Only this year Poland spent 22 million euro on increasing export of our companies. Analogously, German government allocated 60 million, whereas British – 440 million, 20 times more! Western diplomats are trained to take an economic interest of national companies into account when realising state interest. So far, this kind of perspective lacked in Poland. I can claim, in all conscience, that as far as the quality of products is concerned, we are in the top European league. But it does not matter that much if Polish products sold to Germany are often rebranded and then exported to other countries as German goods? We want to convince global buyers as soon as possible that they ought to pay more for a Polish product. Who knows what will happen in two or three years. If the export to Germany slows down, then we are going to have an issue. Thus, we endeavour to create markets enabling diversification of our exports to reduce the risk beforehand. Such an opportunity may happen only over several years’ time. For some of the Polish companies, it might be way too late – says for klubjagiellonski.pl Tomasz Pisula, President of the Management Board of the Polish Investment and Trade Agency.
Maciej Dulak: One of the tasks of the Polish Investment and Trade Agency (Polska Agencja Inwestycji i Handlu, PAIH) is to promote Polish companies abroad. How are they doing outside of Poland?
Tomasz Pisula: I’ve got a positive impression. Especially if we take into account that Polish companies had little or none support for the past several dozen years, particularly in the markets distant regarding culture and geography. Unfortunately, they were forced to remove obstacles and adjust to completely different conditions only by themselves. Successful entities tend to export their products on the decent level not only to the EU member states but also to the more distant countries. However, we have to bear in mind that in the long run, competition is not possible without the state’s support.
Do you mean financial tools?
Yes, but not only. Financing is the second step. Firstly, companies need to be ‘equipped’ with the proper knowledge about markets they are aiming to enter. It will enable them to come to a decision where to sell their products, as well as which strategy they ought to adapt to capitalise on their idea. PAIH’s role is to give support in those very first steps. We deliver knowledge which minimises the risk of entering a new market. If companies are given this consulting in Poland and their target country, then the financial support might even be unnecessary.
Nevertheless, when financial aid is needed, then companies may obtain it from our partners from the Polish Development Fund Group – Export Credit Insurance Corporation or Bank Gospodarstwa Krajowego – in diverse forms. We also advise companies whom they should turn to. In some cases, we can help in getting state grants from the country to which they plan an expansion.
How does the state support for the foreign expansion of national companies work in other countries?
The cardinal difference arises at the beginning. In Western European countries diplomats are trained to take the economic interest of national companies into account when realising state interest. Support from the foreign diplomatic posts is and has to be something natural. We seem to have been lacking such a perspective.
It has some practical implications – a French, British or Italian entrepreneur can be sure that if he gets in contact with embassies or national economic institutions around the world, then he does not have to convince civil servants that he needs help. He knows that he only needs to notify them and will obtain proper support. Besides, the diplomatic personnel are aware that if a country that they are residing in changes tariffs or introduces regulations protecting the domestic market, it has to support the interests of national entrepreneurs. Unfortunately, Polish economic diplomacy after 1989 has not done much in this regard. There was little sense of obligation towards Polish companies. Even so, it usually was limited to supporting several entities belonging to the State Treasury or the few most wealthy Poles. A systemic solution that would enable cooperation with every Polish company was lacking.
I come from Nowy Sącz, so I can give examples of companies that were successful in the international market, such as Fakro or Wiśniowski. Is it true that they owe their success not to the systemic solutions implemented by the state, but to their competences to trade abroad?
Provided examples stand for the companies which are the best in their business. They deserve great respect for what they have achieved on the foreign markets. I wish every company was managed so well in such a challenging environment.
We have some more examples from the south of Poland, like Nowy Styl or Inglot, which are globally recognised brands. Not only is Poland in the forefront of producing cosmetics or furniture, but also, we are global leaders in constructing yachts, windows, buses or components for motorisation and aviation, not to mention IT companies such Asseco. The problem is that we often export those good designed and produced in Poland not under their own brand, but with a label of foreign distributors. Other Polish entrepreneurs present on the foreign markets use names of brands that do not sound Polish to associate them with a ‘big world’.
