ECONOMY

25 YEARS OF SPECIAL ECONOMIC ZONES IN POLAND: A CHANCE FOR INVESTORS

Paweł Kolczyński

Special Economic Zones (SEZ), which have been operating in Poland for over 20 years, have proven to be a very effective tool to attract capital, create new jobs, and modernize the Polish economy. On the occasion of the 25th anniversary of the first SEZ – Euro-Park Mielec – we will take a closer look at their history and importance to the Polish economic landscape.

Special Economic Zones are separate areas of the country where entrepreneurs can conduct business while obtaining support in the form of tax exemptions (corporate and personal) from the income earned from an economic activity specified in the act. The goal of creating the zones and introducing such regulations was clear – to accelerate the development of particular regions by creating new investments and jobs.

THE BEGINNING, LEGAL STATUS, AND THE FIRST ZONE IN MIELEC

The Act on Special Economic Zones came into force in October 1994. Since then, this document, together with its amendments, has served as the basic legal act regulating the activity of SEZs in Poland.

SPECIAL ECONOMIC ZONE EURO-PARK MIELEC, POLAND, MAY 5, 2020.

© Darek Delmanowicz (PAP)

The Act defined a Special Economic Zone as “a separate, uninhabited part of the territory of the Republic of Poland, established in accordance with the provisions of this Act, within which economic activity may be conducted under the rules determined herein.” It aimed to accelerate the economic development of parts of the country’s territory, for instance, by means of developing specific areas of economic activity, boosting export, increasing competitiveness of produced goods and rendered services, as well as developing the existing industrial assets and economic infrastructure.

As stipulated in the Act, the original intention was to establish Special Economic Zones in various regions of Poland. However, only one zone was founded in the beginning – Euro-Park Mielec SEZ (in 1995). Today marks a quarter of a century since its creation. Therefore, it is a good time to take a closer look at the effects of Special Economic Zones, with the first one being their perfect example.

Based on such analysis, it is possible to determine how promising Special Economic Zones are for investors. In the past, the role of SEZ administrators was restricted to managing permits and investment land. Over the years, along with the SEZ’s economic development, the range of services provided to investors has been gradually expanding – now including specialized technical, legal, and human resources assistance. Nowadays, thanks to the active cooperation of SEZ authorities with investors, vocational schools, science and technology parks, as well as other entities, SEZ are important centers for the development of innovative enterprises.

Established in 1995, Euro-Park Mielec has enjoyed great interest from both Polish companies and foreign investors from the very beginning. The reason was the economic growth in the zone in addition to the positive experiences of entrepreneurs and investors. All this contributed to the further development of the SEZ. In the following years – by the end of the 20th century – 14 Special Economic Zones were established in total, including 13 new zones: SEZ Kamienna Góra, SEZ Katowice, SEZ KostrzynSłubice, SEZ Kraków, SEZ Legnica, SEZ Łódź, Pomeranian SEZ, SEZ Słupsk, SEZ Starachowice, SEZ Suwałki, TSEZ Tarnobrzeg (“Euro-Park Wisłosan”),

SEZ Wałbrzych (“Invest-Park”), and the Warmia and Mazury SEZ.

In this article, the character of Special Economic Zones and the effects of their establishment will be described through the analysis of the first of such zones in Poland – SEZ Mielec.

EURO-PARK MIELEC AS A RESPONSE TO THE CRISIS

The beginnings of the Special Economic Zone in Mielec are inseparably connected with the problem of political transformation in Poland. In the first half of the 1990s, the WSK PZL-Mielec factory, which, for almost three decades, served as the region’s economic center, was threatened with bankruptcy. It led to the expected domino effect. The loss of the key sales market, i.e., the USSR, led to the collapse of production. This entailed a drastic reduction in jobs and an increase in unemployment to 22% (compared to the then national average of 16%). For the town, this was almost a disaster. The economic recession affected many, including highly qualified workers1 .

Growing problems in Mielec transformed into the increasing motivation to look for solutions. A decision was made to establish an innovative (for the Polish reality at the time) project to fund a Special Economic Zone – an area with privileged business conditions, which would attract new entrepreneurs and thus revitalize the labor market. The regulation on creating the zone was issued on September 5, 1995, by the Council of Ministers. It was then agreed that it would operate for 20 years. What is more, the Industrial Development Agency (the IDA; Polish: Agencja Rozwoju Przemysłu S.A.; ARP) became the zone’s administrator2 .

1 Jarczewski, W. Kontekst powstania SSE w Mielcu, in: Dziesięć lat doświadczeń..., op. cit., p. 39. 2 Ibid., p. 45.

THE EARLY DAYS OF THE SEZ

The main goal of the Mielec SEZ was to create new jobs and stop the growth of unemployment. To this end, the IDA made specific decisions. The industrial assets and economic infrastructure that remained after the restructuring of WSK PZL-Mielec have been developed. In the first years of the SEZ (1995–1996), a comprehensive investor service system was developed. Simultaneously, an effective information and promotion campaign was conducted3 .

