Promoting Polish businesses abroad

The gov’t has recently announced the creation of a new Agency for Trade & Investment to replace PAIiIZ. Poland Today talks to one of the architects of the new agency, the outgoing PAIiIZ head Bartłomiej Pawlak, about the role and priorities of the new agency.
The acting president of PAIiIZ, Bartłomiej Pawlak took on the role in May 2016. Between 2005-2006 Pawlak was a member of the board of gas monopoly PGNiG. He earlier also worked at Ernst & Young, as well as Polish bank PKO BP.
How will the new Agency be different to PAIiIZ?

First of all, PAIiIZ or rather the future Polish Trade and Investment Agency (PAHI) will continue in its traditional role of helping foreign investors in Poland. We will, however, take a slightly different approach. For example, we will favour investors which are more attractive for Poland – companies which are innovative, technical, invest in R&D, engage with local universities, use Polish contractors and subcontractors, impact positively on their local community – that sort of thing.

Secondly, we want to support those that are ready to invest in less developed regions of the country. Some areas are already saturated with foreign investment. We won’t stop anyone from investing in these places, but we will show them that there are other places to invest in – such as eastern Poland – and provide incentives to invest in: i.e. Lublin, Kielce, Olsztyn, Zielona Góra – cities with big potential, but not so visible on the radar of investors. Sometimes investors ask us for advice as to where they should relocate, and we point out not only the best known places, but also try to promote the rising stars, like Lublin, because it’s an academic city with good infrastructure, and it’s developing dynamically.

We also want to support Polish entrepreneurs, for example, by making special economic zones accessible to them, including those which want to export. If we help them to grow in Poland, they will be able to expand abroad better. For the last decades Polish entrepreneurs have been treated almost like 2nd class citizens. First came foreign investors, then big state-owned companies – and then Polish entrepreneurs. This is going to change.

We want to strengthen PAIiIZ (PAHI) abroad and in this we’d like to cooperate with Polish companies. We’ll focus on key markets from Poland’s point of view both within the European Union and emerging markets in Asia and Africa. We will create trade offices abroad under the supervision of PAIiIZ. There is already one in Shanghai which works very well, focusing only on business. It helps Polish businesses in China – and those which want to enter the Chinese market – as well as Chinese companies intending to come to Poland. However we will not create one dedicated strategy for all foreign offices. Each will operate according to the specifics of the local market.

‘Poland is held in high regard among foreign investors. Higher than some politicians and journalists would have us believe.’

Will these offices abroad be part of the embassy structure?

In Shanghai it is separate, with its own office overseen by the Agency – it’s not part of the embassy structure, although we collaborate with [the departments of economy at the Polish Embassies] and diplomatic structures if necessary. We would like to strengthen the team there and enlarge its scale of activities. The aim is to concentrate on businesses on a micro level. We support Polish exporters looking for local partners, helping them with certification, paperwork, documentation, legalities, consultation, barriers etc. However, we do not do the kind of economic reporting that is expected of the Ministry of Foreign Affairs or the Ministry of Economic Development of Poland.

Deputy PM Morawiecki wants to attract only investors that bring innovative technologies and R&D – highly skilled jobs. But how can this be done in practice?

First of all, we create a profile of the company – a record of its activities, its plans and its strategy, plus data on the scale of its investment. This is part of the process if they work with the Agency. What we want to do from now on is to evaluate the information more carefully, to see how it will impact the local business community and what effect it will have on Polish competitors. Foreign companies somehow cannot be privileged on the local market. Up until recently the impact of foreign investment was sometimes devastating for smaller Polish companies. It cannot go on like this.

I spoke to some foreign investors who said that the Agency doesn’t have political power, meaning that it lacks teeth, so to speak. Another criticism was that there is no one single point of contact for investors. They have to deal with lots of people along the way – the ministries, the special economic zones, city and regional officials.

There are two different elements to the issue. Political power is one thing, a one-stop approach is another. We don’t have political power of course, and we are not the decision maker, but we collaborate closely with the government and we can support the investor in its contact with local authorities. We can facilitate the investment by bringing both parties to the table and help with finding solutions. It doesn’t mean that we can’t be the central institution that resolves all the problems of the investors, but we would rather bring others to the table.

In the past, different ministries were unwilling to give the Agency the degree of independence necessary to be more effective.

This is not a matter of a political will, but rather it’s a matter of mutual understanding, the climate in the country and the government’s treatment of business. It’s going in the right direction under the influence of deputy PM Morawiecki and his entourage, as they are former business leaders. I can see they understand the needs of the business community. In previous administrations there was a reluctant approach to business – it was rare for Polish politicians to support Polish business, like what Morawiecki did for [tractor maker] Ursus in Germany, which was a clear signal that the government is not afraid to communicate with business – that he’s ready to intervene. So there is a strong commitment of the Development Ministry’s leadership that you call “political will” to create a new Agency, based on strong international network of trade offices as well as close relations with the local investors offices. Last but not least – offering “comprehensive solutions” along with the Polish Development Fund partners to its clients.

But doesn’t this “intervention” give investors legitimate fears that the government can meddle in their affairs?

This is only intervention on request of the company in need. That’s why there is no fear. If you go into numbers, the situation is actually the opposite. If you look at our pipeline, we have investors knocking at our door. We are talking to about 180 foreign companies, which isabout 15 percent more than this time last year. At the end of July there were 36 projects completed, compared to 26 this time last year. The number of jobs is up. There is bigger interest in Poland. Poland is held in high regard among foreign investors – higher than some politicians and journalists would have us believe.

