The Largest Transnational Corporations in Poland - Skolar

The World’s Largest Transnational Corporations and Their Affiliates in Poland (against the background of FDI in Central and Eastern Europe) * Marcin Kuzel ** Abstract The paper comments on transnational corporations (TNCs) operating in Central and Eastern Europe (CEE). It focuses on TNCs and their foreign affiliates located in the CEE countries as well as presents a list of major CEE corporations involved in the international business. The article points out that the total number of TNCs from the CEE countries amounts to 850 parent corporations and about 243,000 foreign affiliates. The main part of the paper is devoted to the world’s largest TNCs and their affiliates based in Poland. It discovers that 99 TNCs listed in the ‘Fortune’ GLOBAL 500 own their affiliates in the country. These affiliates are hoped to become respondents to a survey which is going to be conducted in the Autumn 2004.

Introduction The Central and Eastern European countries have become an important destination for foreign capital since the early 1990s. Fast growing and low cost economies have offered new prospective for business activity and international expansion. Therefore, many transnational corporations (TNCs) have started to include Central and Eastern Europe (CEE) among locations considered for new investment. The major group of the world’s largest TNCs have established their foreign affiliates in Poland, Hungary, the Czech Republic, Slovakia, and other countries. They have concentrated their efforts on both making ‘greenfield’ and ‘brownfield’ investment, which is starting new businesses and acquiring existing ones. Generally, foreign investors have played a significant role in the privatization process and participated in building the market economy framework in the post-Communist countries. The international context of foreign investors’ activity in CEE can be illustrated by presenting the evidence of foreign direct investment (FDI) flows and stocks.

1. Foreign Direct Investment in the CEE Countries The participation of Central and Eastern Europe in the world FDI inflows (table 1) amounted to merely 0.06% during 1980-1985 and 0.24% in the period of 1986-1990. The *

The paper is a result of preliminary studies within a scientific project financed by the State Committee for Scientific Research – KBN in the years 2004-2005 as a research project no. 1 H02C 062 26.

**

Marcin Kuzel, Nicholas Copernicus University of Toruń Faculty of Economics and Management, ul. Gagarina 13A, 87-100 Toruń, Poland The paper was presented at the 12th Annual International Conference: “Business and Economic Development in Central and Eastern Europe”, Brno University of Technology, Brno, 10-11 September, 2004.

M. Kuzel, The World’s Largest TNCs and Their Affiliates in Poland

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situation changed totally in the 1990s soon after the fall of the Berlin Wall when some TNCs started to make substantial investments in this region of the world. The CEE countries contributed 6.4% of the world inward FDI flows and accounted for 18.5% of inward FDI flows to developing economies during 1991-1995. The next five years, however, showed a relative decline in FDI inflows to CEE. Although FDI value to the CEE countries increased from over USD 13.5 billion in 1996 to almost USD 26.4 billion in 2000, its participation in the world inward FDI flows fell from 3.5% to 1.9% respectively. The upward trend could be observed again in the beginning of the next decade when FDI inflows to CEE reached its record level of over USD 28.7 billion in 2002. Its participation in the world inward FDI flows accounted then for 4.4%. The inconsistency in FDI inflows to CEE is also visible when analyzing inward FDI flows in relation to gross fixed capital formation (figure 1). The ratio under discussion reached 0.4% in 1991, 1.1% in 1992, 7.7% in 1993, 4.4% in 1994, 8.7% in 1995, 7.1% in 1996, 9.7% in 1997, 13.6% in 1998, 18.5% in 1999, 17.9% in 2000, 14.6% in 2001, and 17.2% in 2002. The annual changes in FDI flows to CEE do not, however, disprove the main thesis that this region’s participation in the world inward FDI flows is continually rising. An upward tendency in foreign capital inflow to the CEE countries is confirmed when considering FDI stocks (table 1). CEE participation in the world FDI stocks accounted for 0.15% in 1990 and rose to 2.1% in 2000. FDI stocks in the CEE countries totalled USD 187.9 billion in 2002 which was 2.6% of the world inward FDI stocks. Although the CEE countries participation in the international FDI flows is still rather marginal, it increases year by year. Moreover, FDI inflows to CEE seem not to follow the recent global downward trend but to grow independently. While the world FDI inflows declined in 2002 for the second consecutive year, CEE attracted its record level increasing FDI inflows by 14.8% (mainly due to investments made in the Czech Republic and Slovakia). It suggested that TNC operations in the region of Central and Eastern Europe were not reduced in spite of the global downturn. The United Nations Conference on Trade and Development (UNCTAD) claimed that TNCs’ activity and FDI inflows to CEE would remain stable after the eight countries from the region joined the European Union (EU). They could even be intensified due to TNCs’ willingness to establish footholds in the enlarged EU market 1 (UNCTAD 2003b: 49). 1

