Poland – a regional leader

Poland’s decline on the FDI index is at least in part an effect of the past two years’ political and economic turmoil and resulting investor fears for the future of economic reforms. In investor eyes the ruling coalition of Law and Justice, Self-defence and League of Polish Families was openly unwilling to collaborate with Russia and the EU in areas like commerce, security, or Poland’s EU representation. Investors were also concerned about the government’s plans to “review” privatization.
Nonetheless Poland is still a regional leader when it comes to drawing foreign direct investment (USD13.9 billions’ worth in 2006), and ranks 5th among the investment countries preferred by European investors. Keeping this position, however, will require better infrastructure, more personnel training, raising the domestic consumer market and improving Poland’s international image.

Central-East Europe less attractive

The countries who joined the EU in 2004 were viewed as attractive investment sites. From 2000 to 2005 the FDI inflow to the 10 “new” EU members rose 78% to around USD39 billion. Today they are still the most attractive for common market producers, not least because their labour costs are still below Western Europe’s. Indeed, 48% of the FDI index respondents named low labour costs as the main reason for investing in Central-East Europe.
Rising incomes and living standards raised these costs and this is one of the reasons why the Central-East European countries are now less attractive for investors. In 2000-2006 labour costs rose 173% in the Czech Republic, 128.9% in Hungary, 123% in Lithuania, 110% in Latvia, 103% in Slovenia and 87.5% in Poland. Nonetheless, labour costs in the new EU countries are still below the EU’s 60% average (31% in the Czech Republic, 25% in Hungary and Poland).
EU accession made Central-East Europe more attractive for investment. The 2007 accession of Bulgaria and Romania added two new low-cost markets, although their competitiveness is hampered by high taxes (12% over the EU average in Romania, 7% in Bulgaria). 

The 25 Most Attractive
FDI Destinations According
to Corporate Executives

China
India
United States
United Kingdom
Hong Kong
Brazil
Singapore
The United Arab Emirates
Russia
Germany
Australia
Vietnam
France
Canada
Japan
Malaysia
Other Gulf States
South Africa
Mexico
Turkey
Indonesia
Poland
Central Asia
South Korea
Czech Republic

The FDI Confidence Index was developed by A.T. Kearney on the basis of a personal poll among executives of the world’s thousand biggest corporations in 42 countries, together covering 24 industrial fields. The polled companies account for about 70% of global investment, their joint annual sales amount to over USD3.8 billion.

A.T. Kearney is a global strategic management consulting firm serving leading global clients in all major industries. A.T. Kearney’s offices are located in major business centers in 33 countries.