Legal barriers to the inflow of foreign direct investments to Poland04.12.2009Poland is considered to be an attractive investment destination. Nevertheless, foreign entrepreneurs often bring up issues concerning legal and practical barriers to investing in the country. That is why reforms in vital spheres of the Polish economy, such as spatial development, construction, tax law, investments in renewable energy and foreigner residence permits, are required. Moreover, it is of vital importance to introduce favourable solutions concerning business activity in the Special Economic Zones.One of the major problems encountered in the investment process in Poland is the lack of spatial development plans which in consequence may delay all procedures necessary to obtain a building permit. The situation poses many difficulties especially in the renewable energy sector and strongly affects the construction of wind farms. Investors interested in the sector in Poland encounter other difficulties when it comes to connecting wind installations to the national energy grid and obtaining funds for the projects from EU funds and the national budget. It is important to remove the existing complications not only to make use of the favourable wind conditions which make the country one of the most attractive wind farm locations in Europe but also in order to help the country reach its targets regarding energy production from RES. In the context of Poland’s environment policy for the years 2011-2014, the country will aim to increase the share of renewables in the fuel-energy balance of the country. The policy translates into the introduction of obligatory RES acquisition and relief in the costs regarding connection to renewable energy sources. Investment subsidies from national and European funds are available for investors interested in starting business in the sector in Poland.
It is also necessary to revise provisions which shape conditions for business activity in the Special Economic Zones, mainly those concerning the criteria according to which private land may be included in a SEZ, the flexibility in the conditions indicated in the authorization to operate within a SEZ and adverse tax provisions. In the process of public aid calculation, tax authorities continually refuse to take into account losses suffered by entrepreneurs in their business activities located in SEZs. This refusal has a vital practical impact because it influences a given investments’ profitability whilst a different approach to the problem could well create an additional investment incentive.
Further reforms are needed in provisions which regulate foreigner residence and work permits in Poland. The provisions relate mainly to: restrictions on freedom of provincial governors in determining the criteria for granting work permits, reduction of restrictive requirements for companies in which foreigners hold positions, facilitation of work permit procedures for employees delegated to work in Poland, introduction of the possibility to implement the complete procedure by proxy and the possibility to appeal against the decision of the consul in case of a visa refusal as well as reduction in administrative costs.
This year was favourable for the development of public-private partnerships in the Polish market. At the beginning of 2009, two new Acts shaping public-private co-operation entered into force i.e. the Act on PPP and the Act on services and construction work licensing. 2009 saw numerous procedures to choose a private partner to carry out projects in various sectors initiated. The number of such initiatives rose substantially when compared to previous years. Yet PPP in Poland could develop faster if communes across the country - as these are the main entities which run such projects - followed clear and cohesive procedure interpretations of e.g. tax regulations.
Foreign direct investment (FDI) constitute an important development and growth factor for the economy of a host country, mainly through new technology and know-how transfer, introduction of new management methods, job creation and general development of regions and countries. FDI inflow to Poland in 2008 accounted for EUR 10.8 million and was lower by 42% than in 2007 when it equalled EUR 17.2 million. The decrease resulted from the global economic slowdown which began in 2008. In order to support business activity in Poland and thus keep last year’s position in the Doing Business 2010 ranking prepared by the World Bank numerous measures to remove the existing complications were implemented. In the category concerning freedom for business activity, last year the Doing Business ranking classified Poland in 72nd position out of 183 classified countries. Also the country performed quite well in Poland’s investment climate survey which was commissioned by PAIiIZ and shows that entrepreneurs estimated the climate at 3.3 on a 5 point scale i.e. slightly more than in the previous years. Still, the existing barriers to the inflow of foreign investment limit Poland’s development in the field and require necessary changes in the Polish law to be introduced.
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