The high inflow of foreign direct investment was possible primarily due to the reinvested profits of companies with foreign shareholders. Polish organizations invested almost as much abroad.
In 2016 the net inflow of foreign direct investment (FDI) to Poland amounted to EUR13.2bn, according to the report prepared by Poland’s central bank, NBP. Reinvested profits were the dominant item, with their total value reaching the amount of EUR8.2bn. This has been the highest amount of profit reinvestment recorded so far. It resulted to a large extent from the record high incomes of entities with the participation of foreign investors.
Meanwhile, the largest increase in income was recorded in real estate activities. The greatest reinvestment of profits occurred in manufacturing.
For the first time NBP included in its report a completely new category – FDI in innovative industries. Their role has been growing in recent years. The increase in transactions in this field is primarily associated with the above average profitability of existing enterprises and the associated greater ability to reinvest profits.
Polish companies invest abroad
In 2016, Polish businesses invested EUR7.7bn abroad as part of FDI. The greatest impact on the value of these transactions came from the organizational transformations in the area of closed-end investment funds, which were linked to the changes in taxation of such entities introduced in November 2016. As a result, investment funds invested in the same entities, but through domestic companies that they established. In accordance with international standards these investments were classified as direct investment. So in 2016 there was EUR3.7bn increase in transactions resulting from Polish foreign direct investment, coming at the expense of portfolio investment.
The report also presents the proportion of Polish FDI carried out abroad by entities (residents) under domestic control and by companies controlled from abroad. At the end of 2016, domestically-controlled entities had receivables resulting from Polish foreign direct investment worth EUR17.4bn, while companies controlled by foreign entities had receivables worth EUR12.1bn.
Polish state-owned companies as the main foreign investors
The largest part of Polish FDI carried out abroad by entities under the control of residents were investments linked to tax optimization, consisting an investment of a domestic entity in a foreign holding company with the goal of a subsequent target investment back in the country (round-tripping). Such transactions amounted to EUR8.4bn (29 per cent of Polish foreign direct investment overall).
The structures established as a result of the above-mentioned reorganization of investment funds are also included as part of round-tripping. The remaining private investments amounted to EUR4.9bn (17 per cent), and the investments of companies controlled by the State Treasury amounted to EUR4.05bn (14 per cent).
In the investments of domestic entities controlled by non-residents, we could distinguish investments associated with capital-in-transit carried out b y entities conducting actual activities, which amounted to EUR2.8bn (9 per cent), and remaining direct investment of domestic entities controlled by non-residents, whose value amounted to EUR9.3bn (32 per cent).