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The Other Europe: A Look at Poland

Scan any of the European front pages lately, and you're likely to see reports on Greece, France, Germany, and the debt crisis crammed in there somehow. But as manufacturers know, there's more to Europe than just what's coming off the newsfeed or TweetDeck.

Take Poland, for instance. When was the last time you heard about what was going on there? A few years back, the country was on many high-tech OEM and EMS radar screens. It was a potential low-cost, high-skill manufacturing center in a key geography. As EBN reported, there are still plenty of opportunities brewing there for those wise enough to take note. (See: Manufacturing Matures in Central, Eastern Europe and Central Europe: Where Opportunities Equal Challenges.) Recently, the buzz has quieted.

For the sake of catching us all up, here are a few things coming out of Poland that are worth watching.

First, there's a growing consumer appetite for consumer electronics, not surprisingly for the Apple gizmos that the whole world is ogling over. According to one report, 18.4 percent of all mobile Internet users in Poland are iPad users, and another 15.3 percent are connecting up through the iPhone.

The hefty price for those devices doesn't seem to be slowing down sales, either. Perhaps that's because Poland generally has weathered the financial crisis relatively well. The Financial Times recently reported that Poland has been on a lucky streak that still has some oomph in it. Among the positives cited:

  • The concern about serious fiscal problems has eased
  • The economy's growing pretty well
  • The country will co-host the European football championships next year (an insanely popular soccer match that will throw a lot of money into the country's coffers by way of tourism)
  • In July, Poland took over the Presidency of the Council of the European Union slot, giving the country a regional political boost.

To boot, there appears to be an underground shale gas bonanza, which will give the country an advantage in any natural gas energy conversation, FT reported.

But it's not all rosy skies. Inflation is troubling at 5 percent, and the central bank probably will have to step in and reel it in. And, although the country miraculously managed not to slip into the 2009 recession that swept through most of the world, it avoided a fiscal drop-off as a result of previous spending hikes and tax cuts, which, according to FT, flung the deficit to 7.9 per cent of GDP in 2010 and public debt pushing up against 55 per cent of GDP, the legal limit.

Then there's the manufacturing picture. Remember the game Red Light, Green Light, where one of your friends stood some distance away and shouted either “red light” or “green light”? If she shouted “green light,” the herd of us at the line darted forward, trying to be the first to reach her. If she shouted “red light,” we all froze in place, trying to balance while in mid-step. That's sort of the sense I'm getting from Poland's manufacturing picture. There was a dash a few years ago to put stakes in the ground, but there appears to be a jittery standstill happening now.

While you can find a bunch of financial and tech stats at Eurostat and OECD, I'm following a hunch based more on anecdotal things I came across. {complink 3074|LG Electronics Inc.}, for instance, has reportedly expanded its production facilities in Biskupice Podgórne as part of an underlining game plan to be the world leader in the global home appliance market in four years' time.

Young-Ha Lee, president and CEO of LG Electronics Home Appliance Co., was quoted here as saying: “The European appliance market is critical to our future success and we are confident in our ability to keep up with the growing demand from consumers there. Increasing our presence in Poland allows us to better address Europe and North Africa’s demands, putting us on course to become the world’s top home appliance company by the middle of the decade.”

The news wasn't so good for Jabil Poland; it recently lost a contract to Northern European companies. Day4 Energy, which provides solar photovoltaic PV technology for the production of advanced solar panels and modules, decided to kill its outsourced manufacturing operations in Poland.

Day4 Energy President George Rubin was quoted as saying: “Since the end of 1Q/2011 we have expanded the reach of our technology and brand platform by securing license agreements with PV Products GmbH in Austria and Solar Modules Netherlands (SMN) in Holland.”

I suspect there are still many untapped opportunities there, but I think high-tech companies are waiting for someone to shout “green light” once again.

11 comments on “The Other Europe: A Look at Poland

  1. Ariella
    August 23, 2011

    The figures you present make Poland look like it's in fairly good shape — relatively speaking. It seems that the US cannot currently boast better on some key indicators.

  2. Houngbo_Hospice
    August 23, 2011

    It is reassuring to hear that everything is not that doomed in this difficult time for the world economy and that Poland is doing pretty well.  I wish investors would see the opportunities there and take their chance.

  3. Taimoor Zubar
    August 23, 2011

    Poland does seem pretty strong in economic terms and seems to offer a lot for hi-tech companies. I think the analogy you mentioned about “green-light” seems right and that there will be an influx of companies once a few key players step in. This could also be a lacking on the part of the Polish government to not market itself well amongst the business community and to attract foreign investment.

  4. FLYINGSCOT
    August 23, 2011

    I really enjoyed your article.  I see a lot of Polish workers in the UK and I know it is a worn out cliche but the Polish workforce is well skilled and very hard working.  I fully expect Poland to begin to fair as well as other more seasoned Western European countries in the very near future once it gets its fair share of inward investment.  Maybe needs some more creative government?

  5. eemom
    August 23, 2011

    I am pleasantly surprised to read the article about Poland.  I did not know they were fairing out well in the global economy problems.  I do wonder why they were able to escape the 2009 recession, seem to have all the advantages you list yet their manufacturing is at somewhat of a standstill?  Why aren't they taking advantage of their good fortune – so to speak.

  6. Parser
    August 23, 2011

     

    The reason why Poland did not slip into deep recession in 2009 was the fact that Poland cost of living and wages were about 1/3 less than in Germany or other major countries in Europe. While the crisis widen in other countries Poland was fueled by cheaper deals from those in Western Europe who wanted to survive. I am not an economist so this was just a speculation.  

     

     

  7. jbond
    August 24, 2011

    It would appear that Poland is doing rather well in spite of all the turmoil going on in the globe. Poland has many hard working skilled laborers and would make a great place for manufacturers looking to set up shop in the European area. I am a little curious about why the (red light) took over. Are some of the companies just finding better deals in other countries? Are companies fearful of Poland's rate of inflation? Or do they just need one or two big companies to put a stake in the ground and others will follow? Ultimately time will tell, hopefully Poland will benefit.

  8. Jennifer Baljko
    August 24, 2011

    @jbond you ask the same question i have. Not really sure what's causing this stop-go pattern. My gut tells me some companies are re-assessing all of their operations and either looking for cheaper-still options either in Europe or elsewhere, or they shifting business models away from weaker-performing products that may be produced here. All speculation on my part.

    Also, I was a bit surprised, too, to hear Poland is faring better than the others. Who would have thought that was the case given the general global malaise right now? Like Parser said, the lower cost of living, lower wages kept it attractive to many companies, but we'll see what comes to roost soon enough… inflation and potential problems with debt could cause decidereversals if they go on for extended amounts of time. Although through this entire global crisis, I have heard of any companies leaving behind expensive fabs as the govt wrangles with debt an interest rates levels. Pullling out for that reason alone would be short-sighted.

  9. Himanshugupta
    August 27, 2011

    @eemom, what i have read previously then why did Poland is doing relatively well while the rest of Northern Europe is caught in financial problem is due to its late inclusion in EU and its independent currency. Now as a member close to wealthy Europe, before and after its inclusion in EU, Poland has relatively cheap and educated workforce. The time differences and culture also make it easier to outsource work there. 

  10. Ms. Daisy
    August 31, 2011

    @Hospice, I agree with your plea ” I wish investors would see the opportunities there and take their chance” to investors. I will add that these investors take into consideration the hard worling Polish and the surplus skilled men and women from Poland now in the UK and the US.

  11. _hm
    September 5, 2011

    Poland may be good destination for value added product development and manufacturing. For very low cost products, it may still be costly.

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