Dariusz Kucharski, CEO and country head of commercial banking at HSBC in Poland talks to the BPCC’s Michael Dembinski about the current climate for investment
Poland has been successful in attracting foreign direct investment in manufacturing and services. Over the past years, in both of these sectors we’ve seen ever-more sophisticated processes being located in Poland. What trends are you observing in terms of inbound FDI into Poland?
Poland has become one of the most attractive countries for foreign direct investments (FDI) in Europe and even globally. Looking only at those transactions that benefited from the support of the Polish Investment and Trade Agency in 2022, foreign companies invested more than €3.7 billion in Poland, a record high. Early estimates released by Poland’s Central Bank show that in last year total FDI in Poland reached €25.43 billion.
The inflow of FDIs reflects the substantial size of the domestic market, favourable location, a stable legal environment, access to a well-educated workforce with good foreign language skills, and good communications infrastructure, among other factors. Changes in the global economy and supply chains are also having their impact on investors’ interest in Poland, and many of them previously unfamiliar with Poland are usually positively surprised by the country and the opportunities it offers. In recent years, we are observing the trend of the so-called nearshoring, i.e. transfers of production from far-away locations, for example in the Far East, closer to key consumption or advanced production markets, and Poland is part of that trend as new location of choice. This is due, among other things, to concerns about the stability of supply chains and Poland is more and more seen as part of a solution to these concerns.
While previously relocations or investments in new manufacturing facilities in Poland were often sought primarily as an opportunity to benefit from cheaper labour, in recent years we have seen an increased interest in investments in high-tech sectors, such as e-mobility or shared service centres requiring access to highly skilled labour. A number of the world’s leading financial institutions, including HSBC, have located their business support centres in Poland. A billion-dollar investment was recently completed by Microsoft, while Visa just announced the construction in our country of its fifth technology hub, first such in Europe.
Wages in Poland may still be lower than in Western Europe, for example, but in many sectors the disparity is no longer that large. The world is changing rapidly, including the growing importance of remote work and home office flexibility. It is also a fact that in many high-tech industries, labour costs are a marginal part of total costs. What matters to investors is quality, timeliness and security of supply. That is where Poland comes strong.
These trends have also a snow-ball effect. Across Europe, we can already see a growing number of companies that locate their headquarters in Poland to manage their regional operations. This is likely to continue and over the next decade, Poland has a chance to close the gaps with, or in some instances surpass EU’s lead economies.
To what extent has geopolitical uncertainty changed the way Poland is perceived by foreign investors?
Record investment data indicates that uncertainty related to geopolitical factors does not affect investors’ choice of Poland. In fact, Poland’s consistent track-record in the region has only been further recognised as it plays a central role in Western efforts to aid and assist Ukraine at present and in post-war reconstruction. This latter may still be a future prospect but the international community – and as a result businesses and investors – are already putting in place plans and strategies to this end. Back in February 2022 there may have indeed been some concerns related to geopolitical stability negatively affecting investment prospects, however, that was a temporary turn at most and in fact has since been replaced by thinking in terms of vast opportunities related to new post-war reality. Decisions on the choice of investment locations are not made overnight, and the process usually takes several years. From today’s perspective, we can see that Poland’s reputation has further increased in in the last year. The inflow of leading politicians, business people and celebrity-figures traveling to or through Poland to the region neighbouring Ukraine, has greatly helped raise general awareness and draw wide-spread interest in the country, also from major media outlets. This certainly is helping attract further investments and this is likely to remain a trend in the foreseeable future.
Transparency, predictability and ease of doing business are high on the list of any foreign investor when selecting a location for a new investment. What can Poland’s government do in terms of lowering barriers for foreign investors, to make the country more competitive and attractive to them?
For many years, Poland has been attractive to foreign investors, who welcome the country’s geographical location and economic stability. As mentioned, in 2022, with the support of the Polish Investment and Trade Agency (PAIH) alone, foreign investors placed more than €3.7 billion in Poland which has set a record for the second year in a row. This is €200 million more than in the previous year and as much as one billion more than in 2020. The number of projects themselves also increased by more than 20%. Last year, 126 of them passed the final investment decision point, which is a significant increase compared to 96 in 2021. Poland is now one of the largest centres in the region for attracting greenfield investments, and observes a growing number of important merger and acquisition transactions by foreign entities.
The biggest barriers to the growth of local companies are the relatively high tax burden and red tape but more and more entrepreneurs also point to difficulties in finding and hiring new employees, or difficulties in obtaining financing. Difficult access to financing is an obstacle to innovation for local companies.. As companies grow, they find it more difficult to find qualified employees. Medium-sized industrial and construction companies complain most about the lack of personnel with appropriate training and skills. Studies point to senior management and owners, particularly in family-run enterprises, often lacking fit-for-purpose management skills and fundamental knowledge of advanced finance and accounting.
