Poland successfully managed its integration into the European Union since joining in 2004, and during the 2008-09 global financial crises it was the only member to experience growth. Poland is a high-income country with a large and diversified domestic economy.
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To make the recovery sustainable, Europe needs to continue reforms to promote exports and investment, create jobs, and protect the vulnerableBRUSSELS, May 28, 2015—Economic growth is expected to conti... Show More +nue to pick up across Europe, from zero in 2013 and 1.3 percent in 2014, to 1.8 percent and 2.0 percent in 2015 and 2016 respectively. Central and eastern European countries (EU-CEE) will continue to grow above the European average, with growth expanding over 2.4 percent in 2015, based on robust consumer demand, the gradual return of investment, and continued export growth, says the new World Bank EU Regular Economic Report launched today in Brussels.The pick-up in 2014 was particularly strong in Germany, Hungary, Ireland, Poland, and the United Kingdom, while southern European countries finally returned to growth following significant financial and economic restructuring, and despite growing concerns about financial strains in Greece and generally weak global trade.“Exports have been the main driver of growth in many EU-CEE countries, such as Poland, Bulgaria, and Romania,” said Mamta Murthi, World Bank Country Director for Central Europe and the Baltic Countries. “That has been partly due to foreign direct investment (FDI) helping countries integrate into global value chains and ‘push’ exports. However, as FDI has declined following the crisis, there is greater need for countries to focus on improving business environments, developing skills, encouraging innovation, investing in infrastructure, and reducing regulatory barriers to encourage renewed FDI and export growth.”According to the report, strengthening economic growth and improvements at the labor market will help to limit the share of people at risk of poverty and social exclusion. Since 2008, the EU-CEE share of people at risk of poverty increased to over 23 percent, as slower growth resulted in job losses, especially among the young and less skilled, pushing them below the poverty line. Going forward, the report says that economic recovery and reduction in unemployment rates, along with increased fiscal space for social expenditures in some EU-CEE countries, will lead to the gradual decline in poverty.While the growth outlook for Europe is moderately optimistic, fueled by the one-off fall in oil prices and ECB quantitative easing, the report says that several risks need to be carefully managed, including: (1) the potential increase in financial market volatility as the US and EU implement divergent monetary policy; (2) fresh pressure on public finances from the combination of low inflation and modest growth; (3) the limited availability of new lending for investment, due to low returns and incomplete bank reforms; and (4) the potentially negative impact on confidence stemming from ongoing financial strains in Greece or ongoing geopolitical tensions in Ukraine.According to Theo Thomas, Lead Economist in the World Bank’s Europe and Central Asia region and Team Leader of the EU RER, “The medium and long term challenge in many countries is to shift policy from fiscal and macroeconomic adjustment towards structural measures to promote growth and competitiveness. Structural reforms include continuing to reduce labor market rigidities, enhancing the business environment, reducing barriers to trade (including in services within the EU), and promoting the skills needed for dynamic job creation and innovation. This will need to be combined with affordable social policies that help to protect the most vulnerable, while promoting greater social and labor market inclusion.” Show Less -
Poland has just had the best 25 years in its history. During that time Poland has become Europe’s champion in economic growth, leaving behind all other transition countries and all of Western Europe, ... Show More +World Bank representatives write.Moreover, in the last 20 years Poland was the fastest developing economy in the world in the group of countries with similar level of development.This year, the level of income in Poland will exceed USD 20 000 (purchasing power parity basis), representing more than 65 percent of income level in the eurozone. In absolute as well as in relative terms, this will be the highest level of income after year 1500. Poland’s new golden age will have settled in.No time for complacencyYet, past success is no guarantee of success in the future. Poland cannot rest on its laurels. Considering significant gap in productivity (GDP per hour worked in Poland is less than half of productivity in Germany), private sector productivity growth will continue to be driven in the near future by absorption of technologies and innovations that are new only at the scale of a company or country. The point is that this will not help maintain, let alone accelerate, economic growth in the long run when Poland’s productivity levels converge with Western Europe countries and simple technology imitation will not be sufficient any more.We need faster growth of