Economic and commercial cooperation between Poland and UAE
Economic and commercial cooperation between Poland and UAE
Diplomatic relations between those countries were formed at the turn of 80’s and 90’s of the previous century. After political transformation of Poland, which has also contributed to the change from centralized to free market economy, its limitations of international cooperation have decreased significantly. The first sign that indicated the beginning of close partnership with the Middle East countries was the creation of Polish Trade Centre in Dubai, which has later transformed into the Commercial Counselor Office. In 1991, the first Polish Embassy was established in the capital city of UAE – Abu Dhabi. A significant revival in relations between the countries took place after 2009, when the decision of building the UAE Embassy in Warsaw has been announced. The Polish governmental explicitly declared that it sees cooperation with the UAE as a chance to reach Middle East and underlined importance of their partnership. It stems from the fact that the UAE plays key role in trade between China, India, Africa and Europe.
The purpose of the cooperation between Poland and the UAE is to strengthen their mutual relations in such domains: economic, commercial as well as cultural. This fact was underlined by Poland and the UAE on numerous occasions.
„We open doors in every possible areas. We are looking for serious partners, and UAE is an extremely serious partner, extremely favorable, extremely consistent” – pointed the Vice Prime Minister of Poland Janusz Piechociński, during the Polish & Emirates Economic Forum. The main topics of Forum discussions covered, among others: new technologies, renewable energy sources, energy efficiency, ICT sector and furniture industry as well as marine, land, and air transport sector. Wide scope of the cooperation areas can be confirmed by various statistics. Polish export to UAE has been rising constantly since 2012, and in 2014 reached as much as 50% growth. Upward tendency also takes place in import, which in 2011-2014 was rising by 40% a year.
Up to now, the relations between Poland and the UAE was backed up by the conclusion of four bilateral agreements on economic cooperation and memorandums on cooperation between research institutions.
The most important agreements are:
-Agreement on avoidance of double taxation,
-Agreement on mutual support and investment protection,
-Agreement of cooperation in air space,
-Agreement on economic cooperation,
-Agreement on on tourism cooperation.
These agreements have significantly determined the development of trade and investments, contributing to the UAE becoming one of the most important commercial partner of Poland among the member states of Gulf Cooperation Council (GCC). Polish direct investments into the United Arab Emirates constituted, overall, USD 480 million. Polish vigorous activity in the mutual trade between those countries as well as an increasing number of companies, established in the UAE by Polish entrepreneurs, serve as a good sign of favorable investment conditions. Various enterprises function in special sectors as well as outside of them, generating considerable export from Poland. Interestingly, this increase results from the signment of a bilateral agreement between Poland and the UAE, which subject was related to the double taxation, mutual support and investment protection. It is also worth mentioning that free trade agreement with EU member countries will allow to abolish still existing restrictions in access to the market and influence the investment implementations for both parties.
According to the UAE Ministry of Economy, United Arab Emirates allocated USD 67 billion to Foreign Direct Investment (FDI) in 2014. Investments were focused on sectors such as energy, hotel industry, real estate, telecommunication market, marine and port sector, finance services and banking as well as industrial segment. In Poland, FDI were focused mainly on real estate in provincial capitals such as Wrocław, Poznań and in Varmia-Masuria region. Moreover, investment project in Tricity and Warsaw received the greatest attention. In Poland, real estate market is the most active sector. It definitely attracts the biggest number of foreign investors in Central-East Europe region. Governments of UAE and Poland have also concluded partnership in terms of innovation development as well as small and medium-sized entrepreneurship. The Ministry of Economy declares that this document „will significantly contribute to mutual cooperation development”1. In fact, Polish part of the agreement was realized by Polish Agency for Enterprise Development.
