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OPINION

Local Reforms Will Make Poland a Better Place

October 19, 2015


Madalina Papahagi, Marina Wes Rzeczpospolita

If Poland was able to aggregate the best of each city in one ranking, Poland would rank 8 positions higher in global “Doing Business” ranking, placing the country ahead of France and the Netherlands.

According to the “Doing Business in Poland 2015” report, Poznań and Gdańsk are two cities where it is relatively easy to start a business, but they rank below most other cities when it comes to dealing with construction permits. How to improve?

This year, for the first time, the World Bank ranked all 18 voivodship capitals in Poland on the ease of doing business. And some of the results are surprising. Not one city is good at everything, and even some of the smaller cities are world-class in one or two areas.

That presents an opportunity for cities to learn from one another, which is what the Ministry of Infrastructure and Development and BGK intended when they requested the study.

Creating an enabling environment for private sector development is an important part of a country’s competitiveness and growth agenda. Government policies and practices can encourage or constrain private sector activity. If laws and regulations are clear, transparent, and enforceable, entrepreneurs feel more confident to do business. If regulations are simple but efficient, entrepreneurs spend fewer resources on regulatory burdens and have more time to devote to productive activities. Reducing red tape is important for Poland, where a large productivity gap with top-performing OECD countries still exists.

Legislate centrally, implement locally

The new report looks at four stages of the lifecycle of a typical enterprise—starting a business, dealing with construction permits, registering property, and enforcing contracts. Even if most laws and regulations governing these areas are set at national level, implementation varies at the local level.

As a result, Polish entrepreneurs face different regulatory hurdles depending on where they establish their business. According to the report, it is easier to start a business in Poznań, obtain construction permits in Bydgoszcz, transfer property in Białystok, and resolve a commercial dispute in Olsztyn.

Warsaw did not score at the top on any one indicator, but it did well in certain areas. For example, court clerks in Warsaw deal with significantly more company registration applications than in any other city, yet the two KRS court divisions in the city manage to maintain their registration times well within the national average. One reason behind Warsaw’s higher efficiency may be a flexible work schedule that allows referendarzs to adjust to peaks in the volume of applications.

What’s the key to improvement here? Two words—competition and collaboration. Local governments and magistrates can use the report to see how they compare with the rest of the country and the rest of the world, learn what their better-performing peers are doing, and take steps to increase their competitiveness.

The good news is that sharing the same national legal framework facilitates the adoption of good practices. Small administrative improvements can make a big difference in the life of small firms—which don’t have access to the resources and skills larger businesses use, when faced with the same bureaucratic inefficiencies, to get better and faster service. This is important for the development of small and medium enterprises, which play a crucial role in economic development at the local level.

Not only top performers

Local reforms will not only improve the ranking of one city as compared to another; they can make a difference on Poland’s global ranking. For example, while Poland was ranked 32nd—out of 189 economies in the global Doing Business ranking last year—if Poland was able to aggregate the best of each city in one ranking, Poland would rank 24th—8 positions higher than Poland’s current ranking placing the country ahead of France and the Netherlands. As one businessman from Warsaw put it, during a discussion on the report findings: “We have our own targets now. We should stop reinventing the wheel and learn from each other.”

Lessons can be learned from the cities that have the best performance and also from those that face the most challenges. Administrations in Łódź and Wrocław can issue a building permit in just over one month—similar to the delay in smaller cities such as Olsztyn and Gorzow Wielkopolski, where the volume of applications is five time less—proving that high demand for business services can be dealt with efficiently.

Registering a property transfer in the Land and Mortgage Registry can take anything from 10 days at the court in Bialystok to 40 days in Wrocław—perhaps predictably, given the respective caseloads. But optimizing available resources—such as the introduction of electronic case management—is another factor behind the faster turnaround time in Bialystok.

The report findings could also form a basis for dialogue between national and local policy makers to ensure the roll-out and effective implementation of legal changes across the country.  Take for example the numerous amendments to the Building Law. Inconsistent dissemination resulted in confusion and uneven implementation across the cities. As a city official from Olsztyn puts it: “The regulation is complex and open to interpretation. Builders would shop around for municipal officials willing to interpret the rules more leniently. We had to issue more than 20 guidelines to ensure uniform interpretation in the application of the law in our city.”

Making the law more cohesive, communicating legislative changes to all stakeholders—enforcement agencies, business and legal communities and the general public—and providing guidelines on how to interpret the law are critical to ensure changes are understood and put in practice.

The findings of this study provide an opportunity for policymakers to address a number of impediments to the country’s investment climate. Promoting convergence among regions and cities towards top performers and thus improving the ease of doing business in the whole country is a challenge worth taking – and will disproportionately benefit small firms. 

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Marina Wes is the World Bank Representative in Poland, and Madalina Papahagi is a Private Sector Development Senior Specialist.


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