However, the new EU countries cannot count on a sharp increase in FDI inflows shortly after joining the European Union as being a member of the EU is not a decisive factor for potential investors when locating their capital. The basic determinants of FDI are first and foremost the specific features of a given market together with its absorptive power and the strength of a respective economy (Czaplewski, Kuzel 2004: 14-15). See also: Nowicki (Ed.) 2003: 22-26.


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Table 1: Participation of FDI Inflows and FDI Stocks in the CEE Countries in the Value of the World Inward FDI Flows and the World FDI Stocks, 1980-2002 (percentage) FDI inflows to the CEE countries as a percentage of: Period/Year

inward FDI flows to developing economies

inward FDI flows to developed economies

the world inward FDI flows

1980-1985 1986-1990 1991-1995 1996-2000 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

0.22 1.42 18.74 13.02 1.09 6.15 9.03 8.85 5.91 12.89 8.87 9.85 11.75 10.97 10.72 11.94 17.71

0.08 0.28 10.18 4.54 0.22 2.24 3.84 5.21 4.27 7.18 6.16 7.06 4.76 3.05 2.35 4.24 6.24

0.06 0.24 6.40 3.28 0.18 1.61 2.62 3.18 2.42 4.41 3.51 3.95 3.28 2.33 1.89 3.04 4.41

FDI inward stocks in the CEE countries as a percentage of the world FDI stocks

… … … … 0.15 … … … … 1.34 … … … … 2.10 2.36 2.64

Source: calculated and worked out by the author on the basis of: UNCTAD 1992, Annex table 1: 311316; UNCTAD 1993, Annex table 1: 243-247; UNCTAD 1994, Annex table 1: 409-412; UNCTAD 1995, Annex table 1: 391-396; UNCTAD 1996, Annex table 1: 227-231; UNCTAD 1997, Annex table B.1: 303-307; UNCTAD 1998, Annex table B.1: 361-365; UNCTAD 1999, Annex table B.1: 477-481; UNCTAD 2000, Annex table B.1: 283-288; UNCTAD 2001, Annex table B.1: 291-295; UNCTAD 2002, Annex table B.1: 303-306; UNCTAD 2003a, Annex table B.1: 249-252, Annex table B.3: 257-261. Figure 1: FDI Inflows to the CEE Countries, 1991-2002 1100 1000 900

FDI Inflows 1991=100 Inward FDI Flows as a Percentage of Gross Fixed Capital Formation

18 16 14

800 FDI Inflows

20

700

12

600

10

500

8

400

6

300

4

200 100

2

0

0

FDI Inflows as a Percentage of GFCF (%)

1200

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002

Source: worked out by the author on the basis of: UNCTAD 1997, Annex table B.1: 303-307, Annex table B.5: 325-338; UNCTAD 1998, Annex table B.1: 361-365, Annex table B.5: 385-397; UNCTAD 1999, Annex table B.1: 477-481, Annex table B.5: 501-512; UNCTAD 2000, Annex table B.1: 283-288, Annex table B.5: 306-318; UNCTAD 2001, Annex table B.1: 291-295, Annex table B.5: 312-324; UNCTAD 2002, Annex table B.1: 303-306, Annex table B.5: 319-327; UNCTAD 2003a, Annex table B.1: 249-252, Annex table B.5: 267-277.