The factor that positively influenced the activities in the initial phase following the establishment of the Mielec zone was the fact that the IDA owns most of the local plots of land dedicated to investments. This made the decision-making process and providing services to investors very efficient4 .

The next two years brought the biggest and most important investments and the highly dynamic expansion of the zone. Many investors turned out to be crucial for the region: United Technologies Automotive (since 1999 Lear Automotive) and BRW (Black Red White). Although other SEZs were being established in the following years, Mielec continued to attract many companies, including brands such as Krono-Wood, Zielona Budka, Kirchhoff, Onduline, and Frantschach.

After 2000, the Act on Special Economic Zones was amended, allowing to create subzones in other locations. This created an opportunity for further dynamic territorial expansion of Euro-Park Mielec. The first subzones were located in Chełm, Gorlice, and Dębica, while the following ones in Sanok, Leżajsk, Jarosław, or Pustków, among others. The zone in

3 Micek, G. Rozwój SSE Euro-Park Mielec, in: Dziesięć lat doświadczeń pierwszej polskiej specjalnej strefy ekonomicznej: Mielec 1995–2005, in: B. Domański, K. Gwosdz (Eds.), Cracow, 2005, p. 49. 4 Ibid., p. 52.

Mielec attracted mostly small and medium enterprises. At that time, a progressive diversification in terms of countries of origin of the capital in the zone could also be observed – with German, British, and French companies starting to invest. Simultaneously, the share of Polish companies was increasing5 .

THE FIRST DECADE OF SUCCESS

The first 10 years of the Mielec SEZ clearly showed that the project positively influenced the region’s economic development. There was a dynamic increase in capital expenditures. As early as 1997, their value amounted to around PLN 100 million. A year later, the expenses incurred by investors reached PLN 700 million. The following year’s growth was less dynamic, amounting to about PLN 300 million, but this allowed to exceed the symbolic ceiling of PLN 1 billion in terms of total capital expenditure in the zone. The year 2000 brought another yearon-year increase in capital expenditure, extending it to PLN 400 million. The following years were not that fruitful, with an annual growth of about PLN 100 million. After 10 years of the zone’s operation, in 2005, the total expenditures mounted up to PLN 2.5 billion. The dynamics of employment growth in the Mielec area was equally positive. The first years of the SEZ’s operation saw a radical expansion in the number of newly created and maintained jobs. In 1997 alone, employment rose almost fivefold – to over 3,500 employees6 .

REVIVAL OF THE MIELEC ZONE AND RESISTANCE TO CRISIS

For Euro-Park Mielec, the first years of the 21st century were a period of stabilization. The development progressed, but, naturally, it could not be as dynamic as at the very beginning. The year 2007 gave

5 Ibid., pp. 57–62. 6 Ibid., p. 8. a new impetus to the project – a decision to enlarge the zone’s area by almost 225 ha (630 ac) – and was a sign of reacceleration. What is even more significant, in the same year, an extremely important government decision was made to extend the period of operation of the Mielec zone until 2020 (instead of 2015, as originally planned). Its expansion and the creation of a broader time perspective contributed to attracting investors, and those who were already operating in the SEZ were encouraged to make further endowments. The next amendment to the SEZ Act, in 2008, proved to be a renewed incentive for companies. It provided, among other things, an increase in the allowed size of the SEZ or the possibility of settling a tax loss to calculate the amount of aid used.

Interestingly, for both Euro-Park Mielec and other SEZs, the effects of the 2008 economic crisis turned out to be less severe than initially anticipated. In 2009, the number of valid business permits increased by 20.8%, which was the best result since 2000. The rate of growth of capital expenditures in that year was still higher than in 2002–2005, though it significantly decreased compared to 2007–2008. A result of favorable conditions for doing business in the Mielec SEZ was that although the crisis reached this place as well, it did not translate into a catastrophe, but only a slowdown in the steady growth.

BILLIONS OF INVESTMENTS, TENS OF THOUSANDS OF EMPLOYEES. WHAT ATTRACTS INVESTORS?

After two decades of the Mielec zone, the numbers spoke for themselves. At the end of 2013, the employment level amounted to 23,500 people, and the total value of capital expenditures incurred by investors since the beginning of the zone’s operation reached over PLN 6 billion. The total number of permits issued over 18 years came to around 180.

MIELEC, POLAND, AUGUST 12, 2017.

During the 20th anniversary of the SEZs, the expenditures exceeded PLN 7 billion, and the employment level – 30,000 employees.

