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The sheer size of its internal market makes Poland one of the key players in the European Union. But what do you need to know to succeed there?

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

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

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

Unilever has a €600m (£409m) turnover business in Poland, with nearly 300
employees. Its four factories all export products as well as serve the Polish

In Katowice in Silesia the company produces tea and margarine on the same
site. It is the third largest margarine factory in Europe. Brands such as Lipton
and Flora are sold in Poland and also exported to western Europe and to

In western Poland there is a savoury products plant in Poznan, producing
brands such as Knorr and Hellman’s, which also exports to the main markets of
western Europe, including the UK.

The third site, in the northwest of Poland at Bydgosc, produces personal care
brands such as Sunsilk and Dove, exporting 80%of production.

The fourth site, at Banino, near Gdansk, is Unilever’s lowest-cost ice cream
factory in Europe.

Chris Bull, chairman of Unilever Poland & Baltics, says: “I announced
just before Christmas a further €50m of investment across the four sites and we
will make further investments as well.”

Bull stresses that manufacturing in Poland is not just about lower wages than
in Germany or the UK, for example. “It’s very much about the efficiency of the
factories. We enjoy a very well-educated workforce, very motivated people who
are able to produce very efficiently to very high quality standards.”

Staff quality also extends to management levels. “Six years ago we had 48
expatriates managing our business. Now we have a business that is three times
larger than it was then, bearing in mind that we acquired Best Foods. We now
have just three expats, of whom I am one, and all the rest of our senior people
are Polish. We also have 18 Polish managers elsewhere in the company abroad. I
think our experience is a very strong endorsement of the capability and talent
of the people here.”

Inflows and outflows

Exports $53.7bn
Machinery & transport equip $20.2bn
Manufactures $12.7bn
Other manufactures $9.2bn
Agriculture/foodstuffs $4.1bn
Imports $68.2bn
Machinery & transport equip $25.9bn
Manufactures $14.3bn
Chemicals $10.0bn
Mineral fuels $6.2bn
Net foreign direct investment $9.7bn
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