Friday, July 24, 2009

Foreign companies flee Poland

Foreign investors are closing down factories in Poland and firing employees in an attempt to cut costs.

In August Takata-Patri, a spare car parts manufacturer, is going to make over 500 people redundant and move its headquarters from the western city of Walbrzych to Romania.

In October SEWS Polska, a branch of the Japanese Sumitomo concern, which produces cables for Toyota, is also planning to close down its factory in Lower Silesia and move to Romania.

Four other foreign investors, mainly from automotive industry, are considering the replacement of their factories and those companies which planned to build their plants in Poland are having second thoughts.

In 2008. direct foreign investment (FDI) in Poland dropped by 5,6 billion euros in comparison to 2007.

“Poland is no longer a cheap country for investment,” explains Marcin Kaszuba from Ernst&Young. In 2008 the average salary in Poland increased by 10 to 12 percent. A strong zloty and the possibility that the government will increase taxes are also perceived as obstacles by investors. Countries with a cheaper work force, such as Romania, have become more attractive for business. Last year the average salary there equaled 517 euros, one third of the salary in Poland, and the low flat tax and VAT rates in Romania also give it a competitive advantage..

The additional threat to foreign investors is the agreement signed with the Polish government, which says that if an employer cuts too many permanent posts, it will have to pay back subsidies, with interests.

But over a hundred companies at present have no choice but to reduce employment as a result of falling production.