Poland — Overcoming Old Ways to Become a Modern Business Location

Business Support Solution
Facts & figures

BSS is a Polish, Łódź-based outsourcing company established in 2008 with:

• over 300 employees, including certified auditors, ACCA/CIA, Green Belt, tax advisors, accountants with the Ministry of Finance Certificates

• over 240 clients (including 10 Capital Groups)

• over 12,000 payroll calculation per month

• about 1 million transactions processed per month

• flexible service on the 11 IT F&A systems

• support during dozens tax audit per year including representation of the entities in front of the tax authorities

• several dozens audits served per year

Services provided:
• Finance&Accounting BPO services
• Payroll and personnel administration outsourcing
• Consolidation of financial statements
• Controlling
• Tax and business advisory services
• Supporting process of obtaining financing
• Shelf companies and corporate secretarial services

By 2025, business process outsourcing (BPO) centres will provide between 300,000 and 450,000 new jobs, says a McKinsey report. According to the Association of Business Service Leaders in Poland (ABSL), by April 2015, 356 investors had set up 532 BPO centres with foreign capital and employed about 150,000 people, across the country.

Tomasz Maciejak, CEO of Business Support Solution, and an audit and outsourcing expert, spoke to Emerging Europe about the prospects for the outsourcing and consultancy sector, as well as the business climate, benefits and the obstacles foreign investors can face in Poland.

Tomasz Maciejak, CEO of Business Support Solution
Tomasz Maciejak, CEO of Business Support Solution

Last year, according to the United Nations Conference on Trade and Development (UNCTAD), Poland was among the top 20 FDI global recipients. What makes the country such an attractive FDI destination?

Well, I would say there are a number of factors that guarantee each investor a certain level of success, once they enter the country. First of all, it’s a large market, with 38 million consumers and there is a stable and dynamically growing economy. Investors have access to a highly-skilled labour force that speaks many foreign languages; if we look at  an employee’s cost — it is two or three times lower than in Western Europe

On top of that, investment projects can be co-financed by governmental agencies, as well as EU funds. I think the infrastructure is also an important element. It has been completely transformed over the last few years — airports, roads and the rail infrastructure – which has strengthened Poland’s image as a reliable partner. Of course, we shouldn’t forget about Poland’s location as a natural bridge between the East and the West, which is an enormous advantage for logistics companies.

Last but not least, we have the assistance that regional authorities provide to foreign investors. Not only large cities have investor relations departments now, but also the medium and smaller sized ones do as well.

However, when you look at the World Bank: Global Investment Promotion Best Practices, 80 per cent of national investment promotion agencies (IPAs), globally, provide little or no information to prospective investors and Poland is no better.

I have had the chance to work with two investor relations’ departments in Lublin and Łódź and while I am sure they are constantly improving, the results speak for themselves, as far as the number of investment projects they win is concerned. I have seen how they have transformed over the years. If we take Lublin as an example, I can say the city is as well perceived as other large cities in Poland. Of course that doesn’t mean you can’t make any more improvements. What is important though, is how proactive the people are.

Additionally, when we look at the outsourcing sector, it seems that the investor relations’ aspect is less important to an investor than access to a skilled labour force, availability of office space, transport and infrastructure.

Recently an investor in the outsourcing sector decided to open a new centre in Gdańsk, just because the communication with Kraków City Hall wasn’t that straightforward.

If we compare Kraków with the Tri-city, there are over 90 BPO centres in Kraków, so market saturation is high. In Gdańsk there are fewer centres, so cities such as this, or even smaller ones, may offer much better incentives — smaller cities may offer more to attract investors.

Initially, when we looked at the outsourcing sector, there was Kraków, Warsaw and Wrocław with a huge gap after these. I am pretty sure that if an investor comes to the smaller cities now, they will be offered great service.

IMG_9671

Is that why investors are now considering smaller cities, such as Lublin, Olsztyn, Rzeszów and Opole?

Exactly. In the three largest BPO cities, the competition to attract employees is very high. Other big cities such as Łódź, and the smaller ones, are trying to take over and are offering higher incentives. They are trying to start collaborations with local universities, to open offices in special economic zones and to promote their offers abroad.

If you look at the outsourcing sector in Poland, what trends do you notice now?

Well, we see that the companies that have invested in Poland so far believe it has been a good investment. Poland is the strongest player in the sector, in Central and Eastern Europe, as far as both cost and quality are concerned.

We now also see that a growing number of companies don’t look only at the cost when deciding about their next location. They want employees that are closer to their time zone and that are closer, also, from a cultural point of view. All of that leads me to believe that the sector in the CEE region will see a double digit growth. This is proven by the number of BPO centres opened per annum and the statements from the people who are managing these centres — almost all of them say they will expand and will employ more specialists.

