Anyone familiar with the aerospace industry knows Poland has been a keen player for a century. So too with automotive; Poland is a significant producer of vehicles, parts and accessories. The country has figured highly as a location for outsourced services over the last 25 years and, increasingly, R&D is taking centre stage. Will these traditional sectors stay at the heart of Polish FDI policy and what else does this Central European country has on its agenda? Jo Murray speaks to Krzysztof Senger, Deputy President of the Polish Investment and Trade Agency.
Poland has performed well on the FDI front. It boasted €159 billion of FDI stock at the end of 2015 and EY’s European Attractiveness Survey 2016 put it first for FDI performance amongst the Central and East European countries. Significantly, it came fifth in Europe, after Germany, the UK, France and the Netherlands. This is a country that moved quickly to transform its socialist planned economy into a market economy following the creation of the Republic of Poland on 13 September 1989. Today, Poland is very much an outward-looking nation. It is a member of the European Union, NATO, the UN, the World Trade Organization, the Organisation for Economic Co-operation and Development, the European Economic Area and the Schengen Agreement, amongst others. It has also built strong ties with its geographical neighbours. This is no mean feat given that Poland has seven land borders as well as its coastal border on the Baltic Sea.
Mr Senger confirms that Poland’s traditional sectors will continue to play a strategic FDI role for years to come. First he turns to the automotive sector. “We have succeeded in establishing ourselves as a regional hub for automotive production,” he says, pointing to the presence in Poland of Volkswagen, Fiat, Ford, Volvo; and now Daimler is going to produce vehicles in Poland. And the Polish automotive sector does not just comprise cars; bus production is also significant, and the automotive supply chain is large and complex.
He says attracting new automotive investors enables Poland to build a complete eco-system with innovation and R&D at its core, and points out that Poland has the right mix of talent and opportunity to attract much more R&D from other sectors, perhaps with the automotive sector leading the way. This is unusual, he adds, as most multi-nationals are not eager to bring their R&D activities across borders; but Poland has not experienced such reluctance. He attributes Poland’s critical mass of both producers and consumers as the impetus for creating a new phase of FDI to Poland.
Aerospace is also a hotbed of innovation with companies participating in INNOLOT (the National Centre for Research and Development) which co-finances research, development and knowledge transfer to the aerospace industry. In fact, Poland has long been a centre of excellence for aerospace in terms of the development and manufacture of aero-structures and aero-engines. This country has attracted a swathe of multi-nationals with their state-of-the-art technology, including the likes of Pratt & Whitney, Augusta Westland, GE, Safran, MTU and Hamilton Sundstrand. Aviation Valley plays host to many aerospace companies and is situated in the south-east region of Poland; but there is also the Wielkopolski cluster, Silesia cluster, Lubelski cluster and the National Center of Space and Satellite Engineering Cluster. They all house aerospace manufacturing and R&D activities.
How has this industry developed into such a vibrant sector? Partly through the well-developed suppliers network, but also the quality of the workforce, the competitive labour costs, and the impartment of skills to that labour force. The result is that there are over 200 aerospace and aerospace-related companies in Poland with annual sales of €1.3 billion and over 30,000 employees. Most of the work relates to the production of aircraft (agricultural, training, executive), helicopters, gliders, subassemblies and accessories. Around 90% of aviation production is exported to the US, Italy, Canada, China, Ukraine, Australia, the UK, France and Germany.
The final sector that Mr Senger mentions as a continuing plank of Poland’s FDI strategy is the services sector. He says Poland is building financial services centres based on the availability of talent as well as the plentiful supply of premises. And it is no longer just human resources and accounting that are being outsourced to Poland; today there is much more scope to outsource functions such as analytics and financial security.
Talent is intrinsic to all Poland’s plans for building a stronger, more resilient economy with a very strong FDI element. Mr Senger says the Polish Government acts in tandem with sector development so that the skills base grows in synch with the various industries. Both Polish and international companies are invited to contribute to planning of university and vocational training to ensure business insights are woven into the DNA of the education sector.
Perhaps this is most clearly played out in the aerospace sector. Over 11,000 engineers graduate from Polish technical universities every year. The AEROnet initiative allows closer cooperation between industry, schools and universities to create appropriate training programmes.
New on the agenda for the Agency is the establishment of trade offices to facilitate both Polish and international companies (with an operating company in Poland) to trade overseas. “We have a new export role,” Mr Senger confirms. “We started with emerging markets in the Far East and have offices in Vietnam and Singapore. We now have a new office in Nairobi, Kenya, as well as Iran and San Francisco.”
In tandem with this trade role, the Agency is charged with building a strong venture capital and start-up culture. “We can fish for technology companies through a developed venture capital scene,” he says, adding that Poland is also stronger in the life sciences sector than ever before.
But he concedes that the Agency’s role has had to change significantly over time. Before the Agency’s brief was to compete for FDI using incentives such as cash grants, tax advantages related to special economic zones and local authority initiatives. Today, its role is much more about adding value and creating the best environment for collaboration.
Most of the FDI into Poland has, to date, originated from the US, in terms of the number of companies, followed by Germany, Japan, South Korea, France, the UK and China. But when you reshuffle the figures and rank countries of FDI origination by the value of investment, Germany comes out top.
Going forward, there will be a whole new set of data to add to the performance figures. As the Agency nurtures its new overseas trade offices and grows Polish exports, a raft of fresh information about the way Poland has built its sectors and the way that has contributed to its success as an export nation will reveal more. But that will be another story.