Austria’s Egger is considering building a new wood based panel plant in Biskupiec, in Poland’s northeastern part. The plan is to build some 170,000m2 of production and storage facilities.

The investment is reported to be located in Poland’s Warmian-Masurian Special Economic Zone (WMSSE) and this will provide the Austrian company with preferential tax treatment for its project.

Investment plans In Poland

Egger “confirms its interest” in carrying out an investment in the Polish market, said Manuela Leitner, a spokesperson for the manufacturer, speaking to Wood Based Panels International. Local media reports estimate that the investment may be worth up to PLN 789m (€182m), but Ms Leitner did not confirm the amount.

The investment is reportedly to be carried out by local subsidiary Horizont Project Development, and production activities at the plant are expected to be launched by the end of 2021.

The exact site is has yet to be definitively announced, but the company “confirms that its 18th plant could be developed in Poland.

At this time, Egger Group is evaluating several potential locations” for the designed production facility, according to Ms Leitner. However Poland, and in particular a Polish Special Economic Zone, offers some major advantages.

“Such major investments are rarely located in the Warmian-Masurian region,” said Grzegorz Smolinski, the chief executive of the WMSSE. “However, our region is the largest producer of furniture in Poland.

Some of the companies that are active here include IKEA, Szynaka and Wójcik. This sector is one of the top three specialisations here.”

The WMSSE is jointly operated by the region's authorities and the Polish Treasury. Mr Smolinski said that, as part of the preparations to attract the potential manufacturing project, the zone prepared an application to extend its area in cooperation with the Polish Ministry of Development.

The application will be evaluated at a government meeting and, should it secure the cabinet’s backing, it will mean that Egger will be able to launch its project in Biskupiec.

Should Egger locate its plant in a Polish Special Economic Zone, it will ensure that its investment will benefit from preferential tax treatment until at least 2026, when the zones are scheduled to cease their activities, as decided by the previous government. This said, the incumbent Polish cabinet has been considering extending the operations of the country’s SEZ's beyond this date, in line with the investors’ expectations.

Poland’s economic Perspectives

It is noteworthy that the Warmian-Masurian region is one of the country’s less developed areas, and, despite the countrywide decrease in unemployment that has been reported in the past years, the region has maintained a large pool of inactive workers.

The region’s unemployment rate stands at about 12.7%, more than twice the national average. This is the highest rate among all of Poland’s 16 regions, and it indicates that Egger would most likely face little difficulty in recruiting workers for its designed plant.

Moreover, the European Commission’s country report for Poland, published earlier this year, points out that Poland has one of the most flexible labour markets in the EU.

“The flexibility of the Polish labour market is largely reliant on temporary contracts. Poland has the highest share of temporary labour contracts of total employment in the EU,” the document states.

Although Poland’s economy has shown a solid performance in past years, the Polish government recently published data that suggests the country could be facing a period of slower growth. GDP results for the third quarter of 2016 indicated that Poland was experiencing its slowest period in three years.

From July to September 2016, the country’s economy expanded by only 2.5% compared with the same period a year earlier. This was less than the expected quarterly growth of 2.9%, raising concerns over Poland’s economic performance next year.

Despite these concerns, a report released by the Organisation for Economic Cooperation and Development (OECD) earlier this year pointed that "Poland’s new government places a high priority on stimulating innovation and entrepreneurship. It plans to do so by increasing tax breaks for those entrepreneurs who re-invest their profits”.

The high availability of a skilled, yet relatively inexpensive, workforce, combined with various government incentives for foreign investors, has attracted a number of panel industry players in the past years and most of their plants are located in the country’s SEZ's. These include Germany’s Steico, which carried out a €60m investment to set up its own LVL production facilities and an additional wood fibre insulation plant in Czarna Woda, in Poland’s northern region of Pomerania. Last September, the manufacturer decided to further expand its facility. Under that plan, Steico will double the output capacity of its Polish plant to some 160,000m³ per year.

Another investment was carried out by German wood based panel producer Homanit, which makes MDF and HDF in Poland, and supplies its output to the furniture, door and automotive industry. The company continues to expand and upgrade its production facility in Krosno Odrzanskie, in south-western Poland. The plant has the capacity to make about 28 million m2 of various products per year, and in 2016 Homanit invested some PLN 211.6m (€49.9m) to further increase the factory's manufacturing operations.

Sweden’s IKEA Industry has also been scaling up its activities in Poland, with an expanded HDF plant in Babimost, in the south west, launched in late 2015. The company’s new 10,000m2 production hall increased the plant’s output capacity by about 2,250m³ per week. IKEA was one of the first foreign investors to have a presence in the Polish panel industry, with its first facility opening in 1992.

As with the two German investors, the Swedish firm carries out its manufacturing activities in a Special Economic Zone. The state-run Polish Information and Foreign Investment Agency (PAIiIZ) claims that Poland is the world's second-largest producer of products for IKEA, after China.

Eastern European Expansion Plans

Egger is based in St Johann in Austria’s western Tirol region, and was set up in 1961 when the firm launched its first particleboard plant. The Austrian manufacturer owns 17 factories in Europe. Should Egger decide to open a new production facility in Poland it would be the company’s second manufacturing investment in an eastern EU state, following the launching of its plant in Romania in 2007.