Market Overview
Poland constitutes a market of over of 38 million people located in the heart of central Europe, sharing borders with both “new” EU and “old” EU-15 countries and markets to the East including Ukraine, Belarus and Russia (Kaliningrad oblast). Poland's integration into the European Union (EU) has been a gradual but steady process. Adoption of EU legislation allowed Poland to reform the way in which its economy is regulated and restrict government intervention in the private sector. Changes in areas such as financial markets, company and competition law, accounting, and intellectual property rights have created a better environment for business and have contributed to economic growth. Poland plans to eventually adopt the Euro currency within the next few years which will further the integration process. The country’s accession to the Schengen free transit zone in December 2007 eliminated all remaining border checks along its intra-EU frontiers. Poland is also an active member of NATO, upgrading its armed forces accordingly and participating in joint peacekeeping activities in the region and elsewhere. Poland has troops deployed in support of the NATO mission in Afghanistan.
The U.S. and Poland enjoy an extraordinarily close relationship, which has fostered strategic and commercial cooperation. U.S. companies are active in Poland, having invested heavily since the early 1990’s after the country’s transition from communism to democracy and the establishment of a market-driven economy. Abundant opportunities remain for U.S. firms in Poland. In addition to the size and location of the domestic market, and the access it affords to the larger EU market. Poles continue to demonstrate a strong affinity for the United States and its products.
Poland’s GDP growth slowed in 2009 to a rate of about 1.5% as compared to the 5% growth rate for 2008. Recent GDP projections for 2010 are about 2%. Even this more moderate performance, however, is noteworthy when compared to the negative GDP outcome for the majority of the European Union’s 27 member states last year. Poland’s strong economic performance in recent history was fueled by high export output, individual consumption and increased business investment. Over the medium term, growth will be generated by domestic demand, infrastructure spending (with EU support), and capital investment.
Much of the country’s road, rail and airport infrastructure, and tourism and athletic facilities need building or improvement, consistent with EU commitments and Poland’s plans to host the European Cup Soccer Championships in 2012. Since 2004, almost 2 million Poles have moved to other EU countries in search of work, resulting in approximately $6 billion in wage remittances - a significant source of domestic capital. Despite positive indicators and commitment by the government, Poland is not expected to meet the Maastricht Treaty criteria and adopt the Euro until 2014 at the earliest. The Polish currency, the z?oty, grew stronger vis a vis the Euro and dollar during the second half of 2009.
On average, the U.S. claims roughly 2-3% of Poland’s annual import market. In 2007, the U.S. sold $3.1 billion worth of products and services and $4.1 billion in 2008. Defense products make up about a quarter of these totals. Although these figures represent an increase in real terms, the overall market share decreased from 2006-2007 due to increasing competition from European suppliers which provide over 60% of Poland’s imports.
Overall, the Polish market can count on moderately increasing domestic demand and general affinity for U.S. products. U.S. firms can increase their competitive edge by cultivating the market, establishing a local presence, committing to strong after-sales service and support and offering pricing and financial terms consistent with customer needs. U.S. exporters are encouraged to offer creative pricing and financing packages in order to win business from Polish buyers. Sectors which offer particularly strong sales opportunities include power generation, environmental technologies including renewable energies, safety/security products, defense equipment, IT products and services, and automotive after-market products. Poland continues to offer the benefits of a positive public attitude toward foreign investment, consistent economic growth rates, a well-regarded workforce, proximity to major markets and political stability. The U.S. is a leader in foreign direct investment (FDI) in Poland.
Poland’s membership in the EU offers access to billions of structural and cohesion fund dollars to support infrastructure and environmental protection and remediation projects. From 2007 to 2015 Poland will be the EU’s largest recipient of funding, €67 billion ($90 billion) in total from the EU’s budget. Much work is planned in part because of Poland’s lead status on EURO 2012, a project in which Poland will co-host the European Cup Soccer Championships in 2012 with neighboring Ukraine. Extensive effort and investment is still required to upgrade and modernize Poland’s transportation infrastructure. The country’s road network consists primarily of two-lane roads with limited stretches of expressway linking Lodz/Poznan and Wroclaw/Krakow. Neither Warsaw nor the port cities of Gdansk/Gdynia are linked to the rest of the country by modern roads. The country’s labyrinth of laws and bureaucratic obstacles limit progress in this regard.