Euro-Park Mielec has permanently changed the region. This would not have been possible without the effective cooperation of several milieux, including state institutions, local authorities, and entrepreneurs.

What factors primarily attracted investors to the Mielec SEZ? It is not easy to establish a hierarchy of criteria. The key factor may have been the synergy of various elements making up a business-attractive investment package. These included: financial incentives, diversified investment offer (e.g., greenfield, brownfield, or buildto-suit investment options), accessibility of the location and media infrastructure,

© Darek Delmanowicz (PAP)

availability and qualifications of employees, low labor costs, education infrastructure, distance from sales or supply markets, as well as good practices in project handling and post-investment services.

As emphasized by Waldemar Barnaś, director of the Mielec branch of the IDA responsible for administering the zone, its attractiveness for investors results from multidimensional economic potential. “Favorable tax rules are only the foundation on which other issues, important for a potential investor, are built. What is fundamental is the logistics and location of the zone at the intersection of the A4 highway and the Via Carpatia road, currently under construction, near the border crossings to Slovakia or Ukraine. The industrial potential of the region is strengthened by developed vocational education, which allows

MICHELIN FACTORY, OLSZTYN, POLAND.

obtaining qualified employees. All this contributes to a friendly ecosystem, which attracts investors,” Barnaś said.

The results of investor surveys confirm all this. A study conducted by KPMG in 2014, concluded that as many as 92% of respondents (representing 14% of all companies in the zone) assessed its functioning positively or very positively. The quality of cooperation with the authorities of the Euro-Park Mielec SEZ was particularly distinguished – 88% of the investigated companies were satisfied.

THE PRESENT AND THE FUTURE

In 2019, the IDA issued other 53 decisions on support for entrepreneurs, 32 in the investment area of SEZ Euro-Park Mielec, and 21 in the SEZ Tarnobrzeg (“EuroPark Wisłosan”). Entrepreneurs declared to incur almost PLN 1.7 billion of capital expenditures and create over 900 jobs7 .

Years after their foundation, it becomes clear that Special Economic Zones have

7 https://www.arp.pl/dla-mediow/aktualnosci/dobryrok-w-strefach-ekonomicznych-zarzadzanych-przezarp-s.a.

© Michelin

contributed to the regular growth of the potential of Polish enterprises and building their investment value. The successes of the SEZs translated into the expansion of the project and the constitution of the Polish Investment Zone in May 2018. From then onwards, entrepreneurs operating all over Poland (and not only in the zones) who have made new investments in both public and private sectors, can count on income tax exemptions (corporate and personal income tax). At the same time, the existing permits for conducting business activity in the Special Economic Zones, as provided for in regulations concerning the Polish Investment Zone (Act on Support for New Investments), remain in force until the end of 20268 . The Polish Investment Zone, administered by the IDA, includes two provinces of Poland – Subcarpathia, and Lublin, as well as the southern part of Mazovia. The IDA also manages the TSEZ Euro-Park Kobierzyce subzone.

8 https://www.paih.gov.pl/strefa_inwestora/Polska_ Strefa_Inwestycji

Among the largest declared investments in these areas, the field that deserves particular attention is the furniture industry. Nowy Styl, a manufacturer of chairs and office furniture, declared PLN 150 million of investment in 2019. Another company, MARMA Polskie Folie, a member of the plastics processing industry, set forth PLN 53 million in the same year. The declared involvement of Varroc Lighting Systems is even more impressive – with the planned spending of almost PLN 230 million in Lublin Province in 2020. These examples show what significant investments can be created within SEZs.

The natural question is, therefore, what the future holds for the Special Economic Zones and in what directions they will develop. Their effects are already visible in the Mielec SEZ, which has undergone a thorough transformation in over 20 years. It currently provides entrepreneurs with tax exemptions, a wellprepared communication and technical infrastructure, as well as available qualified staff. As representatives of the IDA declare, the challenge which the zones face during the fourth industrial revolution is to include them in the process of building an economy based on knowledge and innovation.

“For over two decades, Special Economic Zones have contributed to the rebuilding of the industry in many regions of Poland. Now their effects should reach further. Therefore, the Polish Investment Zone was established so that entrepreneurs could develop their business on preferential terms, not only in the SEZ. The new model of support responds to the needs of sustainable development of the whole country, which have been enshrined in the Strategy for Responsible Development. The strategy highlights innovation’s role in creating Poland’s GDP and a long-term change in its structure due to the increased innovation. In the following years, one of the aims of the IDA is to stimulate this growth by offering Polish companies instruments supporting innovation, such as grants within the Open Innovation Network, supporting technology transfer to companies from the SME sector,” said Cezariusz Lesisz, President of the Management Board of the Industrial Development Agency.