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In terms of foreign capital absorption, Poland was the unquestionable leader among the CEE countries. The value of foreign investment in this country amounted to USD 45.2 billion, which accounted for 24% of the total FDI stocks in CEE and 0.6% of the world inward FDI stocks in 2002. The Czech Republic came second with FDI stocks of USD 38.5 billion (20.5% of FDI stocks in CEE and 0.5% of the world inward FDI stocks), followed by Hungary and the Russian Federation which participated respectively 13% and 12% of FDI stocks in the CEE countries in 2002 (UNCTAD 2003a: 257-261, and figure 2). Figure 2: Participation of the CEE Countries in the World Inward FDI Stocks, 2002 (percentage) Developing Economies 32.8%

Romania 0.1%

Russian Federation 0.3%

Slovakia 0.1%

Slovenia 0.1% Baltic States 0.2% Ukraine 0.1%

Poland 0.6%

Developed Economies 64.5%

Central and Eastern Europe 2.6%

Others 0.2% Croatia 0.1% Hungary Czech Republic 0.3% 0.5%

Source: worked out by the author on the basis of: UNCTAD 2003a, Annex table B.3: 257-261. Notes: The Baltic States are: Estonia, Latvia and Lithuania. The other countries (referred to as the ‘others’) include: Albania, Belarus, Bosnia and Herzegovina, Bulgaria, the Republic of Moldova, Serbia and Montenegro, and TFYR Macedonia.

Although Poland was placed first among the CEE countries when the absolute value of FDI was considered, it came only tenth when analyzing inward FDI stocks in relation to gross domestic product (GDP). The highest values of the discussed ratio as of the end of 2002 were recorded by: Estonia (65.9%), the Czech Republic (54.8%), the Republic of Moldova (45%), Slovakia (43.2%), Hungary (38.2%), Latvia (32.4%), and Lithuania (31.4%). The ratio values for the other economies were below 30.0%. The Russian Federation was ranked the last with 6.5% of inward FDI stock participation in GDP (UNCTAD 2003a: 257-261). Regarding FDI attracting, the high performance of the Czech Republic is clearly visible. The country was placed second considering both inward FDI stocks and inward FDI stocks in relation to GDP. Additionally, the Czech Republic was ranked first among the CEE countries when the value of inward FDI stocks per capita were taken into account. In 2002,


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the value of FDI stocks in the Czech Republic amounted to USD 3,761 per capita compared with USD 3,098 in Estonia, USD 2,547 in Slovenia, USD 2,397 in Hungary, USD 1,892 in Slovakia, and only USD 1,168 in Poland (GUS 2002: 623-624, UNCTAD 2003a: 257-261). The strong position of the Czech Republic as a FDI importer was also confirmed by the country’s high rank in the UNCTAD’s Inward FDI Performance Index 2 Ranking for the years 1999-2001 (UNCTAD 2003a: 193-195). The Czech Republic was placed eleventh among 140 world economies, and the value of Inward FDI Performance Index accounted for 2.929. FDI inflows to the CEE countries together with significant inequalities in their absorption by individual economies are closely related to the foreign operations of TNCs, which to the largest extent determine the scale of FDI flows. As stated before, the major group of the world’s largest transnationals have located their affiliates in CEE.

2. Transnational Corporations in the CEE Countries The number of TNCs in the world economy reached almost 64,000 and the number of their foreign affiliates came near to 870,000 in 2002 3 . The estimated value added of foreign affiliates amounted to USD 3.4 trillion, which accounted for about a tenth of the world GDP in 2002. At the same time, foreign affiliates of TNCs generated sales of estimated USD 18.0 trillion, compared with USD 8.0 trillion of the world exports. The number of workers employed by foreign affiliates reached about 53 million in 2002 (UNCTAD 2003a: 23). Depending on their number, size and range of activity, TNCs can affect their host economies in many ways and to varying extent. Table 2 illustrates TNCs’ influence on selected CEE economies in 1999. The distribution of FDI by economic activity points at tertiary sector as TNCs’ major investment target in the CEE countries (except for Bulgaria and Slovakia, where manufacturing sector was the chief target). The growing importance of services in FDI attracting was reflected by the privatization of banking, telecommunications and public utilities which started in the late 1990s. Considering FDI stocks as of the end of 2000, services absorbed about 50-60% of foreign capital in the Czech Republic, Hungary, Poland,