Partially the government is addressing these different elements: committing to consolidate, simplify and ultimately lower tax burden, running and financing programs to help family-owned businesses with growth- and succession-related challenges, addressing vocational training, etc. What we may be lacking is more coherence, integration and synergy-seeking among these different elements. Finally, a key issue is addressing the undersupply of employees. Low unemployment is certainly welcome, but the inability of businesses to find employees is a systemic challenge. Inflow of migrants from war-struck Ukraine temporarily relieved some sectors, while putting a major strain on others, such as construction for example, yet there is a systemic lack of strategy and vision for attracting long-term employees to counter sustained negative demographic trends.
HSBC has been revising its financing and investment policies in the light of ESG; how are these changes seen by your clients and other stakeholders? How do you ensure that compliance is more than just box-ticking?
Compared to many if not most other EU-countries there may still be relatively little priority given by Polish clients and stakeholders to the broader ESG agenda but that trend is fast changing and in my view is certainly going to further speed up. Clients’ sensitivity to putting environmental, social and corporate sustainability at the centre is still dominated by short- and medium-term monetary cost calculations, and from that perspective a goals-driven approach may not be fully appreciated. Our biggest impact as HSBC is by working with our customers to support their transition. We choose to show up where the challenge is greatest – banking the sectors and regions which will make or break the net-zero transition. Having said that, we certainly want to see that more and more clients and stakeholders come to realise that pursuit of ESG goals is really a common-sense path for long-term investments and operations. That, rather than from a short-term monetary cost perspective, this should be seen as long-term investments and building opportunities. As the pace of this change increases, by virtue it will be about conscious, common-sense choice and no mere box-ticking. We aim to provide and facilitate $750bn to $1trn of sustainable finance and investment globally by 2030, to support our customers in their transition to net zero and broader sustainability. As HSBC we have long been convinced of that and this has driven our decision-making but equally we are committed to supporting our clients and stakeholders in making that mindset or approach change – and that itself is by no means a box-ticking exercise.
ESG is important, and increasingly so for investors. First and foremost, it affects a company’s reputation and stability, as well as its ability to generate profits over the long term. With that in mind, every year more and more companies and financial institutions are incorporating ESG considerations into their investments and business decisions. Moreover, a big part of our portfolio is with energy clients. We will continue to support those who take an active role in the energy transition and who apply best industry practices around environmental, social, and governance issues.
Looking specifically at climate change and the race to Net Zero, how is HSBC helping its customers make the transition to carbon neutrality?
Given our global presence and relationships with clients across industries and client groups, we recognise the role we can play in helping to catalyse change. As HSBC, we will align our financed emissions – the emissions produced by the customers and projects we finance – to net zero by 2050 or sooner. We are global; we finance the future. Partnering with our clients, unlocking finance for clean technology, infrastructure and skills, and being clear on our science-based expectations for the transition, helps enable our clients to play their part in having the world reach a net zero future.
Financing the transition is our primary objective. As HSBC, we promise to phase out finance for coal by 2030 in EU and OCED countries and by 2040 in non-OCED countries. We help carbon sensitive industries diversify and transition into the future. Doing so requires tailor-made plans, and we engage with our clients from the energy sector to understand, review and support their transition plans. If no transition plans are put in place, or if our mutual engagement with the client does not succeed in aligning the transition plan with HSBC’s net zero 2050 target, that is a cause for a formal assessment of whether a continued financing is warranted. Yet I stress that all our efforts and commitment goes to working together with the client, working towards a win-for-all solutions and facilitating merited change, as this – not leaving anyone behind – is the most certain path to reaching net zero.
Poland’s exports and exporters are holding up well, with Poland returning to a balance of trade surplus in goods. Are Polish firms internationalising effectively? How do you assess the way Polish exporters are reacting to volatility in global markets and turmoil in supply chains?
Poland is an important exporting economy in Europe. Despite economic and market volatilities of the past years, Polish export remains strong and growing. Our country’s central location in Europe and the entrepreneurial potential of Polish business are at the root of this trend, although admittedly the country has traditionally not been a central part of the global economy, hence recent gains need to be seen against Poland’s starting position, particularly vis-à-vis some of the traditionally more global industries of the neighbouring countries.
Polish producers of goods with high export competitiveness and technologically advanced solutions or products are also likely to increase their presence on markets outside of Europe. Polish exports have proven resilient – in some instances even surprisingly so – and I am relatively confident that the positive growth trend will not only continue but accelerate. HSBC in Poland is particularly committed to and engaged in supporting its clients in their export activities and operations abroad. We believe that Polish companies have a yet untapped potential in terms of international expansion, and we continually strive to tailor our offer and tools towards clients’ global growth.