The development of modern, advanced industries and branches of industry hiring highly qualified employees is one of the pillars of the IDA’s activity. As Special Economic Zones are being included in this process, the role of administrators evolves. The challenges that these entities face require implementing instruments of effective cooperation between investors, local governments, and the administrators. The range of services provided to investors is gradually increasing and now involves specialized support – technical, legal, and in the field of human resources.

The 25 years of the Euro-Park Mielec SEZ’s operations have translated into the creation of 75,000 jobs and PLN 20 billion investments. The presence of the IDA in the regions managed by the SEZ often resulted in a complete socio-economic transformation of the area. Not only did we manage to reduce unemployment, but, above all, to create opportunities for development in the coming years. Today, the aim is to continue this mission and create other positive prospects – for industry, employees, and investors. In the times of the COVID-19 pandemic, the circumstances are not favorable, but a quarter of a century of SEZ operation has proven that the zones were created for this very purpose – to function under challenging conditions.

Paweł Kolczyński

December 2020

IN MARKETS ACROSS THE WORLD – POLISH FOOD THEN AND NOW

Aneta Parys-Kępińska, Anna Artemiuk-Błaszkiewicz, Export Support Department, National Support Center for Agriculture (KOWR)

Since the beginning of its history, Poland has been an agricultural country, self-sufficient in production of food. As a result of fertile land, favorable climatic conditions as well as location in the center of Europe at the crossroads of west-east and north-south trade routes, the commerce of agricultural products developed well in Poland. Products from other European countries, including oriental spices and sweets, reached Poland through these channels, also thanks to the contacts with foreign cultures, and enriched native dishes with new flavors.

SEASONAL CHERRY HARVEST IN LUBELSKIE REGION. SKOWIESZYNEK, POLAND, JULY 22, 2011.

© Wojciech Pacewicz (PAP)

THE ABUNDANCE OF POLISH CULINARY TRADITIONS

The Slavs, ancestors of today’s Poles, lived in harmony with nature, to which they attributed divine qualities. The Slavic diet was based on flours and groats from grains such as millet, barley, rye, and wheat, as well as vegetables, fruit, poultry, pork, and fish. Cows were bred mainly for milk.

First references about culinary habits of the Slavs can be found in old chronicles, for instance “The Polish Chronicle” written by Gallus Anonymus in the 12th century. The first information about Polish cuisine (written in Polish) comes from a cookbook published in the 16th century. The herbariums created at the turn of the 16th and 17th centuries are also an interesting source of knowledge about old practices of healthy diet as well as healing properties of herbs, vegetables, and broths. For instance, in the herbarium published in 1613 by Szymon Syreński, professor of the University of Kraków, there are descriptions of dishes such as broth, rye bread, and groats.

The Polish culinary tradition is rich and varied. Local products enriched with the fruit of the undergrowth, meadows, rivers, and lakes have been the basis of Polish cuisine for centuries. It is characterized by a common use of mushrooms and wild forest fruit, honey, nuts, venison, and wild herbs. Mushroom picking in forests is a centuries-old tradition, practiced by successive generations of Poles. The knowledge of edible and poisonous mushroom species is common. It is believed that Polish cuisine is based on a variety of meat dishes. It should be noted, however, that the ancestors, meticulously practicing long religious fasts and in the absence of universal availability of meat, also developed rich vegetarian traditions. It is worth noting typical Polish fasting dishes, such as dumplings (pierogi) with cabbage and mushrooms.

The Polish culinary culture also includes regional cuisine. For example, Podlasie region is famous for sękacz – a cake baked over an open fire on a rotating spit, smoked dry sausages and potato dishes such as potato babka (cake made of hash potatoes), kartacze (meat stuffed potato dumplings), or kishkas. The specialty of Wielkopolska region is goose meat, croissant with white poppy seeds (rogal świętomarciński, also known as St. Martin’s croissant), gingerbread, fried

cheese, and smoked plum jam. The cuisine of the highlanders is famous for oscypek, a unique smoked sheep’s cheese, as well as excellent lamb and mutton. Some of these products have been officially recognized as the European culinary heritage and are registered in the EU protected quality scheme of regional and traditional goods.

Nowadays, when food is produced on a mass scale, Polish products, made using modern machinery and in accordance with rigorous EU safety standards, still retain their unique character. Polish producers are inspired by old recipes when developing new products. They uphold traditions, combining them with innovative ideas and technological novelties. Traditional methods of product preservation such as drying, pickling, and smoking are still used. Dried Polish meats find enthusiasts around the world. Meat, fish, cheese, and even plums are smoked, which gives them a distinctive strong aroma and taste. Moreover, Poles are the champions in pickling vegetables such as cucumbers, cabbage, and beets, which are also used to obtain fermented juices, known for their excellent health properties. In the past, other fruit and vegetables, including radishes, turnips, onions, or lemons, have also been pickled. We are reminded about it more and more, often thanks to old recipes. Currently, pickled vegetables are a fashionable culinary trend due to their health benefits and are used by numerous famous chefs. High quality trusted products, often unique recipes and modern production methods make Polish foods increasingly noticeable on world markets.

