One year after joining the European Union Poland regains its reputation as one of the top investment locations in Europe. Fierce competition for foreign direct investment (FDI) with rivals such as Slovakia and Czech Republic has dumped direct investment in the country in the recent years. Frequently changing governments, a network of disputable roads and inconsistent tax laws further contributed to a negative development of FDI in Poland (Cienski 2005).
However last year’s empowerment of a “technocratic government” that replaces a “corruption-ridden” political class is the impetus for a new investor friendly policy. This positive development is underpinned by the victory of Lech Kaczynski in October’s (2005) presidential elections. Positioned centre-right Kaczynski is supposed to enhance Poland’s attractiveness for investors with reduced taxes and bureaucratic burdens and is to approach prospect investors with tailor made offers (Cienski 2005).
A new corporate flat tax of 19%, Poland’s return to strong economic growth (5,4 % in 2004) and its membership in the European Union are just some factors that explain Poland’s attractiveness for investments from abroad (Earnest&Young 2005, p. 14). Wages are about a fifth of European average income (Spiro 2004) and labour productivity has risen significantly by 9,2 % in the past two years 2004 (PAIiIz 2005). This development puts the lid on a successful transition process from a socialist country with a centrally planned economy to a modern western democracy with a market-oriented economic system. This significant progress in transition is the basis for Poland’s appeal to foreign companies and is a key determinant in the decision for a direct investment (Figure 1; Mueschen 1998, p. 303).
Table of Contents
1. INTRODUCTION
2. FOREIGN DIRECT INVESTMENT
2.1. FOREIGN DIRECT INVESTMENT – A DEFINTION
2.2. FACTORS OF INFLUENCE ON FOREIGN DIRECT INVESTMENT DECISIONS
2.2.1. The Domestic Market
2.2.2. Corporate Factors
2.2.3. The Target Market
2.3. FOREIGN DIRECT INVESTMENT IN POLAND
2.3.1. Poland regains Reputation as top Investment Zone
2.3.2. Modes of Foreign Direct Investment – Greenfield is on the Rise
2.3.3. Main Countries Investing – France takes the Lead
2.3.4. Target Industries – Manufacturing on first Place
3. FACTORS OF INFLUENCE ON FOREIGN DIRECT INVESTMENT IN POLAND
3.1. FACTORS OF PRODUCTION
3.1.1. Human Capital – high Quality, low Costs
3.1.2. Knowledge Resources – top in IT and Mathematics
3.1.3. Material Resources – highly available and competitive
3.2. POLITICAL & LEGAL FACTORS
3.2.1. Political Situation – a long Way to Stability
3.2.2. The Constitution – Progress and Stability
3.2.3. Corruption – Poland’s Vice
3.2.4. Infrastructure – Poland’s weak Point
3.2.5. Economic Development – strong but vulnerable
3.2.6. Tax & Investment Incentives – sound Business Promotion
3.3. DEMAND SITUATION
3.4. FACTORS OF INFLUENCE AND MARKET ENTRY STRATEGY
4. CONCLUSION
Research Objectives and Key Topics
This paper examines the strategic viability of Poland as a target for foreign direct investment (FDI). It explores how the country's transition toward a market-oriented economy, combined with specific production factors and political stability, influences the market entry decisions of international corporations.
- Analysis of Poland's transition progress and its impact on attractiveness for foreign investors.
- Evaluation of production factors, including human capital quality, knowledge resources, and material infrastructure.
- Assessment of the political and legal environment, focusing on stability, tax incentives, and corruption.
- Investigation of current trends in market entry strategies, specifically the shift from domestic sales to export-oriented greenfield investments.
Excerpt from the Book
3.1.1. Human Capital – high Quality, low Costs
The Polish are ambitious and hungry says former secretary of treasury Jacek Socha. After decades under a communist regime the EU accession offers significant opportunities to the Polish people to catch up with the western world. The union offers vast opportunities of change and motivates people to give sacrifices in return for the aspired prosperity seen in the western world. It is bigger cars, arty pleasures and expensive journeys that motivate Polish people and provide them with a competitive advantage over prosperous Western European countries which have long accepted those gadgets as granted. Despite slowly growing wealth the Polish do not yet have to fear competitors in the fight for FDI. Romania and Hungary, to name just some examples, offer much lower wages but are way behind Poland with respect to productivity and efficiency (Roland Berger Strategy Consultsnts, 2005).
The appeal of Polish Human Capital is obvious. Employees in Poland are "highly qualified” (Ruedel et al 2003, p.3), highly productive and work for a fifth of European Average wages (Spiro 2004). It is their youth, ambitiousness and skill level that make human resources a key determinant in attracting FDI.
Summary of Chapters
1. INTRODUCTION: Outlines Poland's economic transition and its resurgence as a top investment destination following EU accession.
2. FOREIGN DIRECT INVESTMENT: Defines FDI and analyzes the primary factors influencing investment decisions, including domestic and target market dynamics.
3. FACTORS OF INFLUENCE ON FOREIGN DIRECT INVESTMENT IN POLAND: Provides a detailed evaluation of production, political, and market factors that shape the investment climate in Poland.
4. CONCLUSION: Summarizes Poland’s success as a transition economy and suggests that its future lies in acting as a European hub for specialized high-profile service and manufacturing projects.
Keywords
Foreign Direct Investment, FDI, Poland, Economic Transition, Human Capital, Greenfield Investment, Market Entry Strategy, European Union, Political Stability, Infrastructure, Tax Incentives, Knowledge Resources, Competitive Advantage, Emerging Markets, Central Europe.
Frequently Asked Questions
What is the core focus of this document?
The document focuses on evaluating Poland as a strategic location for foreign direct investment, analyzing the underlying drivers that make the country attractive to international companies.
What are the central themes discussed in the paper?
The central themes include the country’s economic transition, the quality and cost-effectiveness of Polish human capital, the impact of political and legal frameworks, and the shifting trends in market entry modes.
What is the primary research goal?
The research aims to determine why and how companies utilize foreign direct investment in Poland, specifically looking at the intersection of transition progress and strategic investment determinants.
Which methodology is employed in this research?
The paper utilizes a qualitative analysis, synthesizing existing economic studies, investment statistics, and reports from governmental and international agencies to build a framework for market entry.
What is covered in the main section of the paper?
The main section investigates three pillars of influence: factors of production (human and knowledge resources), the political and legal environment (including corruption and tax incentives), and the current demand situation in the Polish market.
How would you describe the document using key terms?
The document is best described by terms such as FDI, economic transition, market entry, Central Europe, human capital, and industrial investment.
Why is human capital highlighted as a key driver for Poland?
Human capital is considered crucial because of the combination of high skill levels, youth, and low wage costs compared to the rest of the European Union, making it highly competitive for foreign firms.
What role does the EU accession play in Poland’s attractiveness?
EU accession is presented as a major catalyst that improved institutional stability, provided access to infrastructure funding, and created a more reliable and investor-friendly tax and legal environment.
- Quote paper
- Simon Winzenried (Author), 2005, Direct Investment as a Strategy to enter the Polish Market, Munich, GRIN Verlag, https://www.grin.com/document/52855