Many of the Polish companies blazed a trail abroad with zero help. In general, for the past thirty years, Polish companies got used to acting alone, cautiously treating the state apparatus. Usually, they link it to the revenue service than to an entity willing to help. We have to change their opinion. Besides, it is also a standpoint of Morawiecki’s plan.
You mentioned that a large portion of Polish entrepreneurs sells their products under Western brands. Is there a simple reason for this?
It is instead a natural effect of the development of our economy. When undergoing the economic transformation, Poland did not have its technologies. On the other hand, we did not have enough private capital to buy these technologies, so we competed mainly by means of cheap labour and low production costs. Either we produced goods with the use of foreign technology or as a subcontractor. Our contractors from developed countries have skilfully seized the opportunity created by such relationship. It is how cooperation between Polish and Western enterprises has been set up, which in many cases lasts up until now.
Thus, we do not build our own “made in Poland” brand, and hence the entire economy is directly or indirectly losing…
Yes and no. As subcontractors, we build our brand in the eyes of agents, consolidating an opinion of trustworthy partners. However, we have not been noticed by the final recipients so far. We started to change this approach, but it is a slow and lengthy process. It is not possible to build a state brand making use only of before mentioned several companies – it will not give us necessary recognition. We need to produce a substantial number of national champions to be more visible around the world. They ought to be innovative enterprises – leaders in their branches – that can compete on the global market. Apt positioning is also needed to automatically associate the keyword ‘Poland’ with a positive business image, which should be followed by a set of solid brands related to Poland. An example of a success of creation of such model is Germany with their automotive industry.
The realisation of this goal is in the core of the Strategy for Responsible Development. Today we endeavour to a situation when entrepreneurs will obtain a bonus for a product that comes from Poland.
Will the state pay extra for exports under the original Polish brand?
It is not about extra charges. The point is that by selling under its brand associated with Poland, the entrepreneur will be able to collect a higher margin. The higher the recognition, the higher the earnings and the possibilities for further expansion. As subcontractors, we lose a large part of the funds possible to obtain.
It seemed like an announcement of a specific support tool, but I guess it is more a case of the general atmosphere around the Polish economy, which the government is trying to build and present as positive. What are the specific activities of the Ministry of Enterprise and Technology and elements of the Strategy for Responsible Development here to help? Are there any symptoms proving that this approach is indeed implemented?
National branding is a very complicated process, with many stages spanned in time. It is why it requires many tools, but most importantly – a strategy. The Strategy for Responsible Development is a fundament of this process. From there derives the whole system of support, realised by the pro-development entities like PAIH, which act as a part of the Polish Development Fund Group. Each of our organisations is responsible for a specific element, which helps Polish companies grow in Poland and abroad.
If I were to point out an example of a program which was designed to build a strong Polish brand, then I would name the Polish Tech Bridges. It is a new six-year project realised by PAIH for the SMSE and micro-enterprises with tech projects. It aims to prepare a strategy to enter a specific non-European market and test own capabilities in action.
In other words, we work with a product, service or technology to sell it well, for example, in Japan. Experts in Poland and in a chosen foreign country that cooperate with us advise how to prepare marketing action, what channels of distribution to use, which category of distributors or clients reach with a product. Or even which elements to change – perhaps the name – to fit in recipient’s preferences. After workshops with mentors and drafting a strategy, we enter the chosen market with the company, where we arrange B2B talks first and show around the business environment. We analyse how the company deals with the process. The entrepreneur is being taken care of by our Trade Office and mentors as long as he needs it.
To be a reliable brand, you need to have good products and a wide offer. How do you assess the competitiveness of Polish enterprises?
I can claim, in all conscience, that as far as quality is concerned, we are in the top European league. So what, if Polish products sold to Germany are often rebranded and then exported to other countries as German goods? We want to convince global buyers as soon as possible that they ought to pay more for the Polish product. I want to act in a manner which will result in five or ten years with the effect that products exported from Poland would be signed with Polish flag to inform about the country of origin, not the origin of the EU.