POLISH FOOD SPECIALTIES

DAIRY PRODUCTS

For centuries, dairy products were considered to be synonymous with prosperity. Not without a reason, Poland was repeatedly described as a land of “flowing milk and honey.” It is worth noting, however, that until the early 20th century cows gave milk mainly in the summer. In order to protect it from spoilage, it was processed into butter and cheese. Cottage cheeses were typical of the lowland areas, while rennet cheeses were produced by the inhabitants of Carpathian Mountains, who learned this craft from Italian shepherds.

The tradition of cheese-making is so strong in Poland that cheeses (mainly rennet ripened) and curds are the most important export goods in the category of dairy products. Poland is currently 7th in the EU and 10th in the world in terms of dairy products exports1. About 30% of all dairy products manufactured in Poland are sold abroad. Apart from the above-mentioned cheeses and curds (which account for 35% of country’s milk products exports), the Polish foreign trade of dairy products is dominated by: milk and cream (19%), condensed and powdered milk (13%), as well as butter and milk fats (10%). Moreover, Poland is a significant exporter of whey, ice cream, fermented beverages, and casein. Polish dairy products can be found all over the world. Most frequently, they reach the EU markets, but are also gaining in popularity in other countries such as China, Algeria, and Saudi Arabia.

It is worth noting that three cheeses typical for Polish mountains: bryndza podhalańska, oscypek, and redykołka, have been registered in the EU quality scheme of Protected Designation of Origin (PDO), while wielkopolski ser smażony (fried cheese from Wielkopolska) and ser koryciński (cheese from Korycin) – in the Protected Geographical Indication (PGI) scheme.

1 The United Kingdom left the European Union on January 31, 2020. From February 1 to December 31, 2020, the United Kingdom remains in a customs union with the EU and is a member of the European single market, thus, it is included in EU trade statistics.

MEAT

In the Polish tradition, meat has long been treated as a luxury product, which only the most privileged could afford. It is worth noting, however, that not every kind of it enjoyed the same recognition. For centuries, the idea that all food products were arranged in a logical, vertical hierarchy from earthly beings to heavenly ones was respected – the closer to heaven, the more noble the product. Following this approach, the hog, which was burrowing in the ground and rolling in the mud, was placed at the very end of the chain, and was treated as meat for the poor. On the other hand, the noble often consumed winged poultry or wild birds. In Polish cooking books, pork starts to appear in the 18th century, mainly in recipes for pork cold meat, sausages, and offal, which over time have become so deeply rooted in our tradition that today we cannot imagine Polish cuisine without them. It is worth emphasizing that sausages such as kabanos (dry sausage) and Old Polish sausages such as kiełbasa myśliwska staropolska (hunters’ sausage), kiełbasa jałowcowa staropolska (juniper sausage), kiełbasa krakowska sucha staropolska (dry sausage from Cracow), kiełbasa biała parzona wielkopolska (white steamed sausage from Wielkopolska), and kiełbasa piaszczańska or lisiecka (whose names come from their places of origin: Piaski Wielkie and Liszki, respectively), produced mainly on the basis of pork, have been included in the EU schemes protecting regional products – Traditional Specialty Guaranteed (TSG) and Protected Geographical Indication (PGI).

Perhaps echoes of old ideas can still be heard today. Poland is the largest producer and exporter of poultry in the EU as well as the 4th largest exporter of this meat in the world. Around 66% of production is destined for export. The offer of Polish producers includes not only chicken meat, but also duck, turkey, and goose meat, particularly valued on the German market. In 2019, the European Union was the largest recipient of Polish poultry. Significant amounts of this product were also exported to Ukraine, South Africa, China, Ghana, and Cuba. It is worth adding that not only meat, but also feathers and down from Polish geese is a highly valued product, especially on Asian markets, while Poland is among the world’s leading exporters in this sector.

Moreover, Poland is a significant player on the market of pork, of which we are the 4th producer and 6th exporter in the EU, as well as beef – 7th place among EU producers and 5th among the exporters. About 84% of domestic beef production is sold abroad, primarily in EU countries and Israel. Smaller quantities of Polish beef also reach Japan, Hong Kong, and Bosnia and Herzegovina, among others. On the other hand, Polish pork has enthusiasts in EU countries, the USA, Hong Kong, Vietnam, Ukraine, as well as Africa (Ivory Coast, Congo), and other parts of the globe.

