CEIS Report: Foreign Direct Investment in Poland Lags Behind Others in Region

By Council For European Investment Security, PRNE
Monday, April 25, 2011

Improvements in Telecommunications, Governance, Rule-of-Law Essential to Promote Modernization

WASHINGTON, April 26, 2011 - The Council for European Investment Security (CEIS) today released a
report titled "Foreign Direct Investments in Developing Nations: Issues in
Telecommunications and the Modernization of Poland." Authored by CEIS
Chairman Dr. Robert J. Shapiro, the report finds that Poland attracts less
FDI as a share of GDP than other transitional countries, and that Poland's
difficulties reflect issues of governance as well as economics. The CEIS
report examines a series of political factors that influence where
multinationals locate their FDI. These factors include legal and regulatory
requirements to establish a new firm, political stability, contract
enforcement, the reliability of the rule of law, and fair settlement of
business disputes.

Several international organizations have taken note recently of these
political factors. The World Economic Forum recently ranked Poland near the
bottom of OECD countries in terms of the clarity, efficiency and neutrality
of the legal framework for firms to settle disputes, and the World Bank has
noted a decline in Poland's reputation for providing a reliable rule of law.
The report notes that "these developments have produced a sharp slowdown in
new FDI by American multinational companies."

The report focuses as well on FDI in telecom, a crucial area for
participating in the global economy. From 1990 to 2003, Poland ranked sixth
among all developing nations in telecom FDI. But these inflows have slowed
sharply in recent years, leaving Poland lagging behind other Central and
Eastern European countries in broadband. In this context, the report also
examines the decade-long dispute between Telekomunikacja Polska S.A. (TPSA)
and the Danish Polish Telecommunications Group (DPTG), finding that it may
"have damaged Poland's reputation as an attractive location for FDI" by
reinforcing the impression of "Poland's substandard reputation for
maintaining an efficient and neutral framework to settle business disputes
involving multinational foreign investors."

"Unlike twenty years ago, multinationals now have many choices in the
developing world to send their FDI," said Dr. Shapiro, former U.S. Under
Secretary of Commerce for Economic Affairs. "They look for stable countries
with governments which respect the rule of law. When a country's leaders
dismiss the norms of international finance and commerce, the transfers that
produced the rapid growth and income gains of the last decade will usually
slow or even stop."

Dr. Shapiro will present his findings on May 16 as part of a panel
discussion at the European Economic Congress in Katowice, Poland.

Examining economies throughout the region, the Council for European
Investment Security is continuing its research with a report on Estonia's own
foreign direct investment climate.

Chaired by former U.S. Under Secretary of Commerce for Economic Affairs
Robert J. Shapiro, the Council for European Investment Security (CEIS) was
established to promote rule-of-law, transparency and financial accountability
in Central and Eastern Europe. With a number of high-profile cases affecting
confidence in the region by foreign investors, Foreign Direct Investment
(FDI) is migrating away from some of these countries to other markets. CEIS
evaluates markets at the country level, promoting practical solutions to
promote investment, stability and positive growth. For more information,
please visit www.investmentsecurity.org

Council for European Investment Security, +1-800-454-3196, info at investmentsecurity.org

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