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Poland has emerged from a difficult past to become one of Europe’s strongest economies, attracting an increasing volume of investment – and moving up the value chain – in a range of sectors such as IT, healthcare, R&D, financial services, aviation and business process outsourcing, writes Ginanne Brownell.

In 1987 Zygmunt Berdychowski had an idea. The Polish Solidarnosc activist wanted to organise a forum to encourage discussion on the economic and political future of Poland.

It took three years – and the introduction of democracy – for it to happen, but in 1990 the first Economic Forum was held in the south-eastern Polish spa town of Krynica, where 120 of the country’s best political and economic brains sat down together to discuss the future of the country.

Now, 20 years on, the Economic Forum – run by Mr Berdychowski’s Warsaw-based Institute of Eastern Studies – has become the gathering place not just for Poland’s political and business elite, but also for thinkers and executives from across the globe. Dubbed “the Davos of the East” by French newspaper Le Monde , this year’s forum attracted 2000 participants, including European Commission president José Manuel Barroso, Estonian president Toomas Hendrik Ilves, Georgian vice-prime minister Giorgi Baramidze and Jerzy Buzek, the former Polish prime minister and current president of the European Parliament.

“I wanted to create a forum where East meets West and to build better relations between EU states,” Mr Berdychowski told fDi Magazine in an interview in Krynica. “This is our future.”

Europe’s rising star

In a sense, the growth and success of the Economic Forum reflects how Poland itself has emerged out of the Communist wilderness to become one of Europe’s strongest economies. In 1990 Poland was just one of several former Soviet satellite states transitioning into a market economy; now, Poland has become the economic success story not only of central and eastern Europe, but of the continent as a whole.

In mid-2010, Poland overtook the Netherlands to become Europe’s sixth largest economy and was the only country in the EU to see growth last year. The Organisation for Economic Co-operation and Development has predicted that Poland’s economy will grow by more than 3% this year and the European Commission has also forecast that Poland will be the fastest-developing country in the EU in 2010.

Poland has also been credited with being one of Europe’s most fiscally responsible countries in terms of avoiding recession and was able to offer help and advice when other European states such as Greece faced serious financial crises earlier this year. “For the first time, we have reacted to something happening in Europe not as a central or eastern European country but as a northern European country,” Radek Sikorski, the Polish foreign minister, told Newsweek in an interview earlier this year. “Poland is now part of the solution [to] the financial crisis.”

And being part of that solution has also been an inspiration for investors; according to crossborder greenfield investment tracker fDi Markets, so far this year Poland has seen almost $1.44bn of greenfield investment. The Polish ‘bison’ economy (as fDi dubbed it last year) may have been slow to take off in the early part of this century but it is now moving steadily and gaining speed; since 2003, the country has received almost $23bn overall in greenfield investment, according to fDi ‘s data, which has helped create more than 156,000 jobs.

“The investment climate has really been improving,” Professor Krzysztof Rybiński, rector at the University of Economics and Computer Science in Warsaw, told fDi Magazine at Krynica. “I believe the next 10 years will be Poland’s golden decade.” One of the reasons he cites for this is that Poland is now number 12 in the world for top-priority host economies for FDI, according to the World Investment Prospect Survey 2010-12, released by the UN Conference on Trade and Development.

Warsaw capitalises on success

Warsaw is a perfect example of Poland’s FDI success. The country’s capital city has already surpassed its investment totals from last year with $1.26bn in greenfield investment so far this year (compared with $1.05bn for the whole of 2009), according to fDi Markets, and has left cities such as Berlin – with only $311m in investment in 2010 so far – a long way behind. In AT Kearney’s 2010 FDI Confidence Index, Poland was placed sixth in the world – up 22 spots from 2009 – in terms of investor confidence.

“Poland’s time has come,” says John Duckworth, managing director for central and eastern European operations for real-estate services firm Jones Lang LaSalle. “The country will be one of the best destinations for investment (both real estate and corporate investment), to locate to a big consumer market that can provide a labour force and good value for money at a strategic location in Europe.”

Broad range of investment

“The investment climate has really been improving,” Professor Krzysztof Rybiński, rector at the University of Economics and Computer Science in Warsaw, told fDi Magazine at Krynica. “I believe the next 10 years will be Poland’s golden decade.” One of the reasons he cites for this is that Poland is now number 12 in the world for top-priority host economies for FDI, according to the World Investment Prospect Survey 2010-12, released by the UN Conference on Trade and Development.

Broad range of investment

Across Poland, substantial investment has come this year from a broad range of multinationals and across a wide range of sectors, including everything from a new financial services centre for Sony Pictures Entertainment in the port city of Gdynia to the Swedish-based construction company Skanska investing $29m in a new business centre in Wrocław.

