Zloty machine

At 38.6 million, the population of Poland dwarved that of the other countries which joined the EU in May 2004. Poland’s accession immediately opened up a large ready market for EU exports and brought on stream a pool of labour at a price to rival low-wage EU economies such as Greece and Portugal.

Two years later Poland’s economic outlook is positive. S&P gives it a longterm sovereign debt rating of BBB+, and lists its strengths as a competitive and increasingly diversified export sector, good external liquidity and benign inflation.

Estimated GDP growth for 2005 is 4.3%, which is likely to continue over the next three years at least one percentage point above projected inflation. And while industrial production in Poland is 9.2%, wage growth is only 1.5% – the UK’s figures are 1.4% and 3.4% respectively.

Poland’s weaknesses include a high fiscal and debt burden, structural reform challenges and high unemployment levels. The bright side of structural weakness is an influx of funds from Brussels. Between 2004 and 2006 Poland was allotted €12.8bn (£8.7bn) to pay for big infrastructure projects such as transportation and roads, and for 2007 to 2013 it will get €58bn. The difficulty in structural reform has been in privatising heavy industries. Administrative delays and red tape are reported to have been major causes.

Political and regulatory environment

Poland is still a bureaucratic society with a considerable amount of red tape. “This is quite easily managed if you understand the process and follow it,” says Eoin McCoy of HR consultancy Hewitt Associates. “Dotting the Is and crossing the Ts is very important.”

The World Bank rates Poland just 54th for ease of doing business. It ranks particularly poorly for ease of paying taxes and enforcing contracts.

The World Economic Forum ranks Poland 57th out of 103 countries while the University of Passau’s Corruption Perceptions Index gives a rating of 3.4.

Doing business there

Poland’s export sector has been a roaring success, in particular its agricultural products. It has also had success in manufacturing, with foreign companies establishing assembly operations in the country.

Significantly, the service sector now accounts for more than half of Poland’s GDP, an indicator that the country is moving away from its traditional strengths in primary industries such as mining and manufacturing. One sector that has proved particularly attractive to inward investors is retail, where western Europe’s big hitters are sparring for a larger slice of the increasingly affluent Polish consumer’s purse, although “affluent” needs to be seen in the context of a less developed post-communist background and a per capita GDP of $6,990.

McCoy advises against starting up a Polish operation from abroad. “There’s a lot of bureaucracy and you have to have the right people on the ground to make it all run smoothly,” he explains. “It’s all about understanding the labour and tax requirements. It’s not a trap; it’s just the way it is.”

Management/accountancy staff

According to McCoy, who has just opened an office in Krakow, the finance and accounting sectors are well served in Poland because of the investment made by the big accounting firms in the 1980s and early 1990s. “The fruits of this investment are visible now,” he says. “Looking across most of the firms like PwC, Deloitte, Ernst & Young and so forth, the majority of partners will now be Polish nationals.”

All the major professional firms, accountants, consultants and lawyers are active in Poland, training and employing local people, and expats are less necessary than they used to be.

Areas such as software development, engineering and call centres are also key development sectors that can draw on able local human resources.

Making a success of business

In Poland, executive and managerial status is very important in dealing with people in business. Greetings like “Mr President” and “Mr Director” are very common when addressing older people, although less formality is required with younger people. The same is true of dress and the conduct of meetings: the older the Pole, the more formal their behaviour.When in doubt, play it conservatively.

Martin Oxley, CEO of the Polish- British Chamber of Commerce, stresses the importance of making the most of Poland’s talent pool.

“Poland has one of the youngest and most highly educated populations in Europe,” he says. “50% of Poles are under the age of 35, an increasing number of them are multilingual, and 10% have a university degree, which makes Poland an increasingly attractive location for R&D.”

Oxley advises putting Poland in the context of a global strategy. “Poland has one of the highest industrial productivity growth rates in Europe,” he says. “It is a viable alternative to the Far East for manufacturing because of its proximity to Europe for complex and high labour input products.”

Case study: People power

Inflows and outflows