POLAND’S position at the heart of the Central and Eastern Europe (CEE) region continues to rise in prominence, as it builds on its solid 30-year economic growth record to forge further ahead.

Europe’s sixth-largest economy has many advantages in its favour, as an investment destination and an excellent springboard to do business in the region for economic partners from all over the world, including Singapore.

Sound macroeconomic profile and tax policy: the best ways to attract investments

Even amid the recent turmoil, Poland’s gross domestic product (GDP) growth bounced back the fastest from the Covid-19 pandemic, with European Commission figures showing it had the bloc’s smallest real GDP decline of -2.7 per cent in 2020. In 2022, its GDP grew in real terms by 4.9 per cent, but will slow down temporarily to around 1 per cent this year. The country expects GDP growth to recover to the range of 2 per cent to 2.5 per cent in 2024.

Highlighting this positive sentiment, Minister of Economic Development and Technology Waldemar Buda told The Business Times: “For several years now, Poland has continued to be a good place to invest and do business. Despite the high uncertainty caused by the pandemic crisis, the energy crisis and the war in Ukraine, fears of capital flight have not been confirmed.”

He noted that “recent years have been a record in terms of FDI (foreign direct investment) inflow”, adding that “Poland’s investment attractiveness is confirmed in both, domestic and international rankings”.

In fact, 2022 was the second consecutive record-breaking year in terms of FDI inflows. Supported by the Polish Investment and Trade Agency (PAIH), foreign companies invested 3.7 billion euros (S$5.36 billion), an increase of one billion euros from 2020.

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“Our mechanism is based on supporting, first of all, the most strategic industries and their supply chains,” Buda said.

Poland’s Ministry of Economic Development and Technology pointed out that the number of investment projects rose 20 per cent to 126 from 96 the year before. These projects comprised mainly high-tech projects with a strong focus on automation and technology transfers.

Buda noted that Poland’s greatest assets include its market size, resilience to disruptions, highly qualified workforce, research and development (R&D) network, and incentives for investors, in addition to its attractive geographic location as a gateway to the European Union (EU).

Manufacturing, energy transformation and logistics: key elements to build resilience against supply-chain disruptions

There are several sectors where Poland has competitive advantages and good potential for investment, in line with the interests of Singapore companies. These include the aerospace, home appliances, electronics, electric mobility, business services, food, pharmaceuticals, logistics, medtech and ICT sectors.

For example, Baltic Hub Container Terminal – a joint venture in Gdansk, Poland, by Singapore’s port operator PSA – has expanded to a third terminal.

“With this investment, Poland can continue to compete with western European ports such as Hamburg, Bremerhaven and Rotterdam. Adding a third terminal will allow the Baltic Hub to serve not only the Polish market, but also the entire Baltic region and Poland’s landlocked neighbours,” the port said.

Poland’s new Solidarity Transport Hub (STH) project is another example of how the country’s location and transportation linkages can be leveraged. Located between Warsaw and Lodz in Poland, STH will serve as a major multi-modal aviation and railway interchange serving 45 million passengers annually when it opens in 2027.

This region is well-connected by road networks to Germany, Poland’s top export partner, while the Lodz terminal, the main terminal for the Chengdu-Lodz railway, links Europe to key markets in China and Asia. Poland’s logistics industry potential has been recognised by Singapore-based private equity firm Elite Partners Capital, which has been steadily investing in warehouses. Elite’s ninth facility in Poland is a 29-million-euro facility located in Radomsko, bringing its total acreage to over 340,000 sq m.

Like many others, Elite is leveraging Poland to build up its pan-European portfolio of facilities, and sees its advantages for e-commerce fulfilment, as well as its exceptional land, sea and air connectivity.

Poland’s foreign investment programme focuses on supporting the most strategic industries and their supply chains, mainly in the form of tax exemptions or grants for the implementation of new strategic investments and for medium-sized innovative projects.

Tax exemptions can run for up to 15 years and include up to 70 per cent deductions for investment costs or two years of labour costs of newly hired employees. Durapower, a Singapore-headquartered company dealing in energy-storage solutions for electric mobility and renewable-energy applications, has seen first-hand the advantage of Poland’s strategic location. In support of its European clients, it has established a 2-GWh-per-year battery-assembly plant joint venture with Polish partners.

“Poland is considered to be an economically stable and fast-developing country with infrastructure, a maturing supply chain and human capital to support growth,” said Durapower’s chief executive officer Kelvin Lim. He also noted that companies investing in the country can count on governmental support and a stable political climate.

Regional centre for talents and entrepreneurship, supported by growing R&D spending

To a great extent, Poland’s success lies in its centuries-long tradition of education in science, technology, engineering and mathematics (STEM), as well as its conducive business environment.

The country produces about 350,000 graduates a year with around 20 per cent in engineering or technical fields. Its unemployment rate, at 3.4 per cent, is about half the EU average. Meanwhile, labour costs are about a third of the average EU rates.

While acknowledging that the war in Ukraine has affected all economies, including Poland’s, the Polish Economic Institute (PEI) noted that there is still a silver lining for the beleaguered country’s neighbour. It said that since the beginning of Russia’s invasion of Ukraine, almost 14,000 new Ukrainian-linked companies have been set up, giving a boost to the economy.

Of the 3,600 companies with Ukrainian capital and 10,200 Ukrainian sole proprietorships established between January and September 2022, 66 per cent said they would continue to operate in Poland regardless of the situation at home.

The information-technology (IT) sector has also been boosted by an influx of professionals and companies under the Polish Business Harbour Programme. Originally targeted at Belarusian companies but extended to other nationalities, more than 50,000 visas for IT specialists were issued as at September 2022 Of these, 35,000 were issued after the attack on Ukraine.

Riding on Poland’s technical prowess, R&D is one of the economy’s fastest growing segments, with an 83 per cent increase since 2014. The country has 30 large R&D centres developing artificial intelligence (AI), big data and software products; substantial and continual investments have also been put towards innovation by global players.

Poland is building up its capabilities in this promising field, and is also expanding into other related areas, such as developing startups and pursuing opportunities in AI. Among the key stakeholders in the R&D ecosystem is the Lukasiewicz Research Network, part of Poland’s National Innovation System and the third-largest research network in Europe.

The network includes key research groups focusing on sustainable economies and energy, digital transformation, smart mobility and healthy living, as well as 32 research institutes across the country. In 2021, it pulled in a total project value of US$1.7 billion.

In support of the fast-growing IT sector, the Polish government has also encouraged a dynamic startup and venture-capital ecosystem. Government funds and agencies have invested more than US$5 billion since 2016, and the number of startups has increased by more than 50 per cent since 2015.

Amid the collapse of US-based Silicon Valley Bank and the resultant turmoil, Poland strives to maintain investor confidence with its stable financial system and vigilant regulation, to provide assurance that there is no direct impact on the Polish financial sector.

The Polish Financial Supervision Authority (KNF) also maintains an updated list of public warnings, publishes warnings from foreign regulators, including the Monetary Authority of Singapore, with which it has also signed a memorandum of understanding on cooperation in fintech.

There are many factors that make Poland a good investment destination. The stable economic growth resulting from an affordable skilled workforce, increasing FDI value and a reliable banking sector, strategic location and steady political environment are among the top reasons.

These help to reinforce the country in a virtuous circle, attracting investment and stimulating further economic growth. With increasing exports, new investments, and huge growth potential, Poland continues to be a good and stable partner for Singapore and its gateway to the CEE region.