The US conglomerate General Electric (GE), an investor in Poland since 1992, has also expanded its operations in the country this year. By the end of 2010, the company’s Warsaw-based European design centre – one of the few major GE engineering operations located outside the US that performs R&D on everything from energy to aeronautics – is expected to employ more than 1000 engineers; when the centre started a decade ago, there were only 20. “There is a real Silicon Valley spirit here,” says Leslaw Kuzaj, GE’s regional executive for central and eastern Europe. “We have been really pleased with how things have worked out for us here in Poland and it’s been a real success for us so far.”

That success is something Poland hopes other companies will pick up on too. Although Poland has historically been seen as strong in manufacturing – two years ago Dell moved its European manufacturing base from Limerick, Ireland, to the western Polish city of Lodz to improve productivity and reduce costs – the country has steadily been moving up the value chain for investment in sectors such as IT, healthcare, R&D, financial services, business process outsourcing (BPO), real estate and aviation.

As fDi Magazine reported in its June/July edition, the region around Rzeszów in south-east Poland has become a hub for the aerospace industry in Europe and is known as ‘Aviation Valley’ – because 90% of the Polish aerospace industry is based there – and the Polish aerospace sector has attracted such multinationals as Sikorsky, Hispano-Suiza, King & Fowler, Avio and Goodrich. In 2012 Poland will play co-host (along with Ukraine) to football’s European Championships and new highways are being built and railway lines are being upgraded for the influx of tourists expected from across Europe.

Thanks to excellent training facilities for nurses and doctors, the Polish healthcare industry – especially healthcare tourism – also has the potential for exponential growth. According to fDi Markets, $31m has already been invested by foreign companies into the Polish healthcare sector this year, up from $26m for the whole of last year. One of the biggest such investors in 2010 has been Alliance Medical, a subsidiary of Dubai Holdings, which has announced plans to launch several teleradiology centres – both public and private – in Lodz, Lublin and Gdansk. Teleradiology is the transmission of x-rays and other medical images to remote locations for interpretation.

With Poland’s strong history of health spas and resorts across the country, Mr Rybiński sees health as a real growth sector. “In Poland you get very good value for money in terms of healthcare,” he says. “Healthcare costs up to a third less here than in western Europe and, with the continent’s ageing population, Poland could gain a lot from specialising in this field, thanks in part to very strong medical education and nursing.”

Poland has a history of strong IT expertise – the country has won top awards for everything from software development to gaming, with several teams from Poland winning prizes at Microsoft’s 2010 Imagine Cup held in Warsaw. This year the sector is expected to grow by 3% and could hit double-digit growth by 2012, which is all the more impressive when taking into account that the IT industry shrank by 10% in 2009.

Investment in IT in Poland has come from companies such as France Telecom, India’s Infosys Technologies and US engineering company Bechtel. IBM, which has been an investor in Poland for several years, announced in July that it plans to open the country’s first multi-purpose cloud computing centre in Wrocław, as part of an agreement with the Wrocław University of Technology. The centre will develop new educational programmes offering courses for more than 1500 students, using existing and nascent technologies.

Regional growth

Kraków, home to several top universities and higher education centres, has gained a formidable reputation for quality R&D thanks to facilities such as the Kraków Technology Park and the Krakow LifeScience Park. The city – which has received almost $87m in greenfield investment this year, as tracked by fDi Markets – also hopes to become a hub for sectors including BPO and financial services, with companies such as Shell and Capgemini having already opened service centres there. Intelenet Global Services, for one, has already been charmed by Krakow’s investment climate; the India-based company and global BPO provider recently opened its first centre in Europe in Krakow, which will provide multilingual capabilities in German, French, Italian, Dutch and Spanish to a global clientele. Meanwhile, Finland’s Stonesoft, a provider of integrated network security, has announced that it will be opening a product development unit in Krakow.

Katowice – long known as a hub for the automotive industry thanks to investments from companies such as General Motors, Fiat and Isuzu – is also hoping to move up the value chain. The south-eastern Polish city has so far this year seen $98m in greenfield investment and has created more than 1200 jobs. New investors in the city this year include Dutch-based TNT, which has opened a road transport hub with advanced technology that will handle domestic and international shipments, while PricewaterhouseCoopers has inaugurated a shared services centre that will support its audit services across eastern Europe.

Meanwhile, the western Polish city of Poznań has already surpassed its investment from last year; so far in 2010 the city has seen $506m compared with $481m in greenfield investment for last year, according to fDi’ s data. Home-goods retailer Ikea of Sweden announced earlier this year that it would open a shared services accounting centre in the city, which will provide work for up to 300 new employees, while French energy group EDF is investing €70m in a renewable energy project that will feed green power to the national electric grid.

Much was made in the Western press about Poland’s “brain drain” when the country joined the EU in 2004 and hundreds of thousands of Poles moved to western Europe seeking job opportunities and education. But now that the Polish bison economy is charging forward, Poles have begun coming back to their homeland in droves to do everything from setting up new businesses to working in high-level jobs in multinational companies that have invested in the country. Mr Rybinski says Poland is now enjoying a “brain gain” as so many people are coming back to take part in the country’s future. Who knows? One day Davos may be known as the “Krynica of the West”.