In one of the interviews, you said that PAIH helps Polish producers to look for niches outside the EU.
The crucial issue is the so-called business intelligence, a preliminary survey of the markets still unknown to the majority of Polish companies and their trends. This is the task of our experts in Foreign Trade Offices of PAIH. Today there are 50 of them all over the world, until the end of 2018 the number will grow up to 70. Our people in the field have insight information about their markets.
How does it look like in practice?
Each Office has relationships with core pro-business environments on site. We are present on the most important economic events, and we have an insight into economic data. Thus, we know precisely what is currently in demand and what a given economy will need in the near future. The latter, so the prediction of trends, is the key to define market niches.
If these actions are translated into concrete steps, it is about finding opportunities for investments or starting sales in a given country. If we manage to find such a niche, then we approach Polish companies, if would they be interested in entering the area we have chosen. We also organise workshops explaining how to enter the market for these branches, or we invite companies and pro-business institutions from both countries to B2B meetings.
On the other hand, companies themselves often ask about a specific market. Then we provide them with appropriate know-how. In general, this amounts to giving a package of crucial market information, checking the reliability of potential partners and providing warnings.
Does PAIH offer some financial tools?
As I mentioned, financial issues are covered by, among others, Bank Gospodarstwa Krajowego.
We also do not deal with venture capital activities that are of the Polish Development Fund’s interest. First and foremost, our role is to provide information reducing business risk, promotion of Polish business during economic events and fairs, finding orders and finally contacting specific companies.
How does it work on a daily basis? Does Polish business make use of PAIH’s services?
Of course. Since early 2017, when we started a project aimed at building a network of Foreign Trade Offices, we served about 8 thousand inquiries from the Polish companies willing to sell or invest abroad. We have a growing number of Polish projects being implemented. For example Lug investments in Argentina or Paradyż’ entry into Canada. Recently, we have found a Hungarian distributor for leading roofing felt producer in Poland. We are conducting many projects in Germany, France, Great Britain, Singapore, Vietnam, Kenya, Mexico and in the US.
Many challenges ahead still are ahead of us. Polish enterprises do well on the EU market. However, we got used to the prosperity, at the same time forgetting that it will not last forever. If for any reason, export to our biggest trading partner – Germany – slows down, then we will have a serious issue. After all, we have several thousand entities that live by providing services, technological solutions and components for the German car factories! Polish business is deeply connected with the German one. Therefore, we try to open them to markets that will help to diversify their portfolio.
I have read a report which stated that in the Polish embassy in India only three people were responsible for business relations. In a country with 1.2 billion citizens, there was a manager, accountant and assistant. How could be that effectively one person is responsible for all business relations between Poland and India? How do you think a model embassy should look like?
We have a few issues here. First, it is the number of employees in Poland’s missions abroad. In general, the number should depend on the demand for the services. In our case, though teams of Foreign Trade Offices are still rather small, at the same time they are very efficient. Sometimes a small team of apt experts with support from the local pro-business environment will suffice. However, I dare to say that our modest teams do much more than over 300 people previously working in the Trade and Investment Promotion Section of Poland’s missions abroad.
Second, PAIH’s model assumes flexibility. If the demand grows, then we either increase the staff number, or we set up another Office in a given country in a location that is strategic for the business. That’s what we do in the case of China or the US.
Third, speaking of huge markets, a reasonable selection is also important: we are looking for market niches and business opportunities on the provincial, regional and state level. This model enables us to carry out the tasks that rest on us.
I get it, it is logical. But still – three people per one billion inhabitants? It could not work.
As I said, everything depends on the personnel, knowledge of the market and adapted approach. PAIH’s office was launched very recently, so it is a rather small team, but strong in merits. We do realise that India is an up-and-coming market for the Polish economy, but we have to analyse more closely its potential, especially the number of inquiries from the Polish companies before we decide on the directions of further development of this area. Simple behaviour coping from a different market won’t be successful.
I understand that you want to change it?
