UNCATD’s World Investment Report 2011

Poland the 6th most attractive investment location in the world. Kraków the best for BPO projects. In Poland, the UNCTAD’s Word Investment Report 2011 was launched on July 26th, 2011 at the Polish Information and Foreign Investment Agency (PAIiIZ).

Poland’s significant rise in this year’s UNCTAD's Investment Report (5 points up from the 11th position in 2010) confirms the country’s strong position on the international investment scene - Poland was only preceded by world greatest economies of China and the USA and ranked before Germany and the UK. Despite the fall in FDI inflow to Poland in 2010 (from USD 13.7 bn to USD 9.7 bn) in 2011 FDI recovery and upward tendencies in the inflow can now clearly be seen - FDI inflow after the first 5 months of the year totalled EUR 4.2 bn i.e. 86% of the inflow recorded in the first 5 months of 2010 what accounts for 62% of the whole 2010 FDI inflow to the country. In the European context the upward trend has already found confirmation in this year’s annual survey of Investment Attractiveness of Europe launched by E&Y in June 2011. The report says that last year Poland recorded the highest increase in the number of FDI projects across Europe - 40% more than in 2009.

The general upward trend finds reflection in the activities undertaken by the Polish Information and Foreign Investment Agency (PAIiIZ). In the 1st half of the year PAIiIZ managed to successfully close projects worth twice as much as projects closed by the Agency in the 1st half of 2010 - an increase in value by 124% from EUR 377.24 mln to EUR 845.5 mln in 2011. The 1st half of 2011 saw also the average value of a single project rise from EUR 13 mln in 2010 to EUR 32,5 mln in 2011 as well as the number of jobs created by the projects (by 7%) from 6046 in 2010 to 6494 in the first months of 2011.

Kraków’s 1st position in the category of Locations for global services - Top 10 emerging cities shows that Polish cities have increasingly been perceived as the best destinations for BPO projects. The Report shows that it is the availability and effectiveness of the Polish, qualified workforce, business environment, low business-related risk and the transparency of the Polish law and fiscal systems that have been gaining recognition across the corporate and economic development executives around the world. Thanks to a similar set of features also Warsaw ranked among the 15 best new cities for business according to American Fortune.

UNCTAD’s World Investment Report 2011 predicts that the recovery of FDI flows will continue in 2011 and will reach a total of some USD 1.4 to USD 1.6 trillion, thus returning to the pre-crisis average. Thereafter, flows are forecast to rise to USD 1.7 trillion in 2012 and USD 1.9 trillion in 2013. The record level of cash holdings, low rates of debt financing and rising stock market valuations of transnational corporations (TNCs) should encourage them to expand overseas. On the recipients’ side, ongoing corporate and industrial restructuring, privatizations resulting from fiscal rebalancing efforts and unwinding of state support programmes, and the growth of emerging economies should create new investment opportunities. However, the post-crisis business environment is still beset by uncertainties. Risk factors such as the unpredictability of global economic governance, a possible widespread sovereign debt crisis, and fiscal and financial sector imbalances in some developed countries, as well as rising inflation and signs of overheating in major emerging market economies, may yet derail the FDI recovery.

From the left: Iwona Chojnowska, Head of the Foreign Investment Department, PAIiIZ; professor Zbigniew Zimny, ONZ expert for FDI and Sławomir Majman, President of PAIiIZ

In 2010, the rise of emerging economies as new powerhouses of FDI became more apparent. Developing countries and transition economies absorbed more than half of global FDI inflows for the first time. As international production and, more recently, the weight of global consumption shift towards developing and transition economies, both efficiency-seeking and market-seeking projects in those economies are on the increase. Half of the top 20 host economies for FDI in 2010 were developing and transition economies. Their outward FDI also rose sharply in 2010, climbing by 21 per cent. These economies now account for 29 per cent of global FDI outflows. Six developing and transition economies were among the top 20 investors.

In terms of sectoral patterns, FDI in services continued its downward path in 2010. All the main service industries (business services, finance, utilities, and transport and communications) saw FDI flows fall, though at different speeds. The share of foreign investment channelled to manufacturing increased, meanwhile, and accounted for almost half of all FDI projects – cross-border mergers and acquisitions and greenfield projects. Within manufacturing, flows fell in business-cycle-sensitive industries such as metals and electronics. The chemical industry, including pharmaceuticals, remained resilient through the crisis, while industries such as food, beverages and tobacco, textile and garments, and automobiles, recovered in 2010. FDI channelled to extractive industries, a sector relatively unaffected by the crisis, declined, despite the growing demand for raw materials and energy resources. (PAIiIZ/UNCTAD)