2

Inward FDI Performance Index is calculated as the ratio of a country’s share in the world FDI inflows to its share in the world GDP. A value greater than one indicates that the country receives more FDI than its relative economic size, a value below one that it receives less. A negative value means that foreign investors disinvest in a given period (UNCTAD 2003a: 9). 3 However, the data related to the number of TNCs and their foreign affiliates are not exact and can be far from the truth because of applying outdated information (the latest available data) or information based on different sources without eliminating mistakes of deviations from the definition of TNC adopted by UNCTAD.


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and Slovakia and about 70-80% in the Baltic States (Estonia, Latvia, Lithuania). At the same time, the production of motor vehicles and transport equipment was the most important manufacturing FDI target in the Czech Republic, and the third in Hungary and Poland. The other important destinations for FDI were manufacturing of chemical products (Croatia), nonmetalic minerals (Bulgaria) and wood products (the Russian Federation and Slovenia). It should be noted that Hungary as the only country in CEE absorbed the most FDI in the high technology segment of electrical and electronic equipment (UNCTAD 2003b: 3-5). Table 2: Role of Foreign Affiliates in the Economic Performance of Selected CEE Countries, 1999 (percentage) Value added of foreign affiliates as a percentage of GDP

Economy Hungary Czech Republic Estonia Poland Latvia Croatia Slovakia

Employment of foreign affiliates as a percentage of total employment

24.0 10.2 8.4 6.6 5.5 5.2 4.4

27.4 4.2 9.4 3.5 10.4 8.1 3.6

Source: UNCTAD 2003b: 16.

The largest foreign affiliates in CEE are owned by TNCs from the EU countries and the United States. The two tables below present the CEE largest foreign affiliates in the industrial and tertiary sectors ranked by values of sales (table 3) and the largest foreign affiliates in finance and insurance ranked by values of assets (table 4). Table 3: Ten Largest Non-Financial Foreign Affiliates in CEE, Ranked by Values of Sales, 2000 (millions of dollars) Corporation (Foreign affiliate)

Host country

Telekomunikacja Polska S.A. Skoda Automobilova AS Audi Hungaria Motor Kft. Philips Magyarorszag Kft. IBM Storage Products Kft. Fiat Auto Poland S.A. MATAV Cesky Telekom Makro Cash and Carry Poland S.A. Personnal Communications Systems

Poland Czech Republic

Home country

Activity

Sales

France Germany

Telecommunications Motor vehicles

Hungary Hungary Hungary Poland Hungary Czech Republic

Germany Netherlands United States Italy Germany Netherlands/Switzerland

Motor vehicles Electronic equipment Electronic equipment Motor vehicles Telecommunications Telecommunications

3 662 3 293 3 191 2 266 2 240 1 765 1 585 1 499a

Poland

Germany

Distributive trade

1 478

Russian Federation

Sweden

Electronic equipment

1 145

Source: UNCTAD 2003b: 15. Notes: The above table includes only foreign affiliates for which data on sales were available. a Refers to 1999.


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Table 4: Ten Largest Foreign Affiliates in Finance and Insurance in CEE, Ranked by Values of Assets, 2000 (millions of dollars) Corporation (Foreign affiliate) Privredna Banka Zagreb DD Splitska Banka DD Rijecka Banka DD Raiffeisen Bank, Austria DD Bank Austria Creditanstaldt Croatia Central European International Bank Rt. (CIB) ABN Amro Bank Rt. Amplico Life Pierwsze Amerykańsko-Polskie Towarzystwo Ubezpieczeń na Życie S.A. Raiffeisen Bank Rt. General Banking and Trust Rt.