The Polish government has work to do on its railway system as well. Although the Polish railway system (run by the state-owned PKP) is the third largest railway in Europe in terms of line length with over 20,000 kilometers of rail, in terms of quality of equipment and service, it lags behind EU countries. Only 22% of lines can service high-speed trains. Poland’s railway system would benefit from modernization projects including the purchase of track rehabilitation machinery, signaling cables, power supply cables, signaling equipment, steel parts for standard turnouts, as well as hot and flat wheel detection equipment
The country’s airport network is also in need of expansion and modernization, especially in preparation for the European Cup Soccer Championships to be held in mid 2012 in Poland and Ukraine. The expansion of airport terminals in Krakow, Poznan, Wroclaw and Gdansk are planned as well as modernization of taxiways, runways and construction of new aprons. Warsaw’s Frederic Chopin Airport opened its new Terminal 2 in spring 2008.
U.S. investors represent a wide range of industry sectors including automotive, aerospace, IT hardware and software, food products, transportation, pharmaceuticals, paper production, appliances and financial services. Poland has also emerged as a favorable location for business processing centers including call centers, back-office operations and research centers. U.S. companies such as IBM, McKinsey, Google, First Data Corporation, Johnson Controls, Dell, and Proctor & Gamble, all invested significantly in Poland throughout 2007 – 2009 creating over 7,000 jobs.
CS Warsaw and the entire Embassy staff stand ready to assist U.S. firms in achieving success in the Polish market. We encourage you to contact us and explore the best way to partner together as you commence or expand your business activities here.
Market Challenges
Poland enjoyed moderate growth in 2009 despite a difficult global and regional environment. The expected improved performance among its EU trading partners in 2010 will reduce last year’s headwind.
Poland remains one of the EU’s lesser developed countries with limited individual purchasing capacity and domestic consumption. However, GDP per head jumped from 50% to 56% of the EU average in 2009.
Poland ranks relatively low in many international indices for business friendliness. A World Bank report judged the Polish tax system at 151st out of 183 countries surveys. Excessive government red tape and lack of transparency are other problems.
Poland has not made much progress in modernizing their road, railway, and air transportation network. Their weak transportation infrastructure increases the cost of doing business for U.S. businesses by limiting ready access to all of the markets within Poland and diminishes the country’s potential as a regional distribution hub.
Market Opportunities
While the U.S. share of Poland’s import market remains small at approximately 3%, U.S. exporters have found considerable success targeting competitive niches, using effective market entry strategies and diligently following up with marketing and sales support. Sectors which offer particularly strong sales opportunities include power generation, environmental technologies including renewable energies, safety/security products, defense equipment, IT products and services, and automotive after-market products.
Much of the country’s road, rail, airport infrastructure, and tourism and athletic facilities need building or improvement, in preparation for the European Cup Soccer Championships in 2012. During the next three years 650 million Euros will be spent on modernizing or building stadiums, 1.5 billion Euros will be spent on four and five star hotel construction and an additional 2 billion Euros will go towards expanding airport capacity. U.S. exporters will find increased market opportunities when directing their efforts towards these rapidly developing market sectors.
With a talented labor force, wage rates among the lowest in the EU, excellent regional location and a sizeable market, Poland will continue to attract substantial new private investment for years to come. Due to the high education levels and language aptitude of its people, Poland has also emerged as a leading regional hub for business processing centers, including call centers, back-office hubs and tech and research centers. Incentives will continue to be offered at the national, municipal, and EU levels to stimulate inbound investment.
Market Entry Strategy
The Polish market is characterized by wide population dispersion with 25% living in rural areas and urban dwellers spread among a number of population centers including Warsaw and Lodz in the center of the country, Krakow in the south, Wroclaw and Poznan in the west, Gdansk and Szczecin in the north and Lublin in the southeast.
Urban consumers generally have greater purchasing power than their rural counterparts. Personal contact with the customer is critical and final purchasing decisions typically require a face-to-face meeting. Success in this market typically requires an in-country presence such as an agent, distributor or representative office.
Communication in Polish is recommended in order to elicit prompt responses to offers and inquiries and to facilitate negotiations. Poland’s communication network is relatively well developed and email communications and website offerings are an increasingly effective means of reaching local buyers.
Pricing remains the most critical factor in positioning a product or service for sale in Poland. Access to capital is difficult for most Polish firms and business transactions are typically self-financed. U.S. firms that can arrange financing will have a competitive edge. The global financial crisis has accentuated the need for U.S. exporters to develop a creative strategy for financing exports. In addition, volatile currency fluctuations may be the norm for 2010, wreaking havoc on even the most well-planned export strategy. Careful crafting of terms of sale including creative packaging of currency and pricing terms, will help the U.S. exporter gain long term advantage in the current Polish market.