investments in R&D and innovations. Economy might stagnate if Poland doesn’t start shifting from imitating others to generating new ideas, from quantity to quality, from potato chips to microchips.Poland has not yet invested enough in R&D and innovation. And the impact of that spending seems to be less meaningful than similar spending by its Central European peers. In 2013, R&D spending amounted to only 0.9 percent of Poland’s GDP, at the tail end of European Union rankings. Private spending on R&D was particularly low and represented just one third of total R&D spending.To change that, an overhaul of public support system for innovations is needed, involving reorientation towards global best practice and greater role of the private sector. Keeping the status quo is not good enough by any measure.Poland simply can’t afford to increase public spending on R&D while continuing to achieve negligible results. Efficient investment of more than 10 billion euros from the EU until 2020 will be instrumental in pushing the country toward knowledge creation, technology improvements and disruptive innovations.What does it take, then, to promote a global champion ‘made in Poland’? Innovations must be moved from the level and quality of Polish football league to that of the Champion’s League. How can Polish authorities help make that happen?|We suggest five priorities for innovation policy.First, focus on the outcomes, not the outlays.In place of simple allocation of EU funds, Poland should now focus on return on investment and tangible business results. In the last EU perspective of such magnitude we should not ask how much money was spent, but what outcomes were achieved.We must support firms and researchers in their journey on uncharted waters; identify entrepreneurs for whom innovation is the key to competitiveness, and provide them with services of world class quality. Further, we must encourage traditional companies spoilt with low cost of labor, high quality of human capital, huge domestic market and weak zloty to start building their R&D competence and to innovate.Second, business takes the lead.To date, a lion’s share of funding dedicated to R&D and innovations has been channeled to scientific community and public research institutes, whose agenda still gives preference to research and publications before commercialization. Direction for the future is to focus on more direct support for research and development activity in enterprises, making sure that public money is never spent without proportionate investment from the business. Success is closer when genuine private money is at stake.Priorities of innovation policy of the state, i.e. smart specializations, should not be treated like ten commandments cast in stone. Rather, they should be subject to continuous verification based on uninterrupted dialog with business; restless search for new, emerging business and technology potential; and discovery of real needs of enterprises and barriers to growth. Third, implementation has priority.Strategy is important but the devil is always in the detail. It seems that all people in the country agree about lofty goals, but hardly anyone cares to check if those goals have anything in common with what is actually happening. This could be observed in last perspective when money was supposed to be spent on high risk innovations but it turned out that it had been spent on the purchase of low risk technologies instead; support was to be targeted at SMEs but in fact it was offered to large companies; priority was to be given to R&D funding in business but, eventually, subsidies were consumed by scientists and academics.Therefore it is imperative in the new perspective to develop efficient framework for project selection to make sure that the money goes where it is needed the most: for the financing of new, high risk and innovative enterprises and technologically advanced projects that are new to the world. Procedures must be simplified; risk aversion so deeply ingrained in public institutions must be mitigated. Public officials should no longer be afraid to go out and talk to business.Fourth, we must be open to the world.Without international contacts we are unlikely to create anything meaningful in a global village. It really makes sense that Polish entrepreneurs and scientists should start filing funding applications in English; international experts should be invited to sit on investment panels taking project selection decisions; and Polish research ideas should be verified by international reviewers.Higher education facilities should finally open to the big wide world. Seeing a foreign professor at a Polish university should not be as rare as seeing the total eclipse of the sun. Command of English, international cooperation and publications abroad should be required of those who aspire to become professors and of those who already hold that title.Another key step for Poland is to welcome foreign scientists, young entrepreneurs, venture capital specialists and professional managers of technology parks and incubators. Back in 1990s we imported banking know-how from abroad and it did us good: now is the time to import R&D and innovation know-how.Finally, Poland should help as many citizens as possible attend international university courses and