Post-Pandemic Reality Favourable for Poland

The next stage involved geopolitics, a dynamic from business for the past thirty years. After war in Ukraine had broken out, everyone – entrepreneurs and the general public – realised how important official state sympathies are. This factor contributed to intensified nearshoring, a process duly dubbed “friendshoring”. Holding manufacturing assets in countries accessible without interruption, geopolitical turbulence regardless, has become particularly significant.

One other aspect should not be forgotten: the United States has imposed sanctions on China, a factor which has also resulted in manufacturing operation transfer from Asia to Europe. The move gave rise to swift reactions, mainly from Japanese and Korean companies who speedily began seeking access to European markets via countries located in central and eastern parts of the continent. Monitor and microprocessor manufacturers have been particularly active. The combination of all aforementioned dynamics has given rise to new economic ecosystems. Ready to attract sizeable investments, Poland is benefitting from the situation. Foreign direct investment influx is dependent on the economy’s capacity, an attribute that has grown significantly on our market.

Are European Union-level activities sufficient to encourage foreign equity to invest in the Old Continent rather than in other parts of the world?

Much depends on the manufacturing and assistance options available elsewhere. Once we take a closer look at the Inflation Reduction Act (IRA) passed in the US, and the European Union’s answer – the drafting of a Temporary Crisis Framework – it becomes apparent that the resultant perspective is far from satisfactory.

Pursuant to the IRA, manufacturers may be eligible to have 40 percent of battery manufacturing cost covered provided that manufacturing plants are located in the US. The European Union has introduced no such tool or respective institutional assistance. While the Temporary Crisis Framework is an implement allowing member states to increase state aid offered to businesses, the scheme has not been backed by any funding. Under the aforementioned solution, states have been given free rein to support local investments – yet using their own budgets only. This means that countries with bigger economies and greater equity at their disposal will be more successful than others in terms of resettling industries locally.

Once we account for the fact that the value of the Polish economy constitutes around 20-25 percent of the German economy, it becomes apparent whose capacity for encouraging business settlement will be greater. Notably, the game is on for automotive microprocessor and photovoltaic battery manufacturers – the core of the modern economy. Let me emphasise that the European Union is planning for 20 percent of all microprocessors to be manufactured in Europe.

Where do you see the foreign direct investment influx potential?

Intel is a flagship example. Intel entering Poland means that we are revisiting times of our market attracting microprocessor segment investors. We had witnessed similar developments on the Polish market in the past, albeit on a different scale and involving different technologies. Today, we are back with a solid partner, ready to develop this manufacturing segment; and by saying “solid” I mean that they are a leading microprocessor manufacturer worldwide.

Let me add that such investments are usually followed up by research and development centres’ evolvement. Yet in Intel’s case, the reverse was true. They began by building an R&D centre in Gdańsk, one employing 2,000 people today. It is thus no coincidence that the manufacturer had decided to locate the manufacturing plant in Poland, a direct derivative of the R&D centre.

How important will benefits arising from potential Ukraine recovery plans be to foreign investors?

This is a hugely complex and multifaceted issue: the majority of manufacturing assets in Ukraine is located on land remaining under Russian occupation.

Consequently, Ukraine’s recovery will entail the rebuilding of the country’s entire industry. Moreover, infrastructural and housing-related construction will be at play. I believe that united forces will be required to make the process effective. Poland may well become a chosen location for process preparations, and a solid operating base, not least for foreign companies interested in joining the effort.

All this means that the subject is a significant one – yet some of these processes will not be feasible until a modicum of situational stability is reached. However, let us bear in mind that free of direct warfare, western Ukraine is on our doorstep and it is already an area of potential investment interest.

Yet I also believe that financing will be of key importance to the entire process. There will be no Marshall Plan reprise. Money will have to be sought elsewhere, by no means from a single source. We may well expect the UN to take action, making UNOPS one of their funding mechanisms. Others will include investment banks – and private equity. While funding distribution procedures and investment schemes will be more or less transparent in the first case, private equity is a different story, especially if Ukrainian capital is involved. Under such circumstances, the partner selection process will be discretionary.

Which of the incentives offered to foreign investors enjoy the greatest interest?

Grants correlated with the Polish Investment Zone are the principal support tools. This is a form of institutional assistance, well-thought through and available under the European Union regional assistance mechanism, under which beneficiaries are eligible for grants and CIT payment waivers, the latter extremely favourable to the economy: before actually securing a tax waiver, one has to make the respective payment.

Triggering great emotion, other new implements have been introduced as well, the Temporary Crisis Framework a case in point, under which allowable state aid is considerably greater for large projects, potentially up to EUR 350 million per project, as opposed to the previously approved EUR 20 million. The difference is enormous.

How pertinent is the ESG aspect to talks with foreign investors?

Let me begin by highlighting that the principle will only apply to a limited number of large companies that will continue expecting their subcontractors to comply with these rules. The arrangement resembles ISO implementation methodologies.

Consequently, ESG should be approached neither as a threat nor an opportunity. It is rather something akin to a circumstance; depending on the company’s approach, it may become an impulse for development – or the exact opposite.

ESG is intended to give Europe an equal playing field with Asian manufacturers. This is why it extends beyond environmental and climate protection into protecting the European Union’s economy.

What is your outlook for foreign investment influx into Poland?

I am optimistic. The foreign investment value reached EUR 5 billion in the first half of this year. It’s a record-breaking performance, ample proof of the enormous leap forward we have taken. Furthermore, ongoing growth has been recorded over the past several years, obviously owing to changes observed after the pandemic and outbreak of war in Ukraine, and changes in the corporate approach to business. Companies have found how important it is to approach their manufacturing asset locations wisely. This does not necessarily mean that transferring manufacturing plants to Europe will result in closing the ones in Asia. This is simply a trend giving rise to new enterprises being increasingly often located in other parts of the world, closer to the end user, the US and Europe unquestionably the largest.

Furthermore, the US having kicked off their manufacturing asset recovery process proves that governmental agencies have modified their take on the situation. Until very recently, the Americans had been convinced that multiple processes could be outsourced. In my opinion, Europe will follow suit.

Jacek Pochłopień

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