Host country

Home country

Activity

Assets 2 699a 1 050 1 037 669 241 193 154

Croatia Croatia Croatia Croatia Croatia Hungary Hungary

Italy Italy Germany Austria Austria Italy Netherlands

Banking Banking Banking Banking Banking Banking Banking

Poland

United States

Insurance

148a

Hungary Hungary

Austria Russian Federation

Banking Banking

115a 114a

Source: UNCTAD 2003b: 15-16. Notes: The above table includes only foreign affiliates for which data on assets were available. a Refers to 1999.

Although the great majority of the world’s largest TNCs are based in the Triad (about 80% of the top 500 TNCs are located in the European Union, Japan and the United States – Czarny, Kleinert 2003: 5), the internationalizing processes can be observed all over the world. The growing number of CEE corporations have started operating abroad as well. However, their activity is usually limited to the other European countries, mostly to the other so-called post-Communist countries. UNCTAD assessed that TNCs based in Central and Eastern Europe numbered 850 parent corporations and about 243,000 foreign affiliates (UNCTAD 2003a: 222-224). Table 5 presents the list of the largest TNCs in the region. Table 5: Ten Largest Non-Financial TNCs from CEE, Ranked by Foreign Assets, 2001 Corporation

Home country

Lukoil Oil Co. Novoship Co. Latvian Shipping Co. Pliva Group Hrvatska Elektroprivreda d.d. Primorsk Shipping Co. Gorenje Group Krka d.d. Far Eastern Shipping Co. Mercator d.d.

Activity

Russian Federation Russian Federation Latvia Croatia Croatia

Petroleum and natural gas Transport Transport Pharmaceuticals Energy

Russian Federation Slovenia Slovenia Russian Federation Slovenia

Transport Domestic appliances Pharmaceuticals Transport Retail trade

Average TNI for the top 25 non-financial TNCs from CEE

TNIa (percentage)

Ranking by TNI

35.0 55.5 77.7 48.3 4.2 63.2 42.6 45.5 22.8 8.9

10 4 1 5 25 2 7 6 15 21

30.3

-

Source: UNCTAD 2003a, Annex table A.I.3: 191. Notes: a The transnationality index (TNI) shows the scale of a corporation’s activity abroad; it is calculated as an average of the following three ratios: foreign assets to total assets, foreign sales to total sales and foreign employment to total employment.


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3. The World’s Largest TNCs in Poland The list of the top foreign investors in Poland contained 996 corporations 4 as of the end of 2003. There were 99 world’s largest transnationals among the top 500 5 . Furthermore, the total value of their investment amounted to USD 33.3 billion in 2003, which accounted for almost 46% of overall FDI stocks in Poland (according to the Polish Information and Foreign Investment Agency – PAIiIZ). This suggests that the world’s largest TNCs perceive Poland as an attractive location for investment. Moreover, their capital contribution in the form of FDI makes these corporations the major foreign investors in Poland. Table 6: Top Twenty Foreign Investors in Poland from among the World’s Largest Corporations, 2003 (percentage, millions of dollars) Corporation

Home country

France Telecom Fiat Hypovereinsbank Citigroup Gazprom

France Italy Germany United States Russian Federation

Vivendi Universal

France

UniCredito Italiano Metro Group General Motors ING Group Tesco Carrefour BP Crédit Agricole Saint-Gobain Lafarge Groupe Auchan Electricite de France Philip Morris Coca-Cola

Italy Germany United States Netherlands United Kingdom France United Kingdom France France France France France United States United States

Activity

GLOBAL 500 Rank 2000

Telecommunications Motor vehicles Banking Diversified financials Energy Engineering, construction Banking Retail trade Motor vehicles Diversified financials Retail trade Retail trade Petroleum refining Banking Building materials Building materials Retail trade Energy Tobacco Beverages