APPLES

Apples have always been perceived as a Polish national treasure. Their cultivation dates back to pre-Slavic times, however, it became widespread thanks to the monks in the 12th century. Fruit farming was supported by Polish rulers. The harvest was personally supervised by, among others, the Polish king, the famous winner from Vienna – John III Sobieski, who made sure that his beloved wife had an adequate supply of her favorite Kosztela apples for the winter.

The care of the royals and the church brought long-term benefits to the Polish fruit farming. Currently, in terms of apple production, Poland is the largest in EU and 3rd in the world. Most of the fruit grown in Poland are table varieties, intended for direct consumption. Climatic conditions and the experience of fruit growers, benefiting from centuries of tradition, make

PRODUCTION OF BUTTER IN THE DAIRY PRODUCTS PLANT OF “BIELUCH” DAIRY COOPERATIVE. CHEŁM, POLAND, NOVEMBER 30, 2017.

© Wojciech Pacewicz (PAP)

Polish apples stand out with their unique taste and huge variety. The most popular of them comprise: Champion, Jonagold, Ligol, Gloster, Golden Delicious, Gala, and Cortland. Additionally, Poland is one of the largest world producers and exporters of concentrated apple juice, manufactured from the varieties intended for industrial purposes. The main export destinations for fresh apples in 2019 included: Belarus, Egypt, Kazakhstan, Romania, Germany, the Netherlands, Czech Republic, Spain, Jordan, and Ukraine.

CONFECTIONARY

In the modern period, Europe fell in love with exotic drinks (chocolate, coffee, tea) as well as sugar and confectionary. In 17th century Poland, sugar was a desirable and at the same time an exclusive product; enjoyed to such an extent that it was often consumed in an unprocessed or little changed form. Sugar was the most important ingredient in recipes for candies, while additives such as fruit, herbs and spices were only supposed to emphasize its delicious taste, available only to a handful of chosen ones.

The love for sweet flavor in Poland continues to this day. Fortunately, it is much easier to satisfy the appetite for sweetness now than a few centuries ago. Poland is a significant EU and global producer of various types of confectionary – cakes, cookies, chocolates, bonbons, and candy. In 2019, we were ranked 6th in terms of production and 5th in terms of export of confectionery products in the EU. We were also the 8th exporter of these products worldwide. The majority of export products included cocoa as the ingredient. Polish candy is present on the markets of over 140 countries in the world, the main recipients of which are: the EU countries, Russia, the USA, Ukraine, and Saudi Arabia.

Confectionary produced in Poland ranges from traditional Polish delicacies such as cream fudge, kukułki, irysy and michałki candies, plums in chocolate, ptasie mleczko (chocolate covered marshmallows known as bird’s milk), delicje (jaffa cakes) and gingerbread, to modern, innovative products developed in response to changing consumer needs and preferences. For example, candy made on the basis of xylitol, i.e. birch sugar, others with sparkling filling containing vitamins, fruit jellies without gelatin and lactose or high protein bars made from ground cocoa beans.

CEREAL AND GRAIN MILL PRODUCTS

Groats, flatbreads, or prażmo (dried ears of grain, crushed and baked in ash) were the basic ingredients of Slavic cuisine. With time, breads were also baked on Polish soil. One of the oldest ones is chlebprądnicki (prądnicki bread), originating from Cracow,(stil) made from rye sourdough, rye and wheat flour, boiled potatoes, bran, and fresh yeast. According to the legend, the first loaf of prądnicki bread, baked after the harvest, was given to the king. In 2011, it had been recognized on the EU forum and registered as Protected Geographical Indication (PGI) by the European Commission. It is worth mentioning that unique regional bakery products from Poland such as: obwarzanek krakowski (a ring-shaped bread roll), cebularz lubelski (a wheat dough pancake topped with diced onion and poppy seed, characteristic for Lublin cuisine), rogal świętomarciński (St. Martin’s croissant), and andruty kaliskie (lightly sweet flat wafers from Kalisz region), have also been registered as PGIs.

Poland continues a centuries-old tradition of growing cereals annual amounting to nearly 29 million tons. The main cereal grown in Poland is wheat, whose significant part is exported to the EU and worldwide. Grains from Poland go mainly to Germany and Saudi Arabia as well as Egypt, Kenya, Cuba, Norway, the Netherlands, andyAlgeria. Polish export offer of cereal and farinaceous goods includes various types of bread and grain mill products such as flour, groats, breakfast cereals, muesli, or bran. Furthermore, Poland manufactures a wide range of high-quality pasta products from wheat flour, including durum and rye wheat as well as buckwheat flour. These products are exported primarily to the EU market, especially Germany, Great Britain, France, and Czech Republin. Outside the EU, Polish cereal and grain mill products are exported to Russia, Senegal, Saudi Arabil, Ukraine, and the USA.

