Economic diplomacy of Luxembourg in Poland

In 2021, the cooperation between Luxembourg and Poland is marked by the centenary of establishing diplomatic relations between Luxembourg and Poland which took place on 18^th April 1921. This meaningful anniversary allows us to reflect on the existing ties between the two countries, especially on the economic links, which are primary drivers of the bilateral collaboration. Many aspects of this multi-dimensional cooperation are going to be presented in the brochure prepared by the Embassy titled “100 years of diplomatic relations between Luxembourg and Poland from A to Z”, which will be published on Luxembourg National Day, June 23. Even though we are currently facing significant economic uncertainties because of the coronavirus pandemic, the longevity and intensity of our bilateral relations reinforce our optimistic outlook into the future.

As the international economy has become a truly global economy, international relationships have become critical to sustain economic growth. Diplomatic tools and resources can naturally sustain these relationships. With the growing needs of trade relationships and the necessary attraction of investment, the importance of economic diplomacy becomes crucial for the daily activities of diplomatic missions. The Internet greatly helps this endeavor as it allows Embassies to use these tools to highlight their missions, roles and activities, to find market intelligence information, and to develop a network of contacts through internet applications such as social networks.

Governments and taxpayers expect that public servants such as diplomatic personnel contribute to the active promotion of a country’s economic interests which results in a real value being added to the economy. Luxembourg also perceives economic diplomacy as a tool to bridge the gap between culture and commerce of both, sending and receiving country. The Luxembourg diplomatic network plays an important role in the country’s national “Trade and Invest” strategy. This strategy defines the vision, the policy objectives and the process through which business promotion and investment attraction are implemented. As a partner in this strategy, the Ministry of Foreign and European affairs and its global diplomatic network actively contribute to this strategy.

More generally, Luxembourg’s deploys a strategy for data-driven innovation and economy aimed at making the country the most trusted data economy in Europe. The strategy aims in particular at six core sectors: Industry 4.0, eco-technologies, health technologies, logistics, space and financial services. Information and communication technologies (ICT), including space-based technologies, are at the very center of this endeavor. As regards the space sector, Luxembourg is fully taking part in the space economy expansion. GDP annual growth rate in Luxembourg averaged 3.6% from 1996 until 2018 (Eurostat). After an economic downturn in 2020, we are hopeful that Luxembourg can generate pre-COVID level economic growth with the post-pandemic economic “NewStart Luxembourg” plan. We are a politically stable country with very low public debt, 23% of GDP (Eurostat). Our active promotion of EU integration is a key factor of this economic success.

The financial sector remains a key pillar of our economy despite the active diversification of the national economy. For more than half a century, Luxembourg has been a center of excellence for international and cross-border financial services. Having flourished alongside European integration and the common European market, Luxembourg today acts as EU hub and competence center to the world’s leading financial institutions. As a truly global platform, it is catering to the needs of global investors. The financial center provides a unique combination of international expertise, a complete toolbox of investment products and highly specialized financial institutions and service providers. From wealth management, treasury and corporate banking to fund services: Banks in Luxembourg have specialized in serving clients across borders.

In Europe’s leading fund center, asset managers find the perfect ecosystem to launch and distribute funds to investors across the world. Out of the top 100 asset managers worldwide, 98 have funds domiciled in Luxembourg. It is home to the Luxembourg Green Exchange, the world’s first platform entirely dedicated to sustainable green securities. The Luxembourg Stock Exchange is the global leader in international securities listings. Luxembourg’s insurance industry has decades of experience in developing solutions to meet the needs of highly mobile citizens and multinational companies. A leading center for international debt listings, securitization and post-trade services, Luxembourg is the right place for companies to finance their global activities. In general, the Luxembourg financial center deploys key resources: English-speaking regulators and administrations, access to a multilingual and highly skilled workforce, a triple A rated sector, a stable economy, an innovation-friendly digital nation (especially fintech), and an international business environment right in the heart of the European continent.

Since its inauguration in 2006, the Embassy of the Grand Duchy of Luxembourg in Warsaw has continuously and actively developed bilateral economic relations and is giving new impulses to the cooperation in diverse fields of the economy. The Embassy, together with the 8Honorary Consuls, wants to inspire cooperation with Luxembourg, since Luxembourg entrepreneurs appreciate Polish partners for their innovative character, ambition and diligence. For Polish entrepreneurs, Luxembourg offers many interesting possibilities not only in the financial sector, but also in logistics, space, and environmental technologies.

Despite the unprecedented situation created by the Covid-19 pandemic, the economies of Luxembourg and Poland are among the most resilient and dynamic in Europe, with low unemployment levels and our cooperation is flourishing. The best evidence of the intensity of these relations is the fact that in 2016 direct flights between Warsaw and Luxembourg were re-established by LOT and the planes used to be fully occupied. In the middle of the pandemic in November 2020, a new connection with Cracow was established by Luxair. More and more Luxembourg companies are becoming aware of the potential of the Polish market, although the investment flow has temporarily been slowed down due to pandemic.

Luxembourg has positioned itself as the third biggest foreign direct investor in Poland. Until 2020, Foreign Direct Investments (FDI) have continued to increase each year, Luxembourg taking third place after Germany and the Netherlands with FDI reaching a volume of 1,364.4 billion euros in 2019. It is worth mentioning that Luxembourg entrepreneurs value Polish institutional support in the form of Special Economic Zones, as well as the role of Polish government agencies, which support foreign investments. There are numerous examples of significant greenfield investments originating from Luxembourg which contribute to Polish economy as well.

