Business

Poland tiger economy, Ireland recession, Polish immigrants in Ireland
Warsaw, Poland

Ireland’s Economic Losses May Mean Poland’s Gain

January 12, 2009 08:57 AM
by Anne Szustek
For years, Ireland was the destination for foreign investment. Now Ireland is losing ground to an emerging market: Poland.

For Investors and Workers in Europe, Red is the New Green

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In Limerick, Ireland, the arrival of the Dell computer factory in 1991 was a symbol that Ireland was well on its way to becoming a European Union success story. The coming years saw thousands of well-educated upstarts, many of whom were from Eastern Europe, make their way to the Emerald Isle to join the ranks—and earn the salaries—of the economy that would come to be known as the “Celtic Tiger.”

Eighteen years later, Ireland is in the throes of a recession, with the highest unemployment rates in more than a decade. And to kick off 2009, Dell is slashing 1,900 jobs at the Limerick plant as part of the company’s $3 billion cost-cutting plan, and moving the computer manufacturer’s European base to Lodz, Poland.

“This is a difficult decision but the right one for Dell to become even more competitive,” Sean Corkery, Dell’s vice-president of operations in Europe, Middle East and Africa, was quoted as saying by Reuters.

Poland is putting up some €53 million ($70 million) in state aid for the deal, which the EU plans to investigate on competition concerns. In the meantime, however, Polish authorities are eager to speak about the benefits of investing in their country.

Speaking about Dell’s decision to pull up stakes for Poland, Pawel Wojciechowski, head of PAIIZ, Poland’s state foreign investment agency, told Reuters, “This decision confirms the competitive advantage of Poland as attractive for investment. It is a good sign, especially in these difficult times.”

The main impetus for the move is labor costs. In Ireland, the minimum monthly wage is more than $2,000, compared with Poland’s minimum monthly salary of $406. But laws adopted when Poland joined the EU in 2004 have also made the Eastern European country’s investment climate more germane to foreign partnership.

From 2005 to 2007, Poland enjoyed 5.4 percent annual economic growth. Its abundance of educated human resources and geographic location, sandwiched among the established markets of Western Europe and the emerging economies of the former Soviet bloc, have made Poland Europe’s largest former Communist economy.

Background: Ireland in recession

After years of expansion, the Ireland Central Statistics Office released figures last September that confirmed the “Celtic Tiger” was officially in a recession. As long-time residents contended with bearish economic indicators, the country’s Eastern European immigrants, whose lower wages helped make Ireland’s original upswing possible, were returning to their home countries, welcomed back by upstart “tiger” markets.

Poland is high on the list of destinations. Polish citizens account for some two-thirds of immigrants to Ireland since 2004, when the Eastern European country joined the European Union. 

“These immigrants are simply putting into life the very idea of European integration,” University of Warsaw’s Center of Migration Research staffer Pawel Kaczmarczyk told The Wall Street Journal in June. Labor mobility “is exactly what we wanted in introducing the whole idea of a common market,” he continued.

Piotr Kalisz, an economist with Citigroup in Warsaw, predicted last June that as many as half of those who have emigrated from Poland to Western Europe may return within the next two years.

Poland’s strengthening economy was a beacon to Andrej Golczewski, a Polish laborer who moved to Ireland in 2005 with the goal of staying there five years. At first, his monthly salary for laying sheet metal was quadruple that of what he would earn back home. But higher wages in Poland, coupled with the euro dropping 30 percent since May 2004, led Golczewski back to Poland.

Related Topic: Poland pushes ahead with euro adoption plans

Poland’s government is gearing to launch talks with the EU about the country joining the European Exchange Rate (ERM-2) currency grid, a key step in adopting the euro as its currency. Poland has a target date of 2012 for joining the Eurozone; however, the government will have to woo at least a few members of the conservative opposition party Law and Justice, which has been against Poland taking up the euro as its main currency.

"We are carrying out the euro road map regardless of whether the opposition conservatives agree to the needed constitutional changes or not," Polish Deputy Finance Minister Ludwik Kotecki told AFX. The Polish government is planning to peg the zloty to the euro by the end of the first half of 2009.
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