ALCOHOL

When listing Polish food specialties, one cannot forget about alcohol. The history of alcohol production in Poland is very long. Traditions of brewing and wine making go back to the beginnings of the state. Polish beer was described by medieval chroniclers such as Jan Długosz, Gallus Anonymus as well as Thietmar, who, at the beginning of the 11th century, called King Bolesław I the Brave “a beer drinker.” Production of vodka is also strongly rooted in Polish tradition. The first written evidence of “vodka” dates back to 1405. Years of tradition have led to the development of original recipes for this alcohol in Poland. According to the legally protected definition of “Polish vodka,” it can only be produced on the basis of Polish cereal grains and potatoes.

Today, Polish vodka is known all over the world whilst Poland has become its largest producer in the EU and 4th in the world. Furthermore, Poland has achieved a high rank in beer production: 3rd in the EU and 9th in the world. It is worth adding that Poland is a producer of original alcohols such as meads, cider, nalewkas(alcohol made by macerating fruit, roots, flowers, spices, herbs or nuts in strong alcohol produced exclusively in Poland), fruit wines, and high-quality grape wines. Several Polish alcohols have been registered in the EU scheme of Protected Designation of Origin (PDO) and Protected Geographical Indication (PGI). They comprise: Polish vodka (polska wódka), herbal vodka from the North Podlasie Lowland aromatized with an extract of bison grass (żubrówka), Old Polish meads (półtorak, dwójniak, trójniak, and czwórniak) as well as podpiwek kujawski, containing a small amount of alcohol.

FOOD FROM POLAND – NEW EXPORT TRENDS

Poland is a country with rich agricultural and culinary traditions, 6th largest food producer in the EU, with 9% share in the

EU food industry. Polish entrepreneurs enter global markets with a wide export offer, including top-quality items, basic agricultural products, traditional food and modern, innovative products with high added value, whose share in the export is growing year by year. In the face of competition in the form of global agricultural giants, often offering lower prices, the sale ofkprimary and unprocessed products cannot guarantee long-term export success. One of the most significant factors determining prosperity on foreign markets is the constant readiness to learn and develop, including monitoring markets and adjusting the offer to the needs of consumers. Thus, more and more manufacturers are targeting niches, offering solutions that respond to market trends.

Polish entrepreneurs have both fresh ideas and modern technologies at their disposal; they often build their brands abroad, focusing on product innovation. It is worth noting that consumers are increasingly becoming aware and demanding. The modern world promotes multitasking, which also translates into food trends. A growing number of people are looking for products that are not only tasty and healthy, but also take into account the diverse needs of body and soul. Thus, Polish producers offer a number of commodities adjusted to the requirements of the modern lifestyle, manufactured with social responsibility and care for the natural environment, including ecological goods.

An example of this is a wide range of functional foods which improve biochemical and metabolic parameters of the body as well as contribute to the quality of performance and well-being. Polish producers, often in cooperation with institutes and research centers, introduce new products of this type to the market. Their offer includes candy and snacks, milk products, drinks, or cereal products devoid of harmful or allergenic elements, yet enriched with ingredients that give them additional health properties. Popular supplements include well-known Polish superfoods such as chokeberry, blackcurrant, mulberry, or sea buckthorn. The products combining top-quality chocolate with “superfruits,” probiotic bacteria and algae extracts are extremely popular. Protein foods as well as healthy candy and snacks from unprocessed ingredients are also becoming increasingly trendy. These goods usually have an additional ecological certificate, guaranteeing the lack of synthetic substances and the highest care for the environment.

Another trend boldly used by Polish manufacturers is the interest in food of plant origin. These products are not immediately associated with Polish cuisine, one of the symbols of which is the pork sausage, famous, among others, in the USA. It turns out, however, that Polish plant-based sausage can taste equally good, and, at the same time, be one of the fastest growing trends on the Polish food market. Consumers of plantbased products are not only vegetarians and vegans, but also people interested in diversifying their diet. In order to meet their needs, the largest Polish producers are expanding their classic portfolio, already valued by consumers, with new, plant-based options. Moreover, there are startups and small manufacturers of plantbased food on the Polish market, including veganized classics of Polish cuisine, such as kabanosy and various types of sausages, bacon, ham, or lard. The return of Poles to their culinary roots, including regional peasant foods, largely based on plants, is also an interesting phenomenon. To experience this aspect of Polish cuisine, it is worth coming to Warsaw, which for years has been one of the world’s most vegan-friendly cities.

HARVEST OF CORN AT MIROSŁAW OSTROWSKI’S FARM. ŁOZISKA, POLAND, NOVEMBER 2, 2020.