participate in research programs offered by top universities, and then help them re-integrate and spread their wings upon return.Last but not least, we should invest in institutional capacity development and in business-friendly economic environment.Any national strategy is only as good as institutions and people who implement it in practice. If innovations are a true priority for the authorities, innovation support institutions should hire only the best professionals qualified to pursue innovations and take risks. Proverbial ‘bureaucrats’ who never accept anything new and only give a green light to something that had been developed by someone else before definitely won’t do. Fast-track procedures are needed so that grant applications can be evaluated and decisions can be taken within 60-90 days, at the maximum. R&D tax relief for medium and large enterprises should be introduced, given that Poland is lagging behind most of Europe in that respect. We also need a friendly system of taxation of intellectual property rights and VC investments.Poland has an opportunity to repeat glorious success of the last 25 years and be at par with the West for the first time in history. Still, no country in the world except for oil producers has ever become rich without innovations. Poland is no exception. We must keep that in mind. 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Future of economic zones is the investments in new, environment-friendly technologiesTotal worth of investments made in special economic zones (SEZs) in Poland exceeded PLN 104.35 billion, as of the e... Show More +nd of last week. According to the Ministry of Economy, average investment growth is equivalent to PLN 215 per second. In other words, every day the value of investment outlays grows by nearly PLN 18.6 million. Dynamics may deteriorate, however, since SEZ tax reliefs were reduced last year. The zones themselves will have to change their structure. According to the World Bank, in the future SEZ programs in Poland can focus on advanced, ecology-oriented technology development, supported by research and development.‘While some Polish SEZs have achieved very significant results, popularity of state aid also resulted in high-level fragmentation and heavy reliance on tax incentives,’ says Douglas Zhihua Zeng, Senior Economist, The World Bank, in his interview for Rzeczpospolita.In his opinion, to make zones more competitive, Poland should modify their structure. Poland should develop less single factory type of zones and build several wide-size, multifunctional zones with more focus on pro-business environment, such as sound legal and regulatory regime, first-class infrastructures, skilled labor and efficient public services.‘Such zones could be used to test future economic reforms,’ Zeng underlines.The future SEZ programs could focus on eco-industrial parks, promoting green technologies and high-end manufacturing, and science parks or service hubs, which promote R&D, technology innovation, and services such as ICT, finance, consulting, etc. SEZs should be used to address market failures or binding constraints that cannot be addressed through other options. They should be developed with participation from the private sector.‘Today, all over the world more and more zones are developed through public-private partnerships (PPP), not only on the basis of government administration efforts,’ Zeng explains.While there have been many obstacles to the development of PPP in Poland, the number of parks promoting modern and environment-friendly technologies has been on the rise. Industry clusters have also been mushrooming: they are established with the involvement of SEZs, higher education facilities and entrepreneurs. Lower Silesia Motor Industry Cluster can be a good case in point: it was established by Legnica SEZ, Wrocław University of Technology, Polish Information and Foreign Investment Agency and automobile sector companies.Analogically, we have observed growing support for education oriented on the needs of companies operating in SEZs. In January, SEZ Law was supplemented with the wording dedicated to SEZ support for vocational education. In April education cluster was launched in Cracow SEZ.‘There is no need to invest excessively in school laboratories if students can do their internships and apprenticeships in companies,’ announced Halina Kurtyka, Member of the Management Board of Cracow Technology Park. Similar clusters have been operating in Legnica, Wałbrzych and Kamienna Góra SEZs, inter alia. ‘If the focus in education is aligned with market needs, we are going to see the outcomes in just three years,’ promises Ilona Antoniszyn-Klik, Deputy Minister of Economy.Business activation of areas located in the vicinity of new express ways is another priority. The first project in a series will include areas around the new S3 Route, currently in construction. It involves five SEZs from Legica, Kostrzyn/Słubice, Wałbrzych, Pomorze, and Kamienna Góra.According to Zeng, Polish SEZs could benefit from World Bank support. First is technical assistance, which can include studies/analytical work, training and advisory services. Second is investment lending. ‘We also offer direct budget support to governments for institutional reforms,’ WB economist says. Show Less -