Small and medium-sized enterprises are also interested in commercial cooperation and investments in UAE. Emirates’ business representatives draw their attention to SME sector. Investors from UAE are attracted by relatively cheap but highly educated human resources from Poland. In order to improve business possibilities of SME sector, Polish Chamber of Commerce concluded agreements on cooperation with Commerce and Industry Chambers in Abu Dhabi and Dubai. Thanks to the established cooperation, the enterprises from SME sector are now the main economic representatives of Poland and they have a chance to organize trade-missions to the UAE every year. As a result of the agreement on cooperation in tourist industry, since 13 November 2015, a new direct air line route from Poland to UAE has been launched. Despite their short existance, the aforementioned destination is highly popular among Polish tourists, who choose the UAE for vacation. Thanks to the agreement and the promotion of Poland in UAE, the former has experienced an increase in the Emirati tourists arrivals to Poland. Conclusion of agreement on abolishing the visa obligation between European Union and United Arab Emirates in 2015 was a crucial factor encouraging cooperation development as far as tourism, business, politics and economy are concerned. It is worth to underline that the agreement entered into force summarily, at the same time emphasizing its importance and involvement of the parties in cooperation development.
The parties also signed an agreement concerning agriculture, agriculture safety, food safety, research and study cooperation as well as food marketing. Nonetheless, the relations between Poland and UAE is not only a collaboration as far as government, economy, business and science are concerned. In 2015, Poland and UAE signed a further agreement on cooperation in education. The purpose of this agreement was to increase recognizability of Polish universities in UAE as well as to encourage Emirati young people to study in Poland. Obviously, this is not the only project of that kind as Poland has also established cooperation with Oman’s Sultan. Currently, works on agreement on education and culture development are taking place with the representatives of Qatar and Kuwait.
UAE and Poland are particularly interesting trade partner for each other, especially in terms of goods export, which benefits from the lack of financial restrictions and administrative barriers. The UAE has great trade traditions; Poland, in turn, has a good geopolitical location, which constitutes a bridge to Europe for its partner. In fact, Polish borders cross the most important north-south, east-west trade routes. On top of that, within last years, Polish economy has become open to trade exchange and international business cooperation. Both parties can offer favorable investment conditions, numerous economic and duty-free zones that foster economic and business relations, which must be constantly developed.
Poland as a region worth investing
Poland attracts investors with a stable, focused on sustainable development economy, highly specialized staff and price competitiveness. The sectors such as renewable energy, new technologies, IT, computerization of enterprises and public administrations, as well as many others, which are described in this guidebook, get the particular attention of investors. Such great interest among investors is certainly fostered by the support of local governments and availability of subsidies from structural funds for enterprises. An extremely important factor of implementation of investment in Poland, which significantly favors and directs investment objectives, are government programs. There are several programs in Poland, aimed at developing infrastructure, transport sector and renewable energy sources. In fact, the recent works of the government were focused on the development of two key segments, i.e. „Flat +” and computerization of public administration structures. „Flat +” is a governmental project, which aims at supporting young families in renting affordable flats, with the possibility of redemption. The program also targeting the reduction of the house deficit in Poland, since the experts claim that the country lacks from 1 million to 2 million flats. In addition to that, the program is also intended to improve the quality of social life. The „Flat +” will be launched in 2017. By implementing this program, the government wants to significantly improve cooperation with the construction and real estate sectors. The second category i.e. “The computerization of public administration”, represents an extension of the development strategy, developed in 2013 – “The strategy of the Better Government 2020”. The strategy of development has to be based on investment in the development of complete computerization of organizational structures, communication and management of public administration. With no doubt, this is a long-term process, which will require extensive cooperation between the government and IT sector.
The success of the investment depends on many factors, each of which plays crucial role in the final estimations. In order to successfully implement the investment, there must be carefully analyzed each of the investment process stages, starting from determining the nature of the activities, by specifying the selected locations, ending with a detailed analysis of the region, in which the investor wants to implement the investment project.
Thanks to the functioning of investment service centers in Poland, the conditions for investing into the country are extremely favorable. Investment Service Center is an institution bringing together a group of leading experts, aimed at supporting and coordinating the appropriate course of investment in cooperation with investors and entrepreneurs, seeking capital. Experts of ISC provide its clients with a professional approach to the needs of each investor and entrepreneur, and offer the selection of appropriate tools for the implementation of investment, or introduction of the planned projects. The Center provides the necessary assistance in key areas for counterparties and implemented by them projects. Cooperating with business partners and local authorities, ISC offers an ongoing support, as well as the opportunity to obtain financing and the highest quality services for the launching and conduction of investment: starting with the access to database with the best investment locations and ending with the full support of investment operation and implementation of the projects, planned by entrepreneurs.
