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Poland from an Irish Perspective

News

Poles Apart

WHEN ENTERPRISE Ireland's (EI) Warsaw office began planning a conference on business opportunities for Irish companies in Poland, they were were hoping for 50 attendees, perhaps 100.

With the gloomy economic forecast at home, prudent managers might be expected to be hunkering down in Ireland rather than looking abroad for new opportunities.

But interest in last week's conference went through the roof: more than 150 Irish and Polish companies attended and EI had to ask for extra space from the hotel hosting the event.

Despite these uncertain financial times, many Irish managers say they are convinced Poland's economic foundation is sound and as good a place as any to build for the next boom.

Soon, they may even be able to benefit from a resource unique to Poland: the first wave of Polish emigrants who have returned home after getting work experience in Ireland.

Enterprise Ireland's Warsaw office has noticed an increase in interest from Irish companies, particularly the slowing construction sector.

"The construction sector in Poland has seen rapid growth in the past three years and the outlook, while dampened recently by global financial events, still looks quite positive for the next several years," says Karen Colahan, director of the Warsaw office.

"The allocation of EU structural funds and the upcoming Euro 2012 championships will continue to provide opportunities in the construction sector in Poland."

The Polish economy has not only left most of its central European neighbours in its dust in recent years, many analysts say its prospects are brighter, too.

Economic growth, expected to top 5 per cent this year, is likely to drop under 3 per cent next year.

But unemployment is down from over 20 per cent five years ago to 8.9 per cent last month, its lowest level since June 1991.

Retail figures are strong, with high-street sales up 11.6 per cent on the same month last year, and up from a 7.7 per cent rise in August.

"Poland is in reasonable shape compared to its neighbours like the Czech Republic or Hungary, simply because it has a much larger internal market and is less dependent on eurozone exports," says David Hauner, emerging markets analyst at Bank of America in London.

Another reason for optimism is the liberal Civic Platform government. After almost year in office, prime minister Donald Tusk's administration has been less decisive than many business figures had hoped.

But few would wish a return to the previous administration of Jaroslaw Kaczynski, seen by managers as unpredictable, business-phobic and disastrous for Poland's image abroad.

But it's not all good news in Poland. Until mid-October, economists were confident Poland would ride out the current economic storm because its modern financial regulatory system had kept banks away from the toxic credit that had hit western competitors.

Then, earlier this month, the zloty fell 14 per cent against the euro, reflecting nervousness among investors in emerging markets. This hasn't just hit Polish businesses, but also many ordinary Poles who took out foreign currency mortgages.

The government hopes the fall is a short-term psychological phenomenon with no basis in economic reality. It hopes to stabilise the situation by pressing ahead with plans to lead Poland into the eurozone in 2012.

With the opposition trying to block the plan, the government may force a referendum on the issue in the spring. The political calculation is that economic uncertainty will help concentrate Polish minds on the benefits of joining the single currency.

"The eurozone will become increasingly popular in Poland, viewed as a safe haven, particularly from a currency perspective," said David Hauner of Bank of America.

A clear eurozone perspective would boost confidence in a market established Irish players say has matured significantly in recent years, opening the largest central European market to a new range of products and services.

"We've reached the point where Polish companies have mail and accounting software and portals. Now they need more sophisticated solutions," said Radek Kozieja, managing director in Poland of Irish firm Codec.

Its management software is now a big seller with Poland's main players, from banks to telecoms companies.

It's nothing new for Irish companies to train Polish managers and send them home to manage new central European operations. But the returning wave of emigrants could open a new scale of co-operation.

Like other established Irish companies in Poland, Kozieja hopes Codec is able to take advantage of returning emigrants.

"Two years ago our employees were very attractive for the Irish market because they work with Irish companies and speak Irish English," he says. "Now we are looking forward to the benefits of having a full range of people available to us in Poland again."

Waste management company Greenstar is another Irish company factoring returning Polish workers into its feasibility studies, which could result in up to €100 million worth of investment.

"The biggest synergy at the moment is in the construction sector as people move back but the biggest boost, I think, will be in project management. Irish companies can benefit from Poles in project teams in Ireland moving back home," says Joe Gilmore of Greenstar in Dublin.

"We'll be looking to doing the same."

For companies like Greenstar with long-term investment goals, the current financial uncertainty doesn't change the fundamental attractiveness of Poland: its central European location, large domestic market and EU structural funds being pumped into infrastructure.

"There's a lot of caution now and business decisions will be scrutinised more carefully than before, but business can't stop," says Gilmore.

Like the original wave of emigration out of Poland, it's hard to quantify the wave of returning emigrants because official figures do not exist. Experts say a huge wave of spontaneous reverse migration is unlikely but predict some movement among qualified Poles in low-paid, low-skills work in Ireland.

"After they have accumulated some capital it would be normal for them to ask, 'Is this something I expect to be doing in the future?'" said Pawel Kaczmarczyk of the Centre of Migration Research at Warsaw University.

Reasons for an emigrant's return are usually personal but external factors may play a secondary role, particularly the diminishing financial reward of working abroad.

Polish wages increased 6 per cent on average last year and the zloty's gains on the euro and British pound have eaten into Polish earnings being sent home.

One Irish company already on the move to Poland is Clare-based FMC Tech. It offers energy companies a computer management system for medium-voltage overhead electricity networks. It has attracted huge interest from major European utilities, including three in Poland. The downturn has proven a boon for FMC Tech because its product allows energy companies to maximise the use of their existing transmission network at low cost.

The firm's managing director Mike McCormack is optimistic that returning Polish emigrants will give Irish business a boost: "Two of our computer engineers are Polish," he says. "They are very skilled and work part of the time in Poland and part of the time here in Ireland. It works out very well for everyone."

INWARD MIGRATION The Polish-Irish connection

WHEN KASIA Skopinska moved to Ireland, she left with thoughts of returning to Poland within a year. But one year has become eight and she can't see herself leaving any time soon.

"I just can't see myself there," she says. "I've been away too long, most of my friends are abroad and my family comes over a lot."

But the migratory tide is turning. In the first half of the year, the number of people from the EU states that joined since May 2004 who registered to work or access public services here fell by 40 per cent compared to the same period in 2007.

The outward flow is more difficult to gauge, but in the year ending April 2007, the Irish emigration rate was at its highest since 1990.

As the Republic falls into recession, the Polish zloty's rise against the euro means that, while the costs of emigration are still high, the relative pay-off has fallen. Combine this with rapid improvement in the Polish labour market and some of the reasons for Poles to leave start to ebb away.

But, as Skopinska points out, ease of travel across Europe also makes it easier to decide to stay and the response to a shrinking host economy is not always to board a plane home.

Anna Pas, editor of the Dublin-based Polski Express , says "it's the big question: is the recession going to push me away?

"But many people who became part of this new, multicultural society would not feel good in Poland."

While official figures have for the past year undeniably been showing a calming of the flow of new migrants coming from central and eastern Europe, the data also confirm that big numbers are still arriving here. While fewer Polish nationals claimed PPS numbers this September than in the same month last year, about 3,200 new numbers were still issued, a significant statistic that shows the flow of newcomers is a long way from drying up.

Add those who are staying and we see a deeper, more complex process than that allowed by the supposed recession-time axiom that the Polish-Irish encounter of the past five years will turn out to be a temporary blip on the demographic charts

http://www.irishtimes.com/newspaper/innovation/2008/1103/1225321600082.html