the list of U.S. trading partners in Europe.  This is not good enough.  Poland should – at a minimum – be ranked in the top 5.”

American and European firms find many reasons to invest in Poland.  It has an educated, hardworking labor force that truly believes in a private and entrepreneurial market economy.

What other factors have led to Poland’s economic success?

“EU membership helped open Poland to trade and investment from many multinational companies.  But experts attribute the country’s recent economic achievement to other factors, including a healthy banking sector, low levels of debt and cheap labor costs.  Poland’s population of 40 million also provides a large market for domestic goods that are now in demand, thanks to the success of comprehensive economic reforms in that 1990s that encouraged rapid expansion in the private sector,” according to Global Post.

Poland, which gets the majority of its energy from its large coal reserves, is looking to achieve a form of energy independence.  As CNN recently reported, “Poland may be sitting on a vast natural resource that could make it energy independent.  The Polish government is funding exploratory research into whether or not it should drill for shale oil—a fossil fuel that some experts believe the country has an abundance of.”

Poland’s Deputy Foreign Minister Beata Stelmach comments, “Poland is arguably the biggest focus for shale gas in all of Europe.”

“The Polish government invited big energy companies like Chevron to explore potential gas fields in the southeast corner of the country.  While Chevron has experience developing shale gas in the U.S., Poland is a new frontier …,” says CNN.

How large and how significant could shale gas be to Poland?  It could be huge says the Deputy Foreign Minister Stelmach. The Polish Minister feels “We are not able to say the precise figure (of how much gas there is in Poland). It may change map of the energy of Europe.”

The discovery of shale gas in Poland, in its initial stages, could truly make Poland an energy independent nation in the next decade.  American energy firms like Chevron and Conoco Phillips could be large factors in making this become a reality.

As the Polish Embassy website in the U.S. states, “Poland faces a great opportunity to build a strong energy sector following the USA where the share of shale gas in the overall gas supply rocketed from 1% in 2000 to 20% now, and it is believed for further grow reaching as much as 50% in 2035.”

The discovery of shale gas in Poland could be a great find and also a way to continue Poland’s economic success story for years to come.

In addition to U.S. firms working on finding shale gas other American firms such as Westinghouse and General Electric are working on possibilities of providing nuclear energy in Poland.

“American companies were the pioneers of Poland’s economic transition. The U.S. companies quickly became one of the largest foreign investors,” according to a KMPG and Amcham report.

Today the United States is in fifth place of largest foreign investors in Poland after the Netherlands, Germany, France and Luxembourg with approximately $20 billion invested by American firms to date.

In addition to the energy field, U.S. firms are involved in software development, health care, defense, aerospace, biotechnology and research and development centers across Poland.

In addition to its economic success in the past decade Poland has proven to be a true ally and friend of the U.S. in Iraq and Afghanistan.

As the BBC points out, “Warsaw’s profile on the international stage was raised by its support for the U.S. led military campaigns in Iraq and Afghanistan.  Polish peacekeeping troops served in South-central Iraq from 2003 until 2008, and the country has also contributed a sizeable contingent to the NATO peacekeeping force in Afghanistan.”

Looking to build on the U.S. and Poland “special relationship” the week of October 8, 2012 has been designated as “U.S.-Poland Week”.  The ambassador of Poland to the U.S., the Polish Ministry of Foreign Affairs and the U.S.-Poland Business Council will host an all day conference at the New York Stock Exchange on October 10, 2012 to explore new ways for American firms to successfully invest in Poland.

Other events in U.S. – Poland Business Week will consist of a seminar on the role of women in business and economic transformation at the consulate general of Poland in New York; academic debate on the global financial crisis at the NYU Stern School of Business and a sculpture exhibit at the Museum of Modern Art in New York.

As Eric Stewart, the president of the U.S. – Poland Business Council , says, “It is my hope to see the two countries  have commercial ties that match their strong political and cultural ones.  That is the objective of our U.S. – Poland Week events.”

Poland’s prosperity, amid a slowdown in the euro-zone and austerity measures across Europe, will continue to be fueled by U.S. firms investing in the country that has been called the “green island among weaker states.”

The proverbial glass which can either be seen as half empty or half full is still seen by the majority of Poles as half full and growing.

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