Which sectors have the biggest chance of succeeding on global markets?

I am confident that Polish companies can be competitive on the global markets, especially those operating in eg. food-processing, furniture, marine and ICT industries. To illustrate this point with a couple of examples, Poland is one of the leading manufacturer of a high quality processed food and very well known for the design and manufacture of yachts across the world. What’s more almost 100 percent of parts and components in automotive and aero-space industry produced in Poland by foreign companies is exported. Those foreign companies are more and more relying on local Polish suppliers helping them to succeed on global markets. It is beyond doubt that if Polish enterprises apply their knowledge worldwide they will prove very successful. Furthermore, companies that place more focus on innovation and research & development will enjoy a greater comparative advantage in business abroad.

Will the Agency look to any other countries for best practices on economic diplomacy, investment support? Which and why these?

Given the broad assistance we offer our investors, we always strive to do it in the most professional way following the best practices in this field. While Trade & Investment Agencies in other European countries may be a good reference in that respect, we also draw from the practices set by other institutions such as the Japan External Trade Organization (JETRO), Korea Trade-Investment Promotion Agency (KOTRA), UK Trade & Investment or Business France. That’s why I also was very interested listening to a speech by a colleague of mine from Kaznex Invest during the recent Poland-Kazakhstan Business Forum in Warsaw.

Which global markets do you consider as potentially the most attractive for Polish business?

Logically the EU offers the most benefits to doing business across the Single Market and facilitates trade and investment. Nonetheless, we need to keep our eyes open for other markets, most importantly the emerging markets of Asia, including ASEAN, Africa and Latin America. Polish companies have been very successful in establishing their divisions in different parts of Africa in countries such as Kenya, Ethiopia and Algeria. Latin American and Asian markets, especially China, may entice Polish companies across the industries too. In short, possibilities for Polish businesses exist in these places and that’s why soon trade offices will start opening in those specific places.

How can the success of the Agency be evaluated?

We constantly keep track of all projects in our pipeline and closely follow the investment landscape as it unfolds. Therefore, we monitor and can measure how much capital has been invested and how many new workplaces have been created as a result of the comprehensive assistance we provide to our investors. As of August 2016, PAIiIZ boasted a total of 180 active investment projects with its global value exceeding EUR 4 bln and more than 46,000 new jobs. Naturally, not all investment projects will come to fruition, but these figures may give you an understanding of the scale of activities undertaken by PAIiIZ. To be precise, last year PAIiIZ helped 56 investments to choose Poland, which will create over 9,000 new jobs in the near future.

Poland is clearly turning its attention to China. Some people say that China is always only out for itself, more so than other countries. What will Poland get from the relationship with China?

After 1989, Poland was involved in internal transformations. The next steps were to join the European Union and to establish its position on the EU market. For 20 years, Poland has largely forgotten distant markets of Southeast Asia and slept through the moment when Western countries were building their position in the growing Chinese market. After getting a stable position on the European market, Polish companies have begun to think of more exotic markets. Undoubtedly, the Russian Federation embargo on Polish products has contributed to this trend. China continues to remain the largest market for the food and beverage sector, after overtaking the United States in 2011. As a result, the Chinese market is becoming increasingly attractive for European brands, especially in the context of changing behaviour of Chinese consumers. Despite the complex distribution infrastructure and growing local competition, the chances of European SME related with products’ sale in China will likely grow. Apart from the aforementioned food sector, it gives an opportunity for the Polish export offer in the fields of natural cosmetics, environmental protection, biopharmaceuticals and medical technology. Due to the abolition of the one child policy at the beginning of 2016, a group of products dedicated to the mother and baby sector can also count on increased interest from Chinese consumers.

Another area of mutual cooperation is the “One Belt One Road” initiative developed by Chinese leadership, as well as Poland joining the Asian Infrastructure Investment Bank. The Chinese side did not specify which countries it intends to cooperate with on this project. The exact course of the route has not been determined, either. China expects a concrete investment offer from the countries through which it can run. Now we can observe a rivalry among CEE countries, which are trying to present their country as a hub for business in China in Europe. In the context of the new development plan and the potential of existing connections and logistics centres, the promotion of the so-called “northern corridor”, which runs through our country – or ends here – is crucial for Poland. We need a new growth model after 2020, independent of European funds – one option could be cooperation with China. The development strategy of the “One Belt One Road” project creates the potential to intensify political and economic cooperation with China. Due to the fact that the current revitalisation of the Silk Road is one of priorities of the Chinese government, issues of infrastructure can become one of the leading topics in the bilateral relations in the years to come.

The name of the PAIiIZ is a bit hard to pronounce. Shouldn’t the new agency have a name that rings a bell with foreigners?

Indeed, PAIiIZ is quite a lengthy acronym standing for the “Polish Information and Foreign Investment Agency” and some foreigners may find it problematic. That’s why we have forged a brand under the name of “Invest in Poland” and this is the one often used when referring to the activities of PAIiIZ. I personally use the name “the Agency” and probably soon you will find us under the new, more client-friendly name which describes both directions of our activities to and from Poland.

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Written by: Richard Stephens

Richard Stephens founded Poland Today in 2012 to help bring Poland to the world and the world to Poland. He has a degree in Theology and Religious Studies from Bristol University in the UK.