American Chamber of Commerce In Poland issued the following announcement on May. 4.
A greenfield investment is highly valued by the country that the capital inflows. This is because it creates new factors of production, assets and increases the host country's production potential. Such an investment requires the investor to have considerable resources and is a long-term project. Greenfield investments are investments in which a foreign investor decides to conduct its activities without using the existing infrastructure of the local enterprise. However, a new factory's construction is usually chosen by those who have not found a cooperation partner and are convinced about market development possibilities, including internal demand. Experts stress that such investments are the best proof of trust in the host country, its economic and social stability.
Although greenfield projects, by definition, are made from scratch, they can also be created by companies already existing in a given market. Therefore, the source of funding for greenfield investments is the capital flowing into the country or the profits generated (reinvestment).
There are many examples of greenfield projects created with capital earned by a company operating for some time, which had been established as the effects of greenfield investments (3M, IBM, McKinsey, Verifone) and acquisitions (Exide, Mondelez, Philip Morris, UPS). Nowadays, recently popular shared services centers are another venture of an investor already present in our country for some time. The table below presents examples of such entities that have set up operations in Poland due to the dynamic development of the core business by a particular company.
Local advantages
In recent years, Poland has attracted even a third of all new investment projects located in the region of Central and Eastern Europe. New investors link their long-term plans with the Polish market, taking advantage of the Polish economy's competitiveness, especially its human resources and market demand.
Significant incentives for investors are Special Economic Zones. They have traditionally operated for more than 20 years as geographically defined regions offering tax reliefs and infrastructural conditions in return for investing specific capital and employing workers on their territory. The EY estimates that about two thousand entities were set up and generated 350,000 jobs in 14 designated SEZs in Poland from 1995 to 2017.
In 2018, changes were made to the granting of income tax exemptions (CIT or PIT). Thanks to this amendment, it was made possible to take advantage of tax exemptions throughout Poland, and the amount of state aid is determined based on the so-called regional aid map. The strongest support is granted to entrepreneurs making investments in the Lubelskie, Podkarpackie, Podlaskie and Warmińsko-Mazurskie Voivodships. There is the intensity of public support amounts to 50% and is granted for 15 years. The total number of projects permitted under the new PIZ regime stood at 400 in 2019, from 348 under the old SEZ regime in 2017.
A very promising region highlighted by experts from the fDi Market is the Lodz Special Economic Zone in Poland, which stands out as the top zone for Europe in fDi’s Global Free Zones of the Year 2020. The zone also featured third in the global overall ranking. The zone has progressed in becoming a center of Industry 4.0 at the heart of central and Eastern Europe. For the last years, a significant number of permits were issued in the Lodz Special Economic Zone, but there has been no boost in investments in 2020.
U.S. companies lead the market
Despite the pandemic, last year has once again confirmed the great attractiveness of our country in the eyes of foreign investors. The Polish Investment and Trade Agency (PAIH) has been running 128 projects, among which 71 were greenfield projects.
Poland was a driving market in greenfield FDI into European renewables, which grew nearly 70% last year. The Polish market has attracted a significant number of battery projects since 2015, next to Germany and Hungary.
The value of investment greenfield projects executed by investors from four countries – USA, South Korea, and Italy – exceeded PLN 500 million. These three investment sources have supplied a totality of over 2/3 of all capital expenditures of greenfield projects.
The Katowice agglomeration has become the center of interest for investors starting their business in Poland, such as AT&T, Hyland, or Weber-Stephens, among American investors. These three projects run by PAIH are worth almost 1 billion PLN and have created over 750 jobs. According to the greenfield investment monitor fDi Market, new projects in industrial manufacturing (incl. EVs), business services, and logistics will bring Katowice and the Silesia region in particular back as an attractive, emerging market as it was before the pandemic.
Recovery potential
It is expected that due to the quite optimistic forecasts regarding a slight decline in Polish GDP last year and recovering symptoms in the entire economy in H1’2021, interest in investing in Poland may still increase, among others, due to the domestic attractiveness of the market for foreign investors, American investors considering Poland as the center of their activities on the CEE market.
In the face of the deteriorating economic situation, American companies show remarkable resilience and have not revised their development plans. It proves their high competitiveness and economic potential, which will serve to return the Polish economy to the path of economic growth.
Original source can be found here.
Source: American Chamber of Commerce In Poland
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