TNIa (percentage) 2001

… … …

4 020.3 1 768.7 1 336.0 1 300.0 1 283.8

91

66.3

1 243.4

345 75 3 24 126 37 7 108 163 470 218 124 34 233

… …

1 200.0 1 156.0 1 010.0 999.0 850.0 814.7 800.0 740.0 690.0 690.0 672.2 600.0 525.7 513.0

127 47 117 12 280

…

Capital invested in Polandb

51.5

29.8

… … 62.6 80.5

… 71.1 89.7

… … 27.8 68.9

Source: worked out by the author on the basis of: Fortune 2001; PAIiIZ 2003; UNCTAD 2003a, Annex table A.I.1: 187-188. Notes: a Transnationality Index (TNI) is given only for corporations listed in the UNCTAD “The World’s Top 100 Non-Financial TNCs”. b According to the Polish Information and Foreign Investment Agency (PAIiIZ). 4

A corporation can be registered in the Polish Information and Foreign Investment Agency (PAIiIZ) list of the major foreign investors when the value of its FDI in Poland exceeds USD 1 million. 5 In the year 2001, the number of the world’s largest TNCs in Poland amounted to 92 – the top 500 of the major foreign investors in Poland was considered (Kuzel 2003: 480-481). In the year 2002, the list of the major foreign investors in Poland involved 109 world’s largest TNCs – the whole group of 979 investors was considered (Przybylski 2003).


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France Telecom ranked first among the world’s largest TNCs investing in Poland. Its capital contribution in the form of FDI reached USD 4 billion in 2003 (table 6). In 2000, the corporation purchased shares of Telekomunikacja Polska S.A. (TP S.A.). Since then, France Telecom has been the major investor in Poland and TP S.A. the biggest foreign affiliate in CEE (table 3). Fiat came second with USD 1.8 billion of capital invested in Poland, followed by Hypovereinsbank (HVB), Citigroup and Gazprom. Motorola ranked last. The world’s largest transnationals own approximately 300 affiliates in Poland. Most of them are based in the capital city of Warsaw, where they have been registered and where their headquarters have been located. Nevertheless, plants and branches of foreign affiliates of TNCs are distributed in other regions of the country, too. And the number of entities associated with foreign affiliates in Poland is hard to estimate. Table 7 presents the distribution of foreign affiliates in Poland belonging to one of the world’s biggest electronic corporations – Royal Philips Electronics of the Netherlands. Table 7: Royal Philips Electronics in Poland, 2004 Corporation (Foreign affiliate) Philips Lighting Poland S.A. Philips Consumer Electronics Industries Poland Sp. z o.o. Philips DAP Industries Poland Sp. z o.o. Philips Lighting Bielsko Sp. z o.o. Philips Lighting Pabianice S.A. Philips Lighting Farel Mazury Sp. z o.o. Philips Polska Sp. z o.o. Philips Polska Sp. z o.o. Centrum Usług Księgowych

Region

City/Town

Year of starting business

Lighting

Zachodniopomorskie

Piła

1991

Consumer electronics

Pomorskie

Kwidzyn

1995

Domestic appliances and personal care

Podlaskie

Białystok

1999

Lighting Lighting

Śląskie Łódzkie

Bielsko-Biała Pabianice

1996 1996

Lighting

WarmińskoMazurskie

Kętrzyn

1996

Sale center

Mazowieckie

Warsaw

1992

Financial and accounting services

Łódzkie

Łódź

2003

Activity

Source: worked out by the author on the basis of information provided by Royal Philips Electronics at: http://www.poland.philips.com/InformationCenter/ (25 July, 2004).

44 out of 99 world’s largest transnationals operating in Poland were listed in the UNCTAD “The World’s Top 100 Non-Financial TNCs”. The UNCTAD list ranks nonfinancial TNCs by values of their foreign assets. Corporations operating in Poland and listed in the UNCTAD statement have been given TNI indexes in table 6. The highest value of TNI index reached 89.7% for a French TNC – Lafarge (table 6). The index points at the large scale of the corporation’s activity abroad. Lafarge operates in 75 countries and employs 75,000 people all over the world. It owns 9 subsidiaries in Poland, which operate in cement, gypsum, aggregates and concrete, and roofing divisions.