We will concentrate on sectors which are of the highest priority for the Polish companies operating on an Indian market. For us, these are primarily furniture and interior furnishing for the hotel sector. Today India is developing its tourism infrastructure very intensively, so everything in this segment – from furniture even to cutlery – counts. Another market niche which we may use is an area of biotechnology and pharmaceutical products. Some big Polish companies already operate in India. It’s high time that others come in too. Naturally, we will strengthen the presence of the entire segment related to the mechanisation of agriculture and food processing.
And what can we offer on the African market?
Remember how vital this continent is, just because of the current demographic explosion. Africa now needs everything and is willing to pay for that. We, on the other hand, can provide a lot of products, including technology.
The majority of African countries struggle with public transport. Therefore, Africa may buy the newest technologies from the Polish companies – electric buses are one of such examples. If we remain in the automotive area, Africa is worth considering for the producers of the spare parts. It is also a rising market for e-commerce. Currently, we pave the way for enterprises specialising in those areas in Kenia.
It all sounds great, but someone has to prepare the ground for the Polish technology that we want to sell to India, China or Africa. Can’t we afford to create a real business institution with 30 employees? It is how an analogous German office in India looks like.
Your words are a balm to me. We should have enough means for that.
It seems that this is another indication of the Polish state’s weakness that we need to put an end. When to take care of export if not in the times of the excellent prosperity?
We are working on that now. We do it aptly, thinking in pro-business categories, which differentiates us from our predecessors. However, since we launched our projects only several months ago, and the system of support was set up from scratch, the measurable effects will be noticeable only after at least one or two years, when the system will be finished and will start to work.
I must underline that we build it for very little money. The system of Trade and Investment Promotion Section, consisting of barely 49 offices, cost 110 million złotys annually. We will spend about 90 million złotys this year, but we have 50 offices right now, and new ones are being created. It is well-known that setting in motion is the costliest part of the process. With 70 offices functioning in the next year we will have a budget that amounts 170 million złotys.
Not that much. How much do the other countries spend?
For the Chancellery of the Prime Minister, I prepared a balance sheet of the economic promotion system in various countries. This year Poland spent 22 million euro on PAIH. Germany spent 60 million euro for an analogous institution, what is three times more. Moreover, the Brits spent 440 million, 20 times more! The US, country with the best business promotion network in the world, paid 460 million euro via the Trade Department. To sum up – big countries are capable of investing 20 times more money than Poland does.
For the time being, we approach it with humility. We know our limits, and we want to put a maximum load on these light, small structures that we currently have at our disposal. It is still more than was available for the Polish companies for the last 30 years. We encourage Polish companies to go outside, and we emphasise that the moment when they have high revenues and stable profits should be used for their expansion.
What are the effects? Do Polish companies decide to expand?
Yes and no. The expansion is costly, „burns” money, but it is necessary to do so in a certain phase. Since we are at the very peak of good prosperity, we have less and less time and who knows what happens in two or three years. An opportunity like today may occur only in several years and it may be way too late for many companies. It is why Polish enterprises are almost drilled by the PAIH to overcome biases and barriers.
First data indicate that several thousand companies have been serviced. It suggests that our work is effective. We can also notice that even entrepreneurs themselves appreciate our engagement more and more. Personally, I received only three complaints from unsatisfied clients. These are occasional situations, whereas in the Trade and Investment Promotion Section a significant number of such complaints were something normal.
Does economic diplomacy rely more on the young generation?
It could be said so. The average age of our experts amounts to 38 years right now. Around 70% of our current employees are entirely new. I hope that, apart from generating a new market for Polish companies and inviting them to expand abroad, our most significant success in 10-20 years will be that we allowed new blood to enter international trade. We led to the generational shift; we’ve decided to give to young people, often graduates of international studies, an opportunity to represent Poland abroad and to make contacts with companies. It will be a reliable trace of us.
What kind of help from the PAIH does an average entrepreneur need?
