Poland: big emerging market

Business America, Feb, 1995

Five years after starting the transition to a free market economy, a period marked initially by contractions in production and employment and by high inflation, the Polish economy has begun to show signs of growth and increased stability. The rate of inflation has continued to decline, although high unemployment remains a major social and political problem. The leftist government elected in September 1993 so far has continued the process of free market economic reform and has won support from the international community in recognition of its commitment to disciplined financial policies.

Trade is on the Rise

Over the last three years, U.S. trade with Poland has been on the rise as import markets have opened for almost all goods. As markets opened, the face of U.S. exports to Poland changed. Prior to 1989, the bulk of U.S. exports to Poland were in the agricultural sector (e.g., maize, wheat). Beginning in 1990, U.S. exports began to change to more standard U.S. manufactured goods such as machinery, computers, telecommunications equipment, and automobiles, not to mention large-scale sales of U.S. aircraft. U.S. direct exports to Poland may have reached $1 billion in 1994.

The United States is chipping away at import market share. Since 1990, total imports from U.S. firms into Poland have ranked the United States between 10th and 15th on the list of Poland's largest import partners, compiling between 2 and 3 percent of the total import market. Germany, Russia, Italy, the United Kingdom, and France are Poland's largest trading partners, followed by the United States with about 4.5 percent of the total import market.

The Commercial

Environment

A year ago, the rate of economic reform and the stability of Poland's political system were underlying concerns for companies doing business in Poland. Polish firms in particular were concerned that the economic environment for expanding or starting new business, which they believed stabilized in late 1993, would worsen in 1994. In fact, the environment remained relatively stable. A survey in mid-1994 indicated that five years after economic and political reform, slightly more than half of all Poles believed they were worse off than before the reforms took place. However, more than 70 percent emphasized that the current commercial environment allowed them opportunities to show individual business initiative, and nearly 90 percent appreciated the fact that they lived in a country with political and economic freedom.

The prospect for real economic growth and the size of the Polish market are the two top reasons U.S. and other foreign companies do business in Poland. Most believe that Poland is the best market in Central and Eastern Europe for their products and/or investments. While lingering concerns about the uncertainty of the regulations on foreign investment in Poland may limit the capital firms are willing to invest, most multinationals in 1994 continued with their plans to expand their businesses.

U.S. companies doing business in Poland believe that their concerns about regulations and the business environment can be addressed. Reasons for doing business in Poland far outweigh current difficulties in the market. One strong indication of the current stability in the market and the potential for growth is that many U.S. companies are reinvesting their profits in Poland.

Attitude Toward

U.S. Business

Polish Government officials have offered encouraging remarks regarding the desire to cooperate with foreign investors. In his first speech to foreign business in January 1994 at the American Chamber of Commerce in Poland (AmCham), Prime Minister Waldemar Pawlak said that Poland was open to free trade. He congratulated the United States as being the largest foreign investor in Poland and urged U.S. companies to increase their trade with Poland and to help open new markets for Polish products.

In a subsequent address in April 1994, Minister of Industry Marek Pol told the AmCham that encouragement of foreign investment was Polish "government policy." He encouraged U.S. business to envision Poland as the "base camp" for expansion of their activities to the East. By way of dispelling perceptions of increasing Polish xenophobia, Pol commented that it is his belief that no political entities of note - in or out of government - are against foreign investment.

Major Business

Opportunities

Opportunities for trade and investment exist across virtually all industrial and consumer sectors in Poland. Opportunities will continue to emerge as privatization of state industry, which has been slow to date, continues. Major projects will develop in industries with problems related to the environment, including the power and coal sectors. Aspects of Poland's infrastructure that are beginning the slow process of modernization include roads and bridges, airports, seaports, and railways. Opportunities will expand in these areas in all corners of Poland. The aircraft and automotive sectors are currently modernizing, and supplier opportunities for parts and components, including transfers of technology, will develop rapidly. The Ministry of Industry has outlined the following five sectors where major restructuring is planned or underway: defense, metallurgy, petroleum, power generation, and shipbuilding.