More central than east

Since 1989, Poland has doubled its gross domestic product and imports from Switzerland have increased sixfold. It would be overly simplistic to view Poland solely as a low-cost country for outsourcing production. It's aim is to be considered a great Central European country.

Tram that runs through the streets of the Polish city Krakau.
As the largest Central European country, Poland offers excellent opportunities for Swiss businesses.

With 38 million residents, Poland is the largest Eastern European country in the European Union.

“The country has made extraordinary progress: it has even surpassed Switzerland in the World Bank’s Ease of Doing Business index, in 24th place,” affirmed Monica Zurfluh, head of Switzerland Global Enterprise (S-Ge) for Italian-speaking Switzerland. Industry accounts for more than 23% of GDP. Unemployment is at its lowest levels since 1989, and in 2017 consumption expenditure will continue to rise, as will GDP (+3.5% according to the National Bank). In the past, this development was incentivized by significant aid from the European Cohesion Fund, which Poland will continue to receive, although in 2016 some payment delays slowed the country's growth. For 2017, Credit Suisse has identified Poland as the most promising European market for Swiss exporters. “Swiss businesses will continue to positively assess  economic framework conditions. The strengths of the Polish economy have not changed, and the environment remains stable,” Zurfluh affirmed. Contrary to European Commission forecasts, the government confirmed that it will not exceed the 3% budget deficit threshold, despite numerous new economic policy measures at the center of the new government's actions. In terms of economic policy, the country aims to reach the highest level in the international value chain by boosting investments in innovation: to this end, promising sectors such as e-mobility, IT security systems, drones and specialized naval engineering are all receiving support.

“We see great market potential for Swiss companies, especially in the manufacturing industry,” Monica Zurfluh stated, referring especially to foodstuffs, beverages, domestic appliances and kitchen tools: no other European country manufactures so many small and large household appliances. Although exports did not rise in 2016, domestic demand expanded, and in the first half of the year alone turnover reached €6 billion, 3% higher than in 2015. The largest international manufacturers are preparing concrete plans for investment in other factories in Poland.

The processing of energy raw materials and the automotive sector are also playing a key role. Other important industries include chemicals, plastics and metals. In recent years, the importance of highly manufactured products has increased. Despite the downturn this year, gross fixed investments are expected to grow by more than 5% per year over the next two years.

In 2016, the mechanical engineering sector posted lower turnover and therefore invested less than in 2015. However, experts forecast a trend reversal starting in 2017. In terms of Industry 4.0 and digitalization in general, the country is still behind to a certain extent, which could be a boon for Swiss suppliers. In 2015, R&D investments (half of which were made by businesses) reached 1% of GDP for the first time.

The digitalization process is therefore already in full swing. Investments were also made in the chemicals industry (a healthy 5%) in 2016. Several large-scale projects presented by national industrial groups ensure that this trend will continue.

Coal continues to be the most important energy source in Poland: state energy suppliers are building roughly 6,000 MW of new plants. Coal-burning power plants are expected to receive €27 billion in investments from now until 2027.

According to S-Ge, other highly promising sectors include waste disposal, transport, software services, the food industry and luxury products. The latter can reap benefits from Switzerland’s particularly appealing image.

Indeed, in Poland Swiss products and services continue to be seen as synonymous with reliability, value and luxury, as demonstrated by the study on the perception of “Swissness” conducted by the University of San Gallo and htp St. Gallen Managementberatung.

“According to this survey, respondents are willing to pay more for quality. For example, for kitchen sinks (a product not associated with any particular emotional value), it was calculated that people are willing to pay 12% more based only on the indication of origin,” Zurfluh commented. “For luxury products, that percentage should be even higher. Although Poland may still be undervalued in Switzerland, many foreign companies have already identified this new market, and local competition is also very strong.” Since there is already significant competition in some areas, it is not worth investing in Poland for all products. This is the case, for example, of cosmetics and household goods.

“To enter the Polish market, a clear promise of added value and sharper differentiation are required: indeed, in this case it is necessary to ask why a Swiss product would be better,” continued the head of Switzerland Global Enterprise for Italian-speaking Switzerland. In many of the promising areas listed above, Swiss SMEs will need to deal with public competitive bidding. In this area, price often plays a particularly critical role, which may be detrimental for Swiss companies, especially considering the strength of the franc. Therefore, Switzerland Global Enterprise notes that it would be wise to subject these situations to prior screening. “In this context, we also advise contacting a lawyer or expert advisor, as Polish bureaucracy can be rather obtuse for foreign companies that do not rely on specialized professional advisory services,” Zurfluh continued.

Anche se la Polonia è vicina (e girando per i centri storici delle maggiori città si noterà ‘aria di casa’: chiese e palazzi costruiti da maestranze ticinesi e progettati da architetti e decorate da stuccatori insubrici) esistono differenze culturali di cui tenere conto: «nonostante il Paese non sia molto distante, alcune procedure commerciali sono regolamentate in modo molto diverso», spiega Zurfluh. In linea molto generale, in Polonia le persone sono abituate a raggiungere risultati decorosi a partire da condizioni materiali difficili. Con il costante miglioramento di queste condizioni cresce quindi sensibilmente anche la qualità dei prodotti e dei servizi. Da molto tempo ormai la Polonia non è più il Paese della manodopera a basso costo e dei bassi salari come era stato, in parte, all’inizio della nuova era: il 1990.

Now in the world of economics it has gained a new awareness and self-esteem, accompanied by a great opening up to foreign partners and investors. Foreigners who make the effort to learn a few words in Polish are highly appreciated. Meanwhile, it is a good idea not to relegate Poland to Eastern Europe: given its historically western orientation and its geographical positioning at the center of the continent, many Poles reject this classification.

Poles place a great deal of importance on the human factor: personal relationships take priority, even in trade relations, and help to create a relationship of trust, for example through small talk, mutual familiarity and the identification of personal connections. “It is important to regularly manage trade contacts, and communications with Polish partners must take place on an equal footing. In this sense, in Poland informal contacts are highly important, at times as important as formal agreements,” Monica Zurfluh explained. The best advice is to identify a reliable local distribution partner as early as possible. This will give you more confidence, from a commercial and cultural perspective, as you work in this new market.

“Swiss Business Hub Polonia, along with Switzerland Global Enterprise, provides consulting to more than 100 Swiss businesses every year on commercial possibilities in Poland. We support projects in the country for around 40 businesses, primarily SMEs. The main task is often to seek out distribution partners,” Monica Zurfluh explained. Swiss Business Hub also handles the organization of participation in some trade fairs in collaboration with the bilateral chamber of commerce, such as the Swiss pavilions at the Mach-Tool exhibition in Poznan and at the Bielsko-Biala Energetab power industry fair. Participation in these fairs is very valuable, and also reinforces Switzerland’s image in terms of innovation and quality.

This article was first published in Ticino Management in April 2017.



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