© Mateusz Marek (PAP)

GROWING INTEREST IN POLISH FOOD IN THE WORLD

Polish companies are engaged in intense export activity, steadily achieving better and better results. For 10 years now, we have been observing further records in terms of income from agri-food exports. Poland ranks high among the European food exporters. In 2019, the value of foreign sales of agri-food products from Poland amounted to 31.8 billion euros – 7% more than the year before and over six times more than in the year of Poland’s accession to the EU (2004). Polish products go mainly to the EU countries, including the most demanding consumers in Germany (24% of all agri-food exports in 2019), Great Britain (9%), the Netherlands (6%), Italy (5%), or France (5%). The most important recipients of Polish products from outside the EU include the CIS (Commonwealth of Independent States) countries (5%), as well as the USA (2%) and Saudi Arabia (1%).

Polish export offer includes a wide range of products, both basic and modern, processed ones. The majority of Polish beef and poultry, a significant part of pork, fruit, dairy products and grain production is allocated to export. The most important goods, exported in 2019, comprised: meat and processed meat (21%), grains and refined grains (12%), tobacco and tobacco products (12%), sugar and confectionery products (7%), dairy products (7%), fish and fish products (7%), vegetables (including mushrooms) and vegetable preserves (6%), fruit (including nuts) and fruit products (4%), coffee, tea, cocoa (2%), oilseeds and vegetable fats (2%), fruit and vegetable juices (2%), alcohol (2%).

During the COVID-19 pandemic, there were serious fears that Polish agri-food exports would suffer from restrictions and the trend of supporting domestic producers noticeable in Europe, among others. However, trade results show that Poland proved to be quite resilient to the effects of the pandemic. From January to August 2020, the foreign sale of agri-food goods increased by 6%, compared to the same period last year, reaching 21.9 billion euros. Faced with the pandemic and restrictions associated with it, fruit and vegetable producers as well as the meat industry, which is mostly dependent on exports, have experienced the greatest difficulties. The biggest beneficiary in the current economic situation was the tobacco industry. Export growth was also recorded in the following industries: grain, oil plants and vegetable fats, alcohols and, to a lesser extent, all other food industries.

What influenced this surprising scenario? Polish companies, which enjoy a good reputation and are increasingly present on international markets, took advantage of this time. They used new trade

opportunities that appeared on many markets as traditional supply chains broke down. Furthermore, they sold a significant part of production surpluses to third markets, among others. The increase in export of Polish agri-food products was also influenced by the situation on the financial markets. The depreciation of the Polish złoty (PLN) against the euro (EUR) and the US dollar (USD), which took place in the first quarter of this year, in addition to the exchange rate of the złoty between April and August, which was favorable for exporters, contributed to the competitiveness of Polish products.

For several years now, a gradual increase in the export rate of Polish agri-food products to third markets has been visible. This process has significantly accelerated during the pandemic. Export of agri-food products to third countries in the first eight months of 2020 increased by 18%. The main export directions, apart from EU countries, included Ukraine and Saudi Arabia, as well as Russia, the USA, Belarus, Algeria, Israel, South Africa, Norway and ChinA. It is worth noting that the value of Polish agri-food exports to Ukraine increased by 32%, compared to the same period in 2019. Already at this point, it is certain that a historical result of Polish agri-food export to Saudi Arabia will be achieved in 2020. In the first eight months of 2020, the its value amounted to a record 419 million euros, half of which was wheat export.

It is difficult to predict how the situation will develop in the last months of 2020. Yet, so far, the trade performance gives reason to believe that 2020 will be much better than initially expected.

SUPPORT FOR FOREIGN COOPERATION

The success of Polish agriculture, processing industry, and trade is supported by promotional activities conducted systematically on the domestic and foreign markets. The main institution that implements policies promoting the agri-food sector in Poland is the National Support Center for Agriculture (KOWR) – a government executive agency reporting to the Ministry of Agriculture and Rural Development. The mission of the KOWR is to provide comprehensive support to Polish entrepreneurs in export and promotion of agri-food products in Poland and on foreign markets.

Within the framework of its promotional activities, the KOWR organizes, among others, economic missions and national stands at the most significant international food fairs. In 2019, together with Polish entrepreneurs, we participated in the largest agri-food conferences in 17 countries worldwide. In 2020, due to restrictions related to the coronavirus pandemic, the KOWR focuses on virtual events. These include business meetings between entrepreneurs and foreign trade partners conducted online, trainings and webinars aimed at supporting trade cooperation, promotional and informational activities in Polish and foreign social media, etc. These activities are aimed at building a strong brand of Polish food products domestically and worldwide under the slogan “Poland tastes good.”

The National Support Center for Agriculture establishes and develops contacts with entities interested in cooperation with the Polish agri-food sector and trade expansion. We cordially invite you to contact us at the following email address: eksporter@kowr.gov.pl.

Aneta Parys-Kępińska, Anna Artemiuk-Błaszkiewicz

December 2020