A lot depends on the size of each entity, scale of its activity, sector, target market and a plan on whether to sell or invest. Some entrepreneurswho have been already doing well on the foreign markets. They often come with a particular issue: ‚I conduct engineering works on several markets. I applied for a governmental commission. I heard that you are going to open a new office here. Can you help me?’. Or: ‚I operate in the US and in Europe, but I see that my service can also be sold in Asia since market there grows. Search for my potential business partners and arrange meetings between us’. Often these are the companies which have been exporting products to China for years but would like to ship even more.
Another category of our applicants are the entrepreneurs exporting to the EU for years, who have fixed incomes amounting to millions. It is quite common that experienced and knowledgeable presidents of the board, after handing over their enterprise to the younger generation or after selling their shares, end up in the supervisory boards. Encouraged by what they read in media, they ask for help in operating in Africa or India. These markets were always in their minds, and now they can afford to take a risk.
Quite a numerous group consists of people who did some research before and see some potential in an expansion. These are primarily young companies which bring new solutions to the market and ask how could we help them. With the tools we have developed, we can contact them with foreign contractors or investors; for example, we have our office in Silicon Valley.
Finally, there are also entities that did not operate outside Poland before, and they ask us to help them in entering the EU market.
China, Africa, the US, the EU and Latin America. Can you explain the specificity of each of these markets, basing on your experience? What is the difference between exporting to Africa and China?
I’ll try to do it briefly. In China, Polish companies should fight for the ‚premium shelf’ – prepare joint efforts and build a country’s image which is associated with healthy food (for which there is a growing demand). Dairy products without heavy metals, which is a problem in China, are a prime example. But we have to bear in mind that this is a market which requires a high volume of goods, and Polish companies are not always capable of producing them. The samples themselves often have to be sent in containers to make their presence noticeable at all. Therefore, the primary challenge for China is the scale.
As far as the US is concerned, this market is very complicated and controlled by the Americans. It has big gaps, for example in technology sector. Some Polish companies could enter American market successfully. There are even state programs which encourage enterprises to move to a specific state.
When speaking about Africa, we can say that it is possible to sell everything there, competing with the Chinese operating in many areas there, will also not pay off to everyone. The Chinese export goods which we had in Poland in the 70s and 80s, therefore it is advisable to estimate possible gains properly. Apart from communication technologies or health services, I could point out infrastructural solutions, especially for cheap, energy-saving houses, as a market opportunity. Export of technologies related to food storage or food itself is another important area. Africa relies on partners who will not deceive. Their hitherto partners from the rich Western world often take advantage of the Black Land countries. Milk or flour exported from Europe to Africa was of much poorer quality than these present on the European markets. Therefore, we can sell top-quality milk and real flour there. On the other hand, infrastructural projects are building a niche in Latin America, where railway and housing industries are developing.
In the end, we can just briefly mention different aspect of PAIH’s tasks, so bringing investments to Poland. How interested in our domestic market are foreign entities?
In the past two years, we have developed cooperation with many foreign investors that are important for the Polish economy. Morawiecki’s Plan focuses on supporting them. I have to admit that in some cases we can speak about the magnet effect – their presence attracts further important foreign companies. A crucial example is LG Chem in electric vehicles industry. This is a brand-new category of projects that we started to support in the past several months. In addition, due to the record-breaking LG investment, the whole stream of Asian projects was activated. South Korea is currently number 1 in PAIH’s portfolio investments.
We can see the snowball effect in financial sector after JP Morgan entered the market. It’s not a coincidence that it was followed by Standard Chartered. I hope that their actions will incentivise other banks and financial companies.
Those firms are not setting up in Poland just like that. We need to reach them with information depicting assets of our economy. For example, we look for investors during the world’s largest trade fair, the Hannover Messe. Last year we brought joint project of Lufthansa and MTU to Rzeszów. We have also presented Poland in the largest investment event in the US – Select USA.
Translation from Polish: Katarzyna Nowicka
This publication has been cofinanced by the Ministry of Foreign Affairs of the Republic of Poland within “Cooperation in Public Diplomacy 2018” programme.
This publication reflects the views of the author and not the official stance of the Ministry of Foreign Affairs of the Republic of Poland.