PAIiIZ survey: perceived barriers to FDI in 2011

2012-01-29



Cumbersome or insufficient investment support procedures, rigid labour laws and overly complex tax regulations were mentioned by foreign investors as key barriers to foreign direct investment (FDI) inflows into Poland in 2011, according to a new survey by the Polish Information and Foreign Investment Agency (PAIiIZ). There is thus room for considerable improvement despite highly positive overall assessments of the country’s investment environment, the Agency notes.
With respect to investment support procedures, foreign investors would like to be able to freely combine government grants with other forms of support, such as tax exemptions in special economic zones and EU grants, which is not possible at the moment. Another grievance is that the eligibility criteria for R&D projects, especially by small and medium-sized firms, are perceived as too restrictive. The procedures for the awarding of EU structural funds should be faster and more transparent, while the conditions for joining and remaining within special economic zones ought to be relaxed and made more flexible, according to the surveyed companies (e.g. possibility to settle tax losses from operations in the zone; possibility to cut jobs; easier incorporation of private land; allowing BPO centres serving financial services firms to join the zones). The zones’ lifetime should also be extended beyond 2020.
With respect to labour laws, foreign companies would like them to be made more flexible to allow swift reaction to market conditions. A more specific suggestion is that BPO centres serving foreign clients should be added to the list of companies allowed to work on Sundays and holidays.
According to the surveyed investors, the lack of tax consolidation hampers Poland’s attractiveness as an investment location, particularly for companies from the BPO sector. Also, the country should exempt employer-sponsored health plans and commute programmes from personal income tax, they argue.
Other weaknesses mentioned by investors include zoning laws, building and administrative procedures, infrastructure and red tape.
The survey is based on interviews with more than 100 foreign investors and more than 10 site visits, conducted as part of the Agency’s post-investment support activities.
Another recent survey by PAIiIZ, carried out in November 2011, found a sharp improvement in foreign investors’ assessments of Poland’s investment environment, to 3.59 points (out of 5.0) from 3.04 in 2010, with market size, availability of qualified workers and political stability mentioned as the country’s key strengths.