Poland has long since discarded its reputation as an extended workbench

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In recent years, Poland has become an important and strong trading partner for mechanical engineering companies from Germany. This year’s guest country at the Hannover Messe has long since widened its role as an extended workbench for Western nations, and the quality produced by Polish companies has seen steady improvement.

Germany is by far the most important supplier of machinery to the 2017 Hannover Messes guest country

“For many years, Poland has been a very interesting country for German mechanical engineering companies looking to invest in new sites,” explained Yvonne Heidler, expert for Eastern Europe at the VDMA Foreign Trade department during an informational trip to Warsaw on occasion of the Hannover Messe. “Solid growth rates of the Polish gross domestic product, reasonable labor costs, geographical proximity to Germany, the suppliers’ quality and a highly qualified workforce make the location attractive,” she added.

This is also reflected in the German mechanical engineering sector’s country statistics, where Poland once again secured the 8th place in last year’s export ranking. In 2016, Germany exported machinery and plants worth EUR 5.7 billion to its Eastern neighbor. “Exports thus increased by 0.9 percent compared to the previous year,” said Heidler. The machinery exported was primarily from the air handling technology (11.5 percent), drive technology (8.1 percent), machine tools (7.2 percent) and conveyor technology (6.6 percent) sectors. Germany has been Poland’s most important supplier of machinery for years. In 2015, 34.5 percent of the machinery imported to Poland came from Germany, with Italy (10.3 percent), China (7.4 percent) and the USA (4.7 percent) trailing far behind. “In addition to quality, the key advantage of German suppliers is their excellent service on site,” the VDMA expert explained.

For many years, Poland has been a very interesting country for German mechanical engineering companies looking to invest in new sites

EU funds are the major driving force for many sectors

While the growth rate of machine exports to Poland has slowed down considerably in 2016 compared to an increase of 14 percent in the previous year, VDMA does not consider this to be a continuing trend. This slowdown can primarily be attributed to the sluggish distribution of EU funds and the uncertainty prevailing among entrepreneurs after the election of the right-wing conservative government. “In 2017, the signs are pointing to growth again,” said Heidler. This is mainly thanks to the EU fund, which will provide Poland with financial support amounting to EUR 82 billion by 2020. The funds are to be used mainly for developing the country’s infrastructure and innovative activities, thus unlocking business opportunities in numerous sales sectors of mechanical engineering. The new government strategy to foster innovation is also expected to boost demand for cutting-edge automation and digitalization solutions.

Technological backlog

For the years to come, the Polish economy’s main challenge will be to catch up with technological progress. The robot density (number of robots per 10,000 staff in the industry) in Germany is 13 times higher than that of Poland. All in all, Poland is still rather sluggish when it comes to paving the way for new innovations. Even though there is great interest in automation, many small and medium-sized local companies are finding it difficult to secure funding. “In the medium to long term, the market is set to push ahead the automation process, as the labor cost advantages continue to fade – in particular in urban areas. The increasing employment rate and the unfavorable demographic trend are exacerbating the lack of specialist staff, leading to rising salaries. This will make automation more attractive in financial terms,” Heidler projected.

Strong local presence of mechanical engineering companies from Germany

According to a VDMA survey on foreign branches, 113 VDMA member companies operated a total of 145 foreign branches in Poland at the time the survey was last conducted (2014). These branches ranged from sales and service offices to assembly and production plants. “The search for specialist staff with technical expertise and foreign language skills is becoming more difficult. In addition to personnel recruitment, it is important to retain existing personnel by offering attractive training programs,” Heidler stressed.

Poland continues to be an interesting procurement market

Poland’s role as a sales market is growing continuously, as Polish companies are placing ever higher demands as customers of the mechanical engineering sector. At the same time, the country remains an important procurement market for mechanical engineering companies from Germany when it comes to parts and components. This is confirmed by German machinery imports from Poland, which amounted to EUR 2.6 billion in 2016; parts and components making up almost 70 percent and complete machinery only about 30 percent. German companies particularly value the high commitment and flexibility of Polish suppliers.

Do you have any questions? Yvonne Heidler, phone 069 6603 1400, would be delighted to answer them. 

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