Poland and other Eastern European nations are a forgotten economic success story, according to Ruchir Sharma of Morgan Stanley Investment Management in a recent Financial Times opinion piece. The Czech and Slovak Republics, Lithuania, Latvia, Estonia, and Slovenia have all made it into the advanced economies, as defined by the IMF, and have a per capita income of $17,000, with Poland not far behind at a per capita income of $15,000. Hungary is even closer, with per capita income of $16,000 and Romania is also catching up, on $13,000. Quality of institutions and other more subjective factors are included in the IMF criteria, so it may be that if some of these countries are judged to have deteriorated under a populist government, then promotion to the premier division will be delayed.
Sharma argues that consistent long term growth is the key to economic success, and manufacturing prowess lies behind this for Eastern Europe. Poland has grown at an average of 4% a year over the past three decades, without a single year of negative growth. Japanese companies do seem to have been attracted to this economic stability. According to our research, Japanese companies in Poland now employ around 53,000 people, making it the fourth largest base for Japanese company employees in the European region after the UK (176,000), Germany (167,000) and France (75,000).
The largest Japanese employers in Poland are indeed manufacturers such as Sumitomo Electric Industries (Sumitomo Electric Wiring/Bordnetze producing harnesses and Sumitomo Riko producing hoses for the automotive industry) and other automotive suppliers such as NGK Insulators, NSG (automotive glass), Toyota Motor, NSK, Bridgestone and Yazaki.
Beer and cigarette manufacturers also feature – Asahi after their acquisition of Polish beer brands Tyskie and Lech, and Japan Tobacco has a factory in Poland manufacturing Winston and Camel. A further vice, chocolate, is also manufactured by a Japan headquartered company Lotte, via their 2010 acquisition of Wedel.
There are some large services sector employers as well – Fujitsu has around 3,000 employees working in its global delivery centres in Katowice and Łódź. However, we estimate around a third of the 200 Japanese companies in Poland have plants there, compared to 16% of the 1000+ Japanese companies in the UK or Germany.
We may still be missing a few Japanese companies in Poland. There are relatively fewer Japanese expatriates in Poland compared to other countries which host larger numbers of Japanese companies. This may cause some underreporting to database survey companies such as Toyo Keizai, which only records around 130 Japanese companies in Poland, and less than 20,000 employees, compared to our estimates of over 200 companies and 53,000 employees. There is still a tendency by Japanese companies to locate their Japanese expatriates in Germany, to manage Eastern European subsidiaries and branches from there. The Polish investment agency says there are 300 companies in Poland employing over 40,000, in 2019.
Cornel Ban, of the Copenhagen Business School, responded to Sharma’s piece by arguing that a high risk of stagnation in countries such as Poland is “baked in”, if they only rely on low labour costs. There is a lack of investment in training and R&D and that “the multinational manufacturing firms that dominate these countries’ export-led growth regimes have few incentives to relocate significant technical innovation systems in the region.” As far as we can ascertain, there are only a few Japanese companies that are conducting R&D in Poland – Canon Ophthalmic Technologies, Fujitsu‘s FQS in computational chemistry systems and Rigaku in thin films and materials.
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