The main Luxembourg-based company present in Poland is the steel manufacturer, ArcelorMittal, which concentrates 70% of Polish steel production. Employing over 10,000 people in Silesia, it has invested over 7 billion zlotys in Poland so far.

In January 2020, CFL multimodal, a subsidiary of Luxembourg’s National Railway Company CFL, announced the launch of an intermodal train between Swarzędz-Poznan and Bettembourg-Dudelange (Luxembourg). Establishing this new connection not only allowed to link Poland with the Iberian Peninsula but also enabled the transportation of products directly from China to Western Europe through Polish soil. Thus Luxembourg and Poland are effectively working together to achieve the goal of modal shift within European New Green Deal (the connection allows to save 15,000 t of CO2 per year).

Other big players, who successfully carry out their activities in Luxembourg and Poland are Guardian Industries, Goodyear, Astron and BosonEnergy. On the other hand, numerous Polish companies are present in Luxembourg to facilitate their international development.

In 2020, Poland was in the top 10 of Luxembourg’s trading partners. Exports of goods to Poland were worth 305.1 million euros in 2020 (342 million euros in 2019). They were mainly composed of base metals, articles of these metals and machinery. The most exported product was coated flat-rolled iron (worth EUR 26.81 million in 2019). Decrease of exports in 2020 was mainly caused by a worldwide decrease of demand for industrial goods but the Grand Duchy maintained significant export levels of plastics and other products.

Imports of goods from Poland showed a value of 295.1 million euros in 2020 (315.7 million euros in 2019). They were mainly composed of plastics and rubber and articles thereof, food products, as well as transport equipment. In fact, the most imported products from Poland to Luxembourg were trailers and semi-trailers (worth EUR 61.92 mil in 2019) .

Many of these examples for economic cooperation were inspired and supported by the Luxembourg Embassy in Warsaw through its economic diplomacy. The Embassy regularly organizes economic promotion events. In 2014 during the State Visit in the Republic of Poland, His Royal Highness the Grand Duke opened the “Poland Luxembourg Business and Financial Forum” which substantially contributed to the development of Polish-Luxembourg relations in many economic areas. In recent years, three sectoral round tables, on sustainable finance, wealth management and the commercial and industrial dimensions of space, took place. Furthermore, a roundtable devoted to the theme of logistics was held, as well as an event with the Luxembourg Association for Investment Funds (ALFI).

There are also many opportunities for cooperation in the civil and military space field. On 29 November 2018, a bilateral memorandum of understanding was signed between our country and the Republic of Poland to begin closer coordination of space activities, in particular on the exploration and use of space resources. The five-year memorandum of understanding covers the exchange of information and expertise in the areas of space technology, policy, law and regulation. Both countries can only gain from closer cooperation in this area and allow each other to benefit from their mutual expertise. In December 2019, on the occasion of the “2^nd Luxembourg-Poland Business Conference – Luxembourg-Poland partnership in space business” organized by the Embassy of Luxembourg in Warsaw, the Deputy Prime Minister and Minister of the Economy of Luxembourg and the Development Minister of Poland declared their willingness to further strengthen cooperation between the two countries. In 2019, the Embassy held an event presenting the capabilities of LuxGovSat, the public-private joint-venture between the Luxembourg Government and the global satellite operator SES, for the Polish military.

It was in 2018 – the year of the celebration of the Centenary of Polish Independence – that the Luxembourg-Poland Business Club became the Luxembourg-Poland Chamber of Commerce (LPCC). At the same time, a Polish-Luxembourg Chamber of Commerce (PLIG) was founded in Poland.

In the framework of the 100th anniversary of diplomatic relations between Luxembourg and Poland, the “Go International: Poland” webinar took place on 20^th April 2021, with organizational support from the Embassy of Luxembourg in Warsaw and the Luxembourg-Poland Chamber of Commerce. The webinar was a part of ‘Go International’ series of events, initiated by the Luxembourg Chamber of Commerce, dedicated to maintaining trade relations abroad, and to assist companies in exploring new markets differently. Over 150 signed up for this particular event to learn about Luxembourg-Polish cooperation as well as true experiences of businesspersons operating in Poland.

We will certainly continue to have to face the consequences of the Covid-19 pandemic in both economic and social life. Nevertheless, Luxembourg being a small country, has the flexibility not only to adapt itself to changing environment but also to continually reinvent itself as it has done throughout its history. Our constantly changing world will certainly continue to offer new options for development, especially in the field of innovation, and we are convinced that we will be able to find Polish partners who are eager to implement them. Possible areas of business opportunity may include sectors of logistics, cleantech and greentech, as well, as space and finance technologies

The Embassy of Luxembourg in Warsaw stays responsive to the needs of the business communities from both countries and emphasizes its willingness to provide assistance and organize matchmaking with foreign partners. The Embassy as well as both bilateral Chambers of Commerce are at your disposal for any further information.

Website of the Embassy: https://varsovie.mae.lu/en
Twitter: https://twitter.com/LUinPoland
Facebook: https://www.facebook.com/luxembourgembassywarsaw
Luxembourg-Poland Chamber of Commerce (LPCC): https://lpcc.lu/home-page/
LPCC Brochure: https://www.lpcc.lu/storage/2019/12/Luxembourg-Poland-Chamber-of-Commerce-Brochure-2019-November.pdf
Polish-Luxembourg Chamber of Commerce (PLIG): https://plig.biz/