In the Zone

 A Special Economic Zone is defined in the report as “a separate and uninhabited part of a country’s territory where business operations may be conducted on preferential terms defined in the Polish Act on Special Economic Zones.” According to this act, they are governed by corporations (joint stock or limited liability companies), with the state treasury the founding body for most of them. They are to be distinguished from Parks, the status of which are much looser and vary according to the particular arrangement made with the local government (1 in 3 have no legal status). The idea behind Parks is also different, in that the latter have been conceived primarily to foster collaboration between science and industry, whereas SEZs are intended to regenerate regions that have suffered industrial and economic decline. As Mariusz Strojny, of advisory company KPMG and co-author of the report, puts it: “SEZs were set up with 3 main ideas in mind: to attract foreign investors to poorer regions of the country, to employ people and support local economies.”

There has been a significant difference so far between SEZs and Parks in terms of revenues and profits. Since 2004, SEZs have experienced on average a 7 pct increase in revenues to PLN 6 mln and an 80 pct increase in profits – their highest ever level. Over the same period, the average Park, whilst also experiencing an increase in revenues, nevertheless has not made a profit – although the report attributes this to the fact that most of them have been on the market for a short time only and have yet to break even.

Up and down

The best performing SEZs in terms of employment generated and investment attracted – amongst other factors – according to KPMG’s ranking, are (in descending order) Wałbrzyska, Legnicka and Katowicka – all in the industrial south western provinces of Lower and Upper Silesia. The worst performing zones, which include Słupska, Starachowice, Suwalska and Warmińsko-Mazurska, are generally located in the north and east of Poland – areas with little or no industrial tradition. Mariusz Strojny offers an explanation of why this might be: “Maybe they don’t have a clear vision or strategy. Perhaps they should not be trying to attract manufacturing, but should concentrate elsewhere, for example on services. But we must remember that each zone is an individual case.”

More room

  EUR 40 mln or employing 250 people). Currently, 62 pct of the area now occupied by SEZs is being utilized, compared to 32 pct for Parks.

SEZs differ from Parks in what KPMG’s report terms their “geographic dispersion”, by which it means that zones are not discrete entities, but instead are made up of separate locations – on average 9. Parks, on the other hand, tend to operate in a single location. This situation has come about mainly through the need to accommodate major investors, who have themselves identified what they feel to be the best location and have agreed to invest in these locations only on condition that the incentives and benefits enjoyed by SEZs will apply there also. For instance, last year Volkswagen’s EUR 40 mln extension of their plant outside Poznań only went ahead after it was agreed that it would be included in the Kostrzyńsko-Słubicka SEZ – more than 100 km to the west.

 The problems experienced by SEZs and Parks tend to be similar, including lack of funds for growth and the inability to attract new investors or obtain EU funding. SEZs, however, are more likely to suffer from legal problems and 55 pct of those surveyed complain of poor infrastructure, compared to only 12 pct of Parks.

However, for SEZs there is one important factor on the horizon: the fact that they must all be closed by 2017, as stipulated in the EU accession treaty. They will only, therefore, be attractive to investors for another a few years. One possible course of action suggested in KPMG’s report is to transform them into Parks. Investors would no longer be able to benefit from the same tax incentives as zones, but would instead be able to take advantage of the infrastructure provided by Parks. Mariusz Strojny of KPMG feels though that some of the investors will stay on, irrespective of whether zones are transformed into Parks, as he believes that lower costs may not be the sole factor motivating foreign companies, as he explains: “Some companies will move because of the growth in Polish salaries which is now occurring. But some will stay, especially those that need highly skilled specialists, such as engineers, computer programmers and scientists, who are available in Poland at a lower cost than in western countries.” If Mr Strojny is correct, and significant numbers of investors decide to remain in Poland after the closure of SEZs, then we can judge them to have been a success.

      z Nathan North