Increasing company’s profitability through EU subsidies
The new financial perspective, which will be in force until 2020, is the best moment for acquiring financial funding or grants. EU funds serve an appropriate option to receive money for the company’s development and modernization and constitute an extremely good source from the perspective of organizing training courses for employees. Starting from 2014, companies can raise the funds for a grant within the framework of the new operational program, called “Intelligent Development”, which is based on the former operational program “Innovative Economy”. Under the new program, small and medium-sized companies can raise their funds for such activities as: support for conducting R&D; increasing scientific and research potential; and finally, encouraging innovation. Planned pool of funds, intended for use in the OP Intelligent Development, amounts approximately EUR 8.5 billion. This sum will sufficiently contribute to the competitiveness and innovativeness of Polish enterprises, and thus, should generate an increase in GDP, which will positively impact country’s economy. The introduction of new solutions and technologies in the company, also contributes to the development of innovations in those regions and consequently, the country, allowing to fasten and stabilize the development of the company. European funds allow one to obtain funding for specialized training for employees, which enriches companies with experienced and skilled professionals. Great enterprises can also obtain funding within the framework of the operational program called “Infrastructure and Environment”. The main task of the program is to increase the efficiency of the economy, support sustainable development and rational management of natural resources and wastes. The program will be able to raise funds, among others, for the construction or expansion of wind power plants, increase energy efficiency of residential buildings or implement the intelligent manufacturing systems.
Regional Operational Programmes
EU grants may be obtained also in the framework of the Regional Operational Programs. Each Voivodship is implementing the regional operational program, having in its disposition certain amount of money. Those programs aimed at reducing thin the framework of the new perspective, the funds have been contracted for activities, aimed at the development of enterprises. It’s the perfect time to obtain the grants for the company’s development and modernization, as well as improvement of its effectiveness. It is worth to take advantage from a wide range of possibilities following from the obtainment of grants for business development and increase market competitiveness, while promoting the development of the region and the Polish economy.
Structural investments - a road to innovativeness
The subsidies affect the asset and financial conditions of particular enterprises. However, after years of investments related to the European Funds, one will notice that it is also a huge step towards the implementation of new technologies and the introduction of the revolutionary enterprise solutions. EU grants also help in the implementation of specific objectives, which include, among others: determination of the economic and financial situation of the enterprises; identification of companies, benefiting from subsidies or determination of the investment directions, supported by EU funds. EU subsidies are the grants, provided to businesses, local government units, and foundations.
The scope of activities, which belongs to the financed projects, constitutes, therefore, a wide diversity. Those sources may be used to purchase fixed assets; to design or implement quality management systems; for the introduction of new technologies, as well as many other projects. Operational programs, in which individual can obtain the support, function at both national and regional levels. In the process of obtaining financial support from the EU Funds, entrepreneurs get acquainted with a number of unique benefits, as with the help of EU, the investment can be for instance, implemented at a much lower cost, than using other sources. Moreover, the grant allows to implement the investment project more quickly, using modern technologies, which exclusive contribution the company often could not afford. It is also an excellent reason for the creation of new workplaces. In addition, the structural funds have a very positive impact on company’s development, improving its competitiveness on the market. For the reason of such support, companies can modernize, but it should be remembered that while planning EU investment, there should be identified the financing of company’s own contribution in the project and secure the ability of lending the investments in total - until a refund. Such conditions increase the risk of losing financial liquidity. However, to force the realized investment bring profits in the future, one should carefully analyze the declared projects and evaluate their effectiveness at the planning stage of the whole process. Evaluation of the effectiveness of the investment project and decisions, using an appropriate techniques and methods, are one of the stages of capital budgeting. A professional estimation of cash flow is a prior condition for a reliable assessment of the effectiveness of the planned project. The basis for estimating real cash flow is to prepare a report on investment flows and costs, as well as evaluate the financial effects that may occur in the future.