|Poland's recent splurge on infrastructure, such as the new National Stadium in Warsaw, is set to continue|
During a visit to the United Arab Emirates in late April, Polish Prime Minister Donald Tusk encouraged businesspeople from his host country to invest in Poland, which he called “the biggest construction site in Europe” and the continent’s “biggest investment.”
The prime minister mentioned that Poland would be spending some $200 billion on infrastructure over the next decade. He also pointed to the fact that while EU economies had recorded cumulative growth of close to zero on average in the last four years, Poland had grown by 18 percent during the same period.
Mr Tusk spoke at the UAE-Poland Business Forum which was attended by Abdul Rahman Saif Al Ghurair, the chairman of Dubai-based Al-Ghurair Group and vice president of the Dubai Chamber of Commerce and Industry, who spoke about the future of business relations between the two countries.
“Expanding into Eastern European markets is a strategic priority for the Dubai Chamber,” Mr Al Ghurair said. “Therefore we have this forum to discuss the strengthening of economic relations with our Polish partners,” he added.
According to April IMF figures, Poland’s economy is expected to grow by 2.6 percent in 2012 and by 3.2 percent in 2013, making it the leader in terms of growth in Central and Eastern Europe. The Polish government itself has predicted a growth rate of 2.5 percent this year.
Regarding possible areas of interest for Gulf investors, Mr Tusk mentioned the fact that his government plans to privatize some 300 firms which it currently controls. The government is expected to continue selling stakes in its listed, large-cap companies, such as PKO Bank Polski, with assets of $60.5 billion, and insurer PZU, with assets of $16.5 billion. The government will, however, maintain operational control over these firms, the Treasury Ministry announced in its 2012-2013 privatization plan released earlier this year.
The plan aims to raise $3.2 billion in 2012, compared with privatization income of $4 billion in 2011, and $7 billion in 2010.
The 2012-2013 program continues the state’s policy of selling stakes in large companies and selling controlling stakes in small companies, which has been in place since 2008. It includes plans to sell stakes in coking coal miner Jastrzębska Spółka Węglowa and other, unlisted, coal miners as well as power utilities and hundreds of smaller companies.
In addition to the sale of 279 companies controlled by the Treasury, the plan includes the sale of 15 companies overseen by the Defense Ministry, four companies overseen by the Economy Ministry and two overseen by the Transport Ministry.
Poland’s track record for attracting outsourcing investments is impressive. A large number of major Western multinationals, including IBM, HP and UBS have already opened Shared Service Centers (SSC) or Business Process Outsourcing (BPO) sites in the country. In total, over 200 companies have chosen to locate BPO and SSC services in Poland and more than 40,000 jobs have been created as a result, according to a 2010 report by PwC. In 2011, the value of Polish outsourcing exceeded $4 billion.
Courtesy of Flickr/KPRM
Poland also offers significant advantages in other key areas: It is located in the heart of Central Europe, its population is the largest in the region, its economy the biggest and its average age is far below that of the EU. All this has led to an increasing number of firms choosing to locate their service centers in Poland.
In recent years, international companies have also been flooding into Poland in the hope of striking shale gas – a type of natural gas trapped in shale deposits deep underground. And it’s little wonder. According to a report from the Polish Geological Institute (PIG), Poland’s shale gas reserves stand at between 0.35 trillion and 0.77 trillion cubic meters (tcm).
Although this was about 10 times less than the 5.3 tcm estimated by the US Energy Information Administration (EIA) in April 2011, it would still be enough to cover Polish energy needs for 25-55 years according to Treasury Minister Mikołaj Budzanowski, who has called the numbers “conservative.”
Grażyna Bukowska, a spokesperson for energy firm Chevron Polska Energy Resources, said PIG’s report “does not change Chevron’s plans in Poland. We remain committed to exploring potential for natural gas on our concession areas.” The US oil giant plans to drill at least three exploratory wells by the end of 2012.
Experts agree that harder data on Poland’s shale gas reserves will only be available in three to four years’ time. At that point equally important information regarding the actual profitability levels of production is also expected to surface.
In the meantime, technological breakthroughs could also be a game changer, said Grzegorz Pytel, an energy expert. “Experience shows that typically once production starts, the results are much better than initial estimates. I expect in time Polish reserves to be more than 5.3 tcm. We still can expect a technological breakthrough that could make some options currently unavailable commercially viable in the future. If gas prices continue to go up, it will also change things.”
The Warsaw Stock Exchange
Poland’s stock exchange is the leader in the CEE region. As of March 2012 it had a market capitalization of €125 billion, while former CEE powerhouse the CEESEG exchange in Vienna, is valued at €74.2 billion and the Prague Exchange at €31.3 billion, according to figures from the Federation of European Securities Exchanges (FESE).
When it comes to investment flow, the WSE saw E226 million channelled through the exchange from March 2011 to March 2012. In comparison, the Vienna exchange recorded €7 million for the same period.
The WSE currently lists over 432 firms and is considered among many economists as one of Eastern Europe’s biggest success stories.
Poland’s steady growth and economic resilience coupled with the presence of strong institutions which guarantee the rule of law and protection of private property make the country not only a profitable place in which to invest but also a secure one.
From Warsaw Business Journal by Remi Adekoya
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