Poland is at the forefront of a significant shift in global manufacturing and logistics, benefiting immensely from the trend of nearshoring that has gained momentum in Central and Eastern Europe (CEE) post-pandemic and amid geopolitical tensions. This transformation is driven by the combined impacts of the COVID-19 pandemic and the war in Ukraine, which have prompted companies to relocate operations closer to their primary markets.
Nearshoring Surge in Poland
Marcin Miecznikowski, managing director of Trans East West, an international logistics operator, emphasized how the war in Ukraine has reshaped global logistics. Poland, already a crucial trade hub on the new Silk Road between Asia and Europe, has now become a preferred nearshoring destination. This shift is largely due to companies seeking to mitigate the risks associated with long supply chains and geopolitical uncertainties.
The Impact of the Pandemic
The COVID-19 pandemic revealed the vulnerabilities in global supply chains, particularly those originating from China. Supply chain disruptions led to unprecedented delays and soaring shipping costs, prompting Western businesses to rethink their reliance on distant manufacturing hubs. Marcin Fabianowicz, director of the Center for Strategic Investments at the Polish Investment and Trade Agency (PAIH), noted, "The pandemic served as a wake-up call for global corporations. They realized that production location based solely on lower operating costs can be very costly in the long run."
Poland's ability to adapt to these changes has been notable. The country's shared services centers (SSC) and business process outsourcing (BPO) sectors have attracted significant foreign direct investment (FDI). Major global players like Google, Accenture, IBM, and investment banks such as JP Morgan and Goldman Sachs have established a strong presence in Poland.
Michael Dembinski, chief adviser to the British Polish Chamber of Commerce (BPCC), highlighted that Poland managed remote work more effectively than other SSC/BPO hubs during the lockdown, leading to a surge in FDI from the second half of 2020 onwards.
The Ukraine War Accelerates Investments
The Russian invasion of Ukraine further solidified Poland's role in trans-Eurasian freight transportation. Many Western firms in sectors such as automotive, construction materials, furniture, and agrifood have relocated production from Ukraine to the EU, with Poland emerging as a key beneficiary. Poland is also seen as a strategic gateway for the future rebuilding of Ukraine.
According to a report by the Polish Economic Institute, Ukraine accounted for 45% of all new foreign companies established in Poland in the first three quarters of 2022. This influx included 3,600 companies with Ukrainian capital and 10,200 Ukrainian sole proprietorships.
Regional Competitors
Romania has also emerged as a major player in attracting FDI within the region. The EY European Investment Attractiveness survey reported a significant increase in FDI projects in Romania, particularly in the semiconductor manufacturing sector. Bogdan Ion from EY highlighted Romania's potential, noting its ranking as the fourth in Europe for new job creation per project.
Other notable investments in the region include Swiss Toblerone's shift of chocolate manufacturing to Slovakia and Samsung SDI's new battery production facility in Hungary, which will supply batteries for BMW cars.
Future Trends
Dembinski predicts a gradual shift away from China in terms of new FDI, driven by the geopolitical alliance between China and Russia. As Western businesses seek more stable and friendly environments for their operations, CEE countries like Poland and Romania stand to benefit significantly from this trend.
Conclusion
Poland’s strategic location, robust infrastructure, and adaptable workforce have positioned it as a leading nearshoring destination in Eastern Europe. The combined impact of the pandemic and the geopolitical climate has accelerated this trend, offering Poland and its neighbors substantial opportunities for growth in the industrial and logistics sectors. For businesses looking to optimize their supply chains and mitigate risks, Poland presents a compelling option for investment and expansion.