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Most of the world’s largest TNCs operating in Poland have their origins in Europe and North America. As many as 90 TNCs have their parent corporations based in the Triad (the European Union, Japan and the United States). The United States alone is the home country for 21 corporations, and France and Germany for 19 corporations each. The list includes also 8 TNCs from Asia, mainly from Japan, and 1 from Australia (table 8). Table 8: Number of the World’s Largest TNCs in Poland by Country of Origin, 2003 Home country USA France Germany United Kingdom Japan Netherlands Internationala Switzerland Sweden Italy Norway

Number of corporations 21 19 19 8 6 5 5 3 3 3 2

Home country/Region

Number of corporations

Spain Russian Federation South Korea Singapore Australia

1 1 1 1 1

Europe North America Asia Australia

69 21 8 1

Total:

99

Source: worked out by the author on the basis of: Fortune 2001; PAIiIZ 2003. Notes: a By corporations classified as ‘international’ we mean 4 British-Dutch corporations and 1 Belgian-Dutch corporation.

More than a half of the world’s largest TNCs in Poland have invested their capital in manufacturing sector. Automotive industry was the top branch for TNCs, followed by food processing and manufacturing of other non-metal goods. The most attractive sectors in services were: financial intermediation, telecommunications, and trade and repairs. The world’s largest TNCs are interested in investing and operating in Poland. Moreover, most of them are among chief foreign investors in the country. The number of TNCs and the value of capital invested in the form of FDI confirm the validity of this hypothesis. However, it should be clearly emphasized that Poland does not absorb such amounts of foreign capital as the other CEE countries. It is clearly visible when analyzing FDI flows per capita and FDI stocks in relation to GDP (as we have presented it in the first part of the paper). What is more, Poland has recently lost the opportunity to host new TNCs, which decided to establish their affiliates in the neighbouring countries. It seems that the time for making large investments in Poland is coming to an end as most of the world’s largest TNCs have already set up their affiliates in the country. Moreover, the privatization process has entered its final stage and the most lucrative agreements have already been concluded. From now on, FDI attracting will depend mainly on successful assimilating foreign affiliates into


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the national economy and increasing the capital contribution of those TNCs, that have already established footholds in Poland. At the same time, the sector of small and medium-sized enterprises (SMEs) should not be forgotten as an important channel of attracting FDI to Poland. While TNCs generally make technologically advanced investment, SMEs usually invest in labour-consuming activities, which may reduce the unemployment. Both types of investment are important to the economic development and both TNCs and SMEs should be intensively encouraged to start their businesses in Poland.

4. TNCs in Host Economies –Theoretical Remarks and Conclusions Foreign direct investment is an economic variable of vital importance to developing economies and most notably to economies in transition. It may contribute to the intensification of development processes and modernization of national economies by providing a broad blend of qualities related to TNCs’ proprietary and non-proprietary assets. The non-proprietary assets FDI may comprise are: finance, capital goods, intermediate inputs and freely available resources. The proprietary assets (specific ownership advantages) are: technology, skills and management, access to export markets, and advanced environmental technologies. While the non-proprietary assets can usually be obtained from the market by any corporation, the proprietary assets are exclusively available to TNCs that forged them (Lall 2002: 329-330). Nevertheless, some of the proprietary assets can be transferred to a host economy by fostering linkages between enterprises and existing spillover effects. Generally, a TNC activity in an economy may influence local enterprises in at least two ways: by raising the level of their knowledge through sharing unique information and by making them create their own specific assets through preventing boasted advantages to be imitated. As a result, the market position of local corporations should be improved in both situations as they become more competitive. Otherwise, they can be ousted from the market. The discussed effects should also bring a boost to a host economy as a whole. However, whether a country can take advantage of TNC presence in a given economy depends strongly on the absorptive power of its public and private organizations and the government economic and development policy. That is why authorities in Poland and other CEE countries should take care to provide proper conditions for entrepreneurial development and encourage TNCs to locate their affiliates in the region of Central and Eastern Europe.


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