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Poland is an upper middle-income country with a population of some 38 million inhabitants. It has undergone a remarkable political, social, and economic transformation following the collapse of Communism in 1989. Amongst others, achievements include an uninterrupted economic growth averaging 4.6 percent per annum during 1996-2007, as well as a decline in the unemployment rate from 19.4 percent to 9.7 percent between 2004 and 2007. Today, it has firmly established itself as a frontrunner among European transition countries. Poland joined the European Union (EU) in 2004 and is set for adoption of the Euro currency in 2011/2012.
Poland is a stable, democratic country with strong institutions. Its political landscape has been marked by many changes over the course of the last several years, the most significant being accession to the European Union (EU) in May 2004. Poland’s legal system is almost completely harmonized with EU law and national-level politics will continue to provide an overall backdrop of political stability and broad policy continuity. Upon his election to power in 2007, Prime Minister Tusk announced his plans to raise productivity by liberising the labour market, privatizing state-owned enterprises and cutting red tape. Such moves further lay claim to Poland’s political stability and transparency providing an attractive market for investment.
Poland began its transition to a market economy in 1990 under exceptionally difficult macroeconomic conditions. Hyperinflation, a high rate of hidden unemployment, large legacy of external public debt, high black market foreign exchange premium and an obsolete State enterprise sector were all characteristic of the Polish economy. In response, Polish policymakers liberalized prices, made the Polish Zloty convertible, fixed the exchange rate, lowered import barriers, and started privatization. Such steps have enabled Poland to become an economic success story in a relatively short time.
In 2008, GDP grew an estimated 5.3%, based on rising private consumption, a jump in corporate investment, and EU funds inflows. In particular, more recently, EU membership and access to EU structural funds have provided a major boost to the economy. The victory of Civic Platform in the October 2007 parliamentary elections ensures that there will be government support for foreign direct investment over the medium to long-term. The new government has also announced its intention to enact business-friendly reforms, reduce public sector spending growth, lower taxes, and accelerate privatization
The total value of FDI coming into Poland in the period 1990-2005 was $US89 billion. In fact, 95.6% of capital coming into the country comes from OECD countries. By sector, the majority of funds coming into the country are invested in the manufacturing sector (36%), financial services (20%) and transport, logistics and data transfers (8%).
Poland is an attractive place for foreign investors due to its competitive labour costs, the size of the market, industrial diversity, and possibilities for the development of new economic entities. It also enjoys a relatively low corporate tax rate of 19% and investment incentives in 14 Special Economic Zones.
Poland’s centralised location provides a bridge between the west and the east, the north and south of the European continent. This makes it an ideal launch pad for direct access to the markets of the European Union and Central and Eastern Europe. More specifically, it has access to a 500 million population in Western Europe, and a 250 million population in Eastern Europe.
Several globally renowned multinational companies have taken the opportunity to invest in the country. In fact, between 2004 and 2007 the average growth of foreign direct investment into Poland has been around 45% annually, 50% faster than the global average. Importantly, about 40% of this foreign investment into Poland is actually reinvestment – in other words, companies that already have an investment there are taking some of their profits and reinvesting them in Poland again. This is a very good sign of growing investor confidence.