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Zones Can Obtain World Bank Support

May 13, 2015

Douglas Zhihua Zeng

Future of economic zones is the investments in new, environment-friendly technologies

Total worth of investments made in special economic zones (SEZs) in Poland exceeded PLN 104.35 billion, as of the end 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.