From Site Selection magazine, July 2009

Built to Last
Poland sees a continuing flow of projects, talent and youth.
Finnish cargo handling system and equipment maker Cargotec will make terminal tractors like this one at its new plant in Stargard Szczecinski in northwest Poland.
t's been 20 years since Poland grabbed the world's attention with the Gdansk-based Solidarność trade union movement, led by eventual Polish President Lech Walesa, which pushed out communist party rule in 1989. In more recent times, the country of 38 million people – with a young labor force of 17 million – has been snaring the interest of growing corporations wanting an affordable yet high-quality East-West foothold.
Polish terminal tractor
Photo courtesy of Cargotec

      The country has gradually ascended to a GDP of some US$422 billion (2007), and GDP growth reached 6.6 percent in 2007 before slowing to a still-healthy 4.8 percent during a rugged 2008. Among the current advantages to doing business in Poland is the currency exchange rate between the Polish zloty and the U.S. dollar, which in early June stood at US$1=3.5 zlotys. The Statistical Office of the European Union (Eurostat) said Polish GDP in the first quarter of 2009 increased by 1.9 percent year to year and was the highest in the European Union.
      "The Polish economy has turned out to be more resistant to the recession as well as more calmly and prudently managed than most of the world's developed countries," said Waldemar Pawlak, deputy prime minister and minister of the economy, in an interview with the Polish Information and Foreign Investment Agency (Invest Poland, at www.paiz.gov.pl).
      Poland's strengths continue to be in metallurgy, machinery and equipment, and the automotive sector, which saw Fiat announce earlier this year a $531-million expansion of its diesel engine plant in Bielsko-Biala .The nation saw foreign direct investment totaling nearly $40 billion in 2007-2008. According to the Conway Data New Plant Database, that included projects from such companies as Ford, Honda, BMW, Philips, Ericsson, Daewoo and Ball Corp.
      The most attention-grabbing recent project was Dell's move of EMEA computer system manufacturing from Limerick, Ireland (where it will shut down a plant originally opened in 1990), to Lodz, Poland.
      But Poland is nothing new to many multinationals. Take IBM, an example held up by Zbigniew Kubacki, Minister Counselor & Head of Investments and Trade, Embassy of the Republic of Poland in Washington, D.C., at a recent presentation in Atlanta. Since its first systems integration contract in Poland in 1991, which saw the company employ 35, IBM has invested in a data center, an innovation center, a software lab in Krakow and, most recently, R&D and BPO operations in that landmark city for openness, Gdansk, bringing its employee count in the country to more than 2,100, and bringing in some $389 million in revenue.
      United Technologies has a similar story. Between its Pratt & Whitney, Otis Elevator and Sikorsky Aircraft units, it now employs some 7,400 people in four Polish cities.
      IBM's latest agreement was signed in late May with the Wroclaw Research Center and the European Institute of Technology Plus (WRC EIT+). WRC EIT+ and IBM are discussing several collaborative projects in the area of nanotechnology, life sciences and intelligent systems intended to deliver long-term and sustainable benefits.
      "There are several areas for research and development in Poland where we see a strong opportunity for collaboration with IBM, for instance water management, energy consumption and transportation systems, where we hope to tap into IBM's global best practice," said Professor Miroslaw Miller, chairman of Wroclaw Research Center EIT+.
      "Poland has a strong heritage in science and technology and through this agreement we will work alongside some of Poland's leading scientists and technology experts on breakthroughs that are important to Poland's national agenda," said Kenneth Keating, business development director, IBM Research.

Machines for Movement
      Eastern Europe is one of the places in the world where underutilized construction equipment has been heading to be better utilized. Befitting such a vibrant industrial atmosphere, it's also a prime place for logistics equipment.
      Finnish cargo equipment maker Cargotec announced in early May its intention to construct a $90-million, 400-employee multi-assembly plant in Stargard Szczeciński in northwest Poland, near the German border, to improve its global supply footprint. Cargotec will launch production of spreaders and medium range terminal tractors in rented premises in late 2009, and plans to begin production in its own facilities during the second quarter of 2010.
EU Education Chart

      Cargotec's sales totaled approximately $4.8 billion in 2008, and it employs approximately 11,000 people. As with Dell, the move to Poland is part of a restructuring of Cargotec's facility footprint toward more cost-effective but still high-quality solutions, and comes at the same time the company is cutting back at facilities in the Netherlands, Sweden, the U.S. and its native Finland.
      The company did not respond to interview requests. However, in the publication Polish Market, Harri Ojala, deputy president of Cargotec, said, "We analyzed dozens of potential destinations which could host our investment. When we saw the airport in Stargard Szczeciński we knew we found a solution to our quest. Stargard Szczeciński does have all the elements we need to successfully develop our business, i.e. it is located close to our European clients, it has an airport, access to motorways, appropriate logistic solutions and further plans for transport infrastructure development. I am also impressed by the academic centers of the region. I am optimistic about our future cooperation with them."

Primed to Move, Room to Improve
      A recent UPS marketing brochure encouraging small businesses to do business in Poland said, "Its infrastructure continues to improve rapidly as more than 90 billion euro [US$127 billion] is available for development, infrastructure and human capital for 2007-2013 – the largest amount of EU funds of any beneficiary EU member state. And its growing class of consumers is driving 10 percent annual retail market growth."
      Witold Zabinski, president of the Polish-American Chamber of Commerce of the Southeast, and managing partner of Atlanta-based investment banking and corporate development firm Corporate Strategies International, Inc., says UPS executives know how well positioned Poland is for logistics. And he thinks UPS is on the right follow-up track in courting small and medium-sized businesses to the country.
      "They have greater opportunities for growth. They have not lost the trust," he says of such companies. "They are family owned, more savvy, more savings-oriented. Those are the companies that need to start exporting more."
      Zabinski says one news bit that came out of the same seminar was that the Krakow region is growing at a 10-percent clip. He says it's no surprise that Poland is one of the few countries in Europe that continues to grow, given its large market and its major roles in manufacturing and agribusiness. Add in a decline in the currency, he says, and Poland is "a clear-cut winner. It can compete with China and India, yet be in the heart of Europe."
      Zabinski, whose most recent trip to the country was in October 2008, says steel is still a large and active sector in Poland, and he's been working with various auxiliary steel suppliers, as well as outsourced back-office operations. He also sees more interest by companies on the research side, and is involved in an effort to locate a bio-engineering center in Krakow in partnership with Atlanta-based Georgia Institute of Technology. He says many Polish firms are dealing with restructuring issues for the first time, and are using the economic crisis to improve efficiency and productivity.
Many 'second tier' locations have a population with more skills than 'first tier' markets. The Czech Republic and Poland both have an incredibly motivated, skilled work force in terms of technology, market understanding and languages spoken; they also boast a rapidly maturing IT infrastructure and are well located.

      One challenge in that quest is production from the nation's electrical grid, which he characterizes as needing "a lot of improvement. The utilities are very expensive in terms of what they're making, probably very close to what we're paying [in the southeastern U.S.]." Rail and highway infrastructure also needs attention.
      "Rail was too big," he says. "It's well developed, but they were not service oriented, not going to the right places. Highways are developing, but not fast enough." However, a push by Poland and Ukraine to host the 2012 European Cup soccer championship may provide some added impetus.

We're On Our Way Home
      An early June check of the European Commission's "Job Mobility Portal" found more than 12,000 jobs available in Poland. Asked about the movement of skilled labor into the country, Zabinski says Europeans from many countries are coming to Poland. In addition, the nation continues to produce a high number of qualified graduates.
      Among the strongest trends in Poland's favor is a homecoming of sorts for its native work force, which over the past decade had dispersed across Europe and beyond. It included a large number of people who moved to the U.K. and Ireland, to work at places such as Dell. Now, Dell has decided to shut down its Irish plant, and expand its site in Lodz, Poland, at the same time that many native Poles are moving back home.
      According to the Kubacki presentation in Atlanta, 87 percent of Polish students can communicate in a foreign language. What's more, 50 percent of the entire population is less than 35 years old, and 35 percent is younger than 25.
      Berenika Marciniec, deputy director of the infrastructure of modern economy unit at the Polish Agency for Enterprise Development in Warsaw, says the emigration started years ago with IT professionals heading to Germany, followed by a larger wave (especially to the U.K.) when Poland joined the EU in 2004. She says many of those people, skilled and unskilled alike, are coming home, driven partly by disappointment and partly by improving wage conditions in Poland.
      "Poland started to be comparable," she says. "It may be a good experience for people to know that everywhere is very similar. Now they see the U.K. or other countries, and are back because Poland is not so bad."
      Marciniec says conditions have improved for scientists too, who used to leave Poland due to lack of commercialization funds and lack of opportunity. A program financed by the national government to encourage Polish scientists to return home to better salaries and university jobs has met with some success, but she notes more work is needed to break through the wall of the nation's university tenure system.
      Marciniec herself recently returned to the country after a two-year stint in Luxembourg. She says there is a more visible increase in other nationalities in Poland today too, including those from Ukraine and other former Soviet republics.

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