There is one more area that will make use of outsourcing services soon and that is the public sector. Naturally, this requires time and changes in legislation that would allow public organisations to use outsourcing services.

When will that happen?

Perhaps in a couple of years but it depends on the legislative decisions. However, you can already see a growing demand in the sector.

What impact will that have on the BPO sector in Poland?

The growth in the sector will be multiplied. Alongside this there will be a massive growth in commercial services, which is already beginning right now. The dynamics of the public subsection will not be enormous but, with time, it will grow significantly.

Business Support Solution is an outsourcing company that helps domestic and foreign companies, at any stage of their operations in Poland, so you’re very much familiar with the business climate in the country. If we look at the World Bank’s Doing Business ranking, we see that although Poland’s position improved over the last five years (from 70th to 25th), improvements in some areas are small, for example in ‘starting a business’. In 2011 Poland ranked 113th and in 2006 85th. Why is it still so difficult to set up a company in Poland?

You are right. Setting up a business is not as fast in Poland as it is in other countries and there are lots of formalities. Even though Poland made starting a business easier, five years ago, by reducing the minimum capital requirement and consolidating company registration with the tax, social security and statistics authorities, it still takes about 30 days to register a company fully.

Since 1 April 2016, new provisions have come into force in the Polish Commercial Companies Code. They facilitate the electronic filing of applications to the National Court Register in the case of companies: registered partnerships and limited partnerships, as well as limited liability companies. Nevertheless, for a large number of investors or entrepreneurs it is still too time consuming and complicated. However they can also buy a ready-made company that has already been set up and is operational, so this shouldn’t be a major obstacle.

I believe the tax system is quite complicated as well, isn’t it? According to the World Bank and PWC’s Paying Taxes 2016, Poland ranked 58th, 29 notches higher than in 2015. Has the situation improved that much in practice?

I think there is still a lot of room for improvement. The main barrier is the lack of an explicit interpretation of tax regulations.

This often makes foreign investors, especially those medium-sized firms, hesitate about whether they should invest or not, as they are not sure what losses that could be entailed in the future.

However, I would like to point out that from 2013 Poland made paying taxes easier for companies by promoting the use of electronic filing and payment systems and since January 2016 there has been added a new provision to the Tax Code, according to which doubts which cannot be removed concerning tax rules should be resolved in favour of the taxpayer.

IMG_9766

What other procedures do foreign companies often struggle with, for example, obtaining a building permit?

As you can easily see there is a formalistic approach in local authorities. I admire companies that want to invest in renewable energy, as obtaining all the documents can take up to twelve months, in some cases.

I would also say that obtaining visas is difficult. Investors who set up companies in Poland often employ workers from various countries, and also from outside the European Union. This process is not very simple and it takes a lot of time and effort to obtain the necessary documents. If you want to employ someone, they need to have a resident’s permit, a work permit and multiple certificates and permits from regional offices (voivodship), etc.

It is obvious that large international investors will always find a way to operate in a new market. What advice would you give to small and medium sized businesses that are considering entering the Polish market?

Just as you said, large multinational companies will always find a way by contacting strategic consultants, who will open the market for them. But we know these services may be expensive. At the same time, I don’t think smaller and medium sized firms should be afraid to enter the market. Instead, they should find a local partner who will help them find a way of operating in the market. I would also reach out to a company of similar size and ask them to share their experiences related to how to address certain aspects of operations. I would also speak to bilateral chambers, as well as regional business representatives.

When we look at the consultancy market in Poland it seems under-penetrated. The size of the business-to-business services’ sector in Germany is significantly bigger than it is in Poland. Why is it like this?

I wouldn’t try to compare the consultancy sector in Poland with Germany. The latter has been developing since World War II. There, the economy grew really quickly and consulting was in high demand and after an initial peak it kept growing. In Poland, the services have only been on offer since the transformation of the economy, in 1989. The sector is smaller but the best is still to come.

There is also some sort of resistance to consultancy and outsourcing services. Only roughly 8 per cent of Polish entrepreneurs use outsourcing services, whereas in Brazil that figure stands at about 60 per cent. I think this also results from our confidence; that we are able to do everything by ourselves and are afraid to share confidential information. Slowly but surely, this attitude is changing as the sector grows. More entrepreneurs understand that if they want to keep up with the changing environment and to build a strong foundation for the company, they need to ask for advice.

The world is changing…

Exactly, it is changing and the ability to adapt is very important. Strategic advisors will be able to push companies in the right direction. Why risk your own funds if you can mitigate that risk?

 

RELATED ARTICLES

Leave a Reply

Your